[Alpha Biz= Reporter Kim Jisun] The steel industry in South Korea is grappling with mounting concerns as the government pushes forward with another industrial electricity rate hike to normalize power pricing. With demand falling due to a construction downturn and rising production costs, the industry's burdens are increasing.

As of the 25th, the Ministry of Trade, Industry, and Energy (MOTIE) announced a 10.2% average increase in electricity prices for large-scale industrial users, primarily targeting large corporations. This follows efforts to address the Korea Electric Power Corporation’s (KEPCO) massive accumulated deficit, which reached KRW 41 trillion by mid-2024.

The steel sector, already struggling with low-cost competition from China, is expected to feel the impact significantly. A general estimate suggests that for every KRW 1 increase in electricity per kilowatt-hour (kWh), the industry's annual cost burden rises by approximately KRW 20 billion. With the new hike increasing electricity prices by KRW 16.9 per kWh, the steel industry's costs are projected to rise by an additional KRW 340 billion.

This comes at a time when the construction sector is weakening, leading to a continued decline in steel demand. According to the Korea Research Institute for Construction Industry, construction orders in August fell to KRW 10.2 trillion, down KRW 4.9 trillion from the recent three-year average of KRW 15.1 trillion.

 

 

 

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