Korean steel market weakens as truckers strike intensifies

As the strike by truck drivers in South Korea enters its 14th day on Wednesday, the country's steelmakers are growing increasingly concerned about its impact to their business and the domestic steel market, especially that for long products.

The strike, which began on November 24, involves unionized truck drivers under the Cargo Truckers' Solidarity Union over their demands that a temporary scheme that guarantees minimum cargo rates for truck drivers be made permanent, as Mysteel Global reported.

In a statement issued by the Korea Iron and Steel Association (KOSA) on December 6, the steel group claimed that as of December 5, shipment disruptions in the domestic steel industry had reached 920,000 tonnes, based on reports from the five major companies including POSCO and Hyundai Steel.

KOSA said there were fears that shipment disruptions in the steel industry will spread to producers in major domestic industries such as automobiles, shipbuilding and machinery, and that small- and medium-sized enterprises that process and deliver steel materials will suffer even more.

Cargo Solidarity's refusal to transport goods should be immediately withdrawn and drivers return to work, Korea Steel Daily quoted the statement as saying, while the government should also normalize steel logistics and improve the structure of the transportation market in accordance with laws and principles, it said.

If steel logistics stop, not only related parts companies but also major demand industries will have to stop, the industry daily noted. This is because steel manufacturing and distribution processing companies are already experiencing great difficulties due to the suspension of raw material receipts and product shipments, while delivery deadlines are being missed and sales are declining.

Markets are also being disturbed. The combination of falling scrap prices over the past few weeks and falling demand due to delivery disruptions caused by the strike, has seen the standard price of 10 mm high tensile rebars fall by a reported KRW 16,000/tonne ($12/t) to reach KRW 968,000/t for December delivery to construction sites and KRW 1.5 million/t from distributors, the first drop in three months.

As of December 1, the rebar producers were holding stocks totalling 199,000 tonnes, some 28,000 tonnes higher than in mid-November, as Mysteel Global reported. The market for sections, already sluggish because of weak building demand, is reportedly suffering as well. In November, even before the strike really took hold, sales of H-beams fell by nearly 10% on year to 222,000 tonnes.

Nevertheless, despite Korean president Yoon Suk-yeol's vow on Sunday to "immediately issue an administrative order" effectively forcing drivers serving industries such as oil and steel to return to work, as Mysteel Global reported, that order has yet to be issued.

This is despite the fact that the strike by truckers has caused supply disruptions of goods worth an estimated KRW 3.5 trillion in five key sectors, according to industry ministry estimates on Tuesday.

"We are reviewing an option to issue a return-to-work order in oil refining, steel and petrochemical sectors as early as this week in a pre-emptive effort before massive damages become a reality," Korea's Yonhap newsagency quoted industry minister Lee Chang-yang as saying on Tuesday.

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

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.