Seoul – S&P Global Ratings has issued a report warning that the imposition of broad steel tariffs by the United States will have a significant negative impact on South Korean steelmakers.

The report highlights that while South Korean companies have benefited from tariff exemptions on a quota of about 2.6 million tons of steel annually, the expiration of this measure will put them at a disadvantage compared to competitors in the region who were not eligible for such exemptions. 

"While the direct impact on major players like POSCO and Hyundai Steel may seem limited, given that their US export volumes account for only a small fraction of their total shipments, the report emphasizes that these exports are high-value, high-margin products," an S&P analyst said. "The loss of this lucrative market will put a strain on their profitability."

The report expresses particular concern about POSCO, noting that the company's increased capital expenditure for its secondary battery materials business has led to a substantial rise in debt. The reduction in high-profit exports to the US could further exacerbate its financial burden.

S&P also cautions that the tariffs could negatively affect the credit ratings of South Korean steelmakers. The report estimates that the tariffs could lead to a mid-single-digit percentage decline in revenue and a high-single-digit percentage decrease in operating profit.

"The US tariffs represent an additional challenge for South Korean steelmakers, who are already grappling with a difficult business environment," the report states. "Oversupply from China, coupled with sluggish demand, is weighing on the industry, while falling steel prices are squeezing margins. The US tariff measures are expected to further impede the recovery prospects of these companies."

The report concludes by emphasizing that the US steel tariffs will add to the existing headwinds facing South Korean steelmakers, potentially hindering their ability to rebound from the current downturn.