The global steel industry continues to experience a decline in cumulative crude steel production due to weakening demand. This trend is largely attributed to the downturn in the construction sector and an overall slowdown in demand, prompting steel manufacturers to adjust production levels. The steel industry anticipates that a recovery in market conditions will remain challenging through 2025 and plans to focus on cost reduction and production adjustments to protect profitability.

According to the World Steel Association (WSA) on January 1, global crude steel production in November reached 150 million tons, a 0.8% year-over-year increase. However, it marked a 3.5% month-over-month decline and a 1.4% decrease year-to-date compared to the previous year.

China, the world’s largest steel producer, reported November production of 78.4 million tons, up 2.5% from the same month in the previous year but lower than October's 81.9 million tons. Cumulatively, China's production for the year through November stood at 930 million tons, a 2.7% year-over-year decrease.

The crude steel production of Japan, the United States, Russia, and South Korea—ranked 3rd to 6th globally—continues to decline. In November, production volumes for these countries fell by 3.1%, 2.8%, 9.2%, and 3.6%, respectively, compared to the same period in the previous year.

This downward trend in production is largely attributed to seasonal demand slowdowns during the winter off-season. Steelmakers have been adjusting production levels to address sluggish demand and growing steel inventories, taking measures such as reducing plant operating hours.

The steel industry is expected to adopt "downsizing" strategies through 2025 to navigate the ongoing recession. With an unfavorable market outlook for the year ahead, companies are focusing on minimizing risks and implementing measures to sustain their operations and profitability.

In November, POSCO ceased operations at its Pohang Wire Rod Plant No. 1 after 45 years and 9 months of operation. This marks the second shutdown at the Pohang site in 2023, following the closure of Pohang Steel Plant No. 1 in July. The decision to shut down operations was driven by a combination of factors, including the global oversupply of steel, the influx of low-cost steel imports, and aging facilities.

Hyundai Steel has also reportedly adopted a plan to scale back operations at its Pohang Plant No. 2, which handles steelmaking and rolling processes. The plant will transition its workforce structure from the existing four-shift, two-team system to a two-shift, two-team system for both its steelmaking and rolling operations. This adjustment is attributed to low utilization rates caused by the downturn in the construction sector.

Hyundai Steel's Pohang plant, one of South Korea's key production bases for bar and shape steel products after its main Incheon plant, primarily focuses on producing H-beams. The operational adjustments highlight the impact of weak demand and challenging market conditions on the steel industry.

To make matters worse, a surge in exchange rates is adding to the challenges faced by domestic steelmakers. Most raw materials required for steel production are imported from countries like Australia and Brazil, with payments made in U.S. dollars. As the exchange rate rises, the cost of these imports increases, further straining profitability.

In a report, Samjong KPMG projected that global steel demand in 2025 will be driven primarily by the United States, Europe, and India. Additionally, it noted that if domestic interest rates are lowered, a recovery in construction orders could ease inventory burdens for bar products like rebar and H-beams. However, the report also highlighted potential risks, including market saturation due to an influx of low-cost Chinese products and profitability challenges stemming from rising industrial electricity rates. These factors are expected to exacerbate the difficulties for the steel industry in the coming years.

hyeon@metroseoul.co.kr