Korean lawmakers pass K-Steel Act

The 'Special Act for Strengthening Steel Industry Competitiveness and Carbon Neutral Transition' – dubbed the K-Steel Act – was passed at the National Assembly plenary session last Thursday by a massive majority of 245 lawmakers out of the 255 attending that day, with 5 against and 5 abstentions.  

The overwhelming support the bill received underscores the concern the country's politicians have for the sector facing what's been called the 'triple suffering' of declining steel exports, increasing low-cost foreign steel imports, and stagnant domestic demand. Among those members who voted against the legislation or abstained were undoubtedly some who believed that the weighty act – stretching to 46 articles and 3 subsidiary provisions – did not go far enough.

Thursday's vote was the culmination of efforts by both ruling and opposition lawmakers who fear that the industry's plight threatens not just its survival but the nation's economic stability and national security. Last August, 106 parliamentarians had proposed a bipartisan bill to the assembly recommending numerous support measures, from accelerating steel demand-linked public procurement to strengthening regulations on the origin of imported steel, as Mysteel Global reported.

"Our steel industry is experiencing an all-round crisis due to the huge investment pressure following the implementation of carbon neutrality," warned Democratic Party of Korea member Eoh Kiy-ku. "Before our national economic sovereignty, industrial ecosystem, and local economy are seriously damaged, a comprehensive support system at the national level must be established," he said at the time.

Eoh is co-chair of the National Assembly Steel Forum that had proposed the bill before the House of Representatives that was passed last week, albeit with some alterations and controversial omissions.

The K-Steel Act, which will formally take effect after six months beginning May next year, directs the Minister of Trade, Industry and Energy to establish and implement basic plans to strengthen the competitiveness of the domestic steel industry and support carbon neutral transition. A Special Committee for Steel Industry Competitiveness Enhancement formed under the prime minister will deliberate and decide related policies. The Act will come into effect in May next year and be valid until December 31, 2028. After that, it can be extended for up to three years if necessary.

"Additionally, the act includes practical policy measures for carbon neutral transition and competitiveness enhancement," news portal BusinessKorea noted. These include "the selection of low-carbon steel technology and demand-creation support, the designation of low-carbon steel special zones and support for production facility construction, the strengthening of recycled steel resource supply chains, and establishing legal foundations for rapid business reorganization," it explained.

Lee Kyung-ho, executive vice chairman of the Korea Iron & Steel Association (KOSA), welcomed the passing of the act, saying "a legal framework has been established to secure the future competitiveness of this national key industry." Lee also noted that its enactment had occurred "approximately 40 years after the Steel Industry Promotion Act (and) is a monumental matter in steel industry history." It was under that act promulgated in 1970 that Pohang Iron & Steel – now POSCO – received domestic and overseas funding to begin construction of its Pohang steel works and could enjoy protection from steel imports while it became established, as reported.  

However, the legislation passed last Thursday differs in several ways from the draft that the National Assembly Steel Forum had presented last August.

For example, the forum's members at that time had recommended that the Steel Committee be led by either South Korea's president, prime minister, or the trade, industry and energy minister, with the bill's backers favouring the president chairing.  

However, "while the intention was for the president to take direct interest in the steel industry, it was concluded that placing it under the prime minister was more appropriate considering scheduling and administrative convenience," local daily Chosun Ilbo reported, adding that a committee directly under the trade and industry minister was considered impractical due to the need to coordinate across different ministries.

The Steel Committee, to be established early next year by the trade ministry and KOSA, will have the prime minister as its chair and the trade minister as its secretary-general.

Meanwhile, a key omission in the final act that has sparked criticism from both steel producers and opposition parliamentarians is the dropping of a recommendation that steelmakers receive government subsidies for their electricity and that the Steel Committee be required to review electricity supply arrangements.

Industrial electricity rates have climbed by about 70% over the past three years, according to Chosun Ilbo, with the steelmakers' production costs rising by KRW 10-20 billion ($6.8-13.6 million) annually for every KRW 1 per kilowatt-hour increase. However, help to offset these charges was excluded from the final draft.

"Direct electricity rate reductions or support raise concerns about potential WTO litigation, and fairness with other laws and industries, making it unavoidable to delete this provision," the trade, industry and energy ministry argued.

Written by Russ McCulloch, russ.mcculloch@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com