South Korea’s major steel player, Dongkuk Steel announced a temporary shutdown [1] of its Incheon rebar production plant, marking an unprecedented move in the company’s 71-year history. The decision, effective from July 22 to August 15, comes in response to a prolonged downturn in the construction sector and a persistent oversupply in the domestic steel rebar market.
The Incheon facility, the largest single rebar production plant in South Korea, has an annual capacity of 2.2 million tons and accounts for 40% of Dongkuk Steel’s total revenue. The shutdown is expected to reduce rebar supply by approximately 200,000 tons.
The company has been grappling with declining demand for over two years, exacerbated by falling construction orders and intensifying competition. Despite previous efforts to mitigate losses, including scaling back plant utilization rates, Dongkuk Steel determined that a full production halt was necessary to address excess inventory and stabilize market conditions. Rising raw material costs and anticipated summer electricity rate surcharges further contributed to the decision.
Industry-wide challenges have led other major steel producers, including Hyundai Steel, to implement similar measures, temporarily suspending rebar production due to weak demand and oversupply. The domestic rebar market has seen demand drop to its lowest levels since 2010, with prices experiencing significant declines. Dongkuk Steel plans to maintain a reduced operation rate until June before initiating the shutdown, supplying pre-contracted volumes from existing inventory. The company will reassess market conditions in August, with the possibility of extending the shutdown if the oversupply situation persists.
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[1] Dongkuk Steel Halts Operations at Incheon Rebar Production, Crisis Deepens in Korean Industry https://www.chemanalyst.com/NewsAndDeals/NewsDetails/dongkuk-steel-halts-operations-at-incheon-rebar-plant-crisis-deepen-in-korean-steel-36902