Korean Steel Market Mar 25~26, 2019 86 th Session of the Steel - - PowerPoint PPT Presentation

Korean Steel Market

Korea Iron and Steel Association

Mar 25~26, 2019 86th Session of the Steel Committee

General Economy

2 Economic Indicators in Korea

(Y-O-Y %) * Source : Bank of Korea

2016 2017 2018 2019(e) 2020(e) 1H 2H

TOTAL

GDP 2.8 3.1 2.7 2.5 2.8 2.6 2.6 Private Consumption 2.5 2.6 2.8 2.5 2.7 2.6 2.6 Equipment Investment

• 2.3

14.6

• 1.7
• 2.1

6.3 2.0 2.3 Construction Investment 10.7 7.6

• 4.0
• 6.1
• 0.5
• 3.2
• 2.0

Exports 2.2 3.8 3.9 2.4 3.8 3.1 3.0 Imports 3.6 7.4 1.7 0.6 4.0 2.3 2.5

* Source : Bank of Korea

GDP Private Consumption Equipment Investment Construction Investment Exports

(’19e) With the expansion of government fiscal policy, GDP is expected to grow by 2.6%, mostly driven by consumption and export (’19e) Empowered by government policy, private consumption will show steady growth trend, but compared to ’18, decreased growth rate is expected, due to slowdown in growth of household income (‘19e) Due to recovery in global semiconductor consumption, equipment investment is expected to show positive growth rate, focused in IT manufacturing industry (‘19e) Expected to show continuous negative growth rate due to slump in new construction orders (‘19e) Forecasted to show slight decrease in growth compared to ‘18, due to slowdown in world economic growth and global trade disputes

2.6 2.8 3.1 2.7 2.6 '15 '16 '17 '18 19e GDP Growth Rate

(Y-O-Y %)

158.0 164.9 160.5 154.5 '15 '16 '17 '18 4,560 4,230 4,110 4,030 '15 '16 '17 18 12.7 12.4 10.6 7.7 10.9 2.2 7.6 12.6 '15 '16 '17 '18

Shipbuilding Shipbuilding order

Steel-Consuming Industries

3

103.7 101.3 105.2 103.6 '15 '16 '17 '18

(Unit: Million CGT) (Unit: trillion KRW) (47.0%) (4.4%) (△ 2.3%) (△ 3.7%) (0.7%) (△7.2%) (△2.7%) (△2.1%) (5.0) (△3.1) (△13.8) (△27.4) (1.3%) (△2.4%) (3.7%)

(‘18) Construction Investment has been decreased by 3.7% (‘18) Auto production has been decreased by 2.1% (‘18) Shipbuilding has been decreased by 27.4% (‘18) Machinery production has been decreased by 1.5%

(Unit: trillion \) (Unit: 1,000 units) (Source : Construction Association of Korea) (Source : Korea Automobile Association) (Source : Korea Association of Machinery Industry) (Source : Clarkson) (△1.5%)

Construction Automobile Shipbuilding Machinery

(△15.5) (△79.8) (24.5.5) (65.8)

27.7 28.3 28.2 26.8 22.8 23.1 23.3 21.6

55.8 57.1 56.3 53.7

'15 '16 '17 '18 Flat Long Pipe Total

46.6 46.4 47.2 45.9 19.9 20.1 21.2 21.5

74.2 74.3 77.1 75.2

'15 '16 '17 '18 Flat Long Pipe Total

Steel Consumption

Steel consumption has been decreased to about 54 million tons in 2018 due to slowdown in construction sector and decreased shipbuilding

4

Steel Production

Steel production has been decreased by 2.4%, recording 75.2 million tons in 2018

Korean Steel Market

Consumption Production

* Source : Korea Iron & Steel Association

(million MT) (million MT)

(△4.6%) (△1.3%) (△2.4%) (3.7%)

24.8 24.4 23.6 23.3

2.9 2.9 2.9 3.2

31.6 31.0 31.7 30.4

'15 '16 '17 '18

Exports by product category (2015~2018)

Flat Long Pipe Semi Others Total

ASEAN (10) (19.8%) CHINA (13.5%) JAPAN (12.5%) EU (28) (11.6%) INDIA (10.1%) U.S. (8.3%) MEXICO (6.9%) TURKEY (2.7%) CANADA (2.0%)

Steel Exports

5

(‘17) Despite decrease of exports to major markets, exports showed a similar trend to the recent years due to increased supply for factories invested by Korean steel makers (‘18) Due to trade protectionism, Korean steel exports decreased by 3.9%, and especially to the United States (-28.3%), due to U.S. section 232 measure

* Change in exports to major markets : U.S.(-28.3%), Japan(-7.4%), ASEAN (-3.9%), China(-3.8%)

Korea’s Steel Exports by Country in 2018

* Source : Korea Iron & Steel Association * Source : Korea Iron & Steel Association

Korean Steel Market (Cont’d)

(million MT)

Steel Imports

6

(‘17) Decreased by 16.8% due to slump in shipbuilding industry and domestic effort to reduce imports (‘18) Decreased by 22.2% due to decrease in imports from major markets such as China and Japan

* China and Japan, which account for 84.7% of the total imports, decreased by 34.5% and 8.7% respectively, compared to the previous year.

* Source : Korea Iron & Steel Association

Korea’s Steel Imports by Country in 2018

* Source : Korea Iron & Steel Association

Korean Steel Market (Cont’d)

CHINA (49.2%) JAPAN (35.5%) ASEAN (5.9%) BRAZIL (1.9%) EU (28) (1.6%) MEXICO (0.6%)

11.8 12.8 11.0 8.6 5.7 5.9 5.0 3.3 2.9 3.4 2.4 2.0

22.1 23.7 19.7 15.4

'15 '16 '17 '18

Imports by product category (2015~2018)

Flat Long Semi Others Pipe Total

(million MT)

Korea Emission Trading Scheme (KETS)

7

Recently Introduced Environmental Policy

* Source :Ministry of Environment, ICAP

Overall GHG reduction target By 2030 : 37% below BAU(536MtCO2eq) Type od ETS Mandatory with voluntary opt-in (599 business entities) Cap and trajectory Phase I (‘15~’17) : 1,687MtCO2eq, including a reserve of 89MtCO2eq for market stabilization measures, early action and new entrants 2015 : 573MtCO2eq, 2016 : 562MtCO2eq, 2017 : 551MtCO2eq Phase I I (‘18~’20) : 1,796MtCO2eq, including a reserve of 153MtCO2eq for market stabilization measures and new entrants 2018 : 547.7MtCO2eq, 2019 : 547.7MtCO2eq, 2020 : 547.7MtCO2eq Carbon Price KRW26,500(USD23.32), market price of 15 March 2019 Emission covered by the ETS 68% GHG covered CO2, CH4, N2O, HFCs, PFCs, SF6 Sectors covered and thresholds 23 sub-sectors from steel , cement, petro-chemistry, refinery, power, buildings, waste and aviation sectors Inclusion thresholds : Company ≥125,000tCO2/year, facility ≥25,000tCO2/year Allocation Phase I (‘15~’17) : 100% free allocation, no auctioning phase I I(‘18~’20) : 97% free allocation, 3% auctioned Phase III(‘21~’25) : less than 90% free allocation, more than 10% auctioned Enforcement The penalty shall not exceed three times the average market price of allowances of the given compliance year or KRW 100,000/ton(USD89)

Power plant 10.1% Industry 53.7% Transportation 27.9% Living 8.3%

Reduction Portion by Sector

324 49 123 90 61 208 38 61 58 51 Total Power plants Industry Transportation Living

Emission in 2014 and the Target by 2022

Emission ('14) Reduction Target ('22)

Fine Dust Reduction

Objective To improve quality of air, GOK aims to reduce 35.8% of fine dust emission by ’22 in power plants, industry, transportation and living sectors GOK has adopted a new emission charge for nitrogen oxides (NOx) starting from Jan 2020

• Emission charge : 2,130 KRW ($1.9) / 1kg of NOx

Korean steel companies are planning to invest 844 million U$ to establish additional air pollution prevention facilities

* Source : Ministry of Environment

8

(Thousand MT)

* Source : Ministry of Environment

Reduction Mechanism in Industry sector & Efforts of Steel Industry

(Total Reduction : 116 thousand tons)