South Korea’s steel industry is seeking additional government assistance to offset electricity costs linked to the shift to lower-emission production. Legislative proposals under discussion in the National Assembly are aimed at preserving the competitiveness of domestic manufacturers as investment in cleaner steelmaking technologies expands. The debate is taking place as South Korea’s main steel competitiveness legislation entered into force in June 2026.
Reporting dated 31 October says lawmakers from both major political parties are considering measures to address power-related expenses. The proposals include financial support, investment incentives, and possible exemptions from electricity-related surcharges for steel producers located in designated industrial areas. Industry representatives argue that the existing framework does not adequately address electricity costs, which they expect to become more significant as producers consider electric arc furnaces and hydrogen-based steelmaking.
Electricity demand implications for industrial electrification
Industry discussions are tied to reported tension between industrial decarbonisation targets and the cost of electricity needed to meet them. Conventional integrated production relies on coal-based blast furnaces, while alternative routes require different energy inputs and supporting infrastructure. Electric arc furnaces are described as consuming substantial electricity, while hydrogen-based direct reduction depends on access to competitively priced low-emission hydrogen and related production or delivery infrastructure.
A Bank of Korea regional analysis, using assumptions from the country’s long-term power-supply planning framework, estimates that additional electricity demand from industrial electrification could rise from 1.2 TWh in 2025 to 63.0 TWh by 2038. The figures cover electrifying industries more broadly and are not a forecast limited to steel-sector consumption. The analysis is presented as an indicator of the potential scale of additional power requirements as industrial production changes.
The reporting says electricity cost and availability may increasingly affect whether lower-emission technology investments are financially viable for steel manufacturers. As producers evaluate different decarbonisation pathways, electricity expenditure is positioned as a factor influencing project economics. The same reporting links these considerations to ongoing legislative discussions on industrial power costs.
National Assembly proposals on industrial power cost support
Kim Jeong-jae of the People Power Party has proposed additional support measures for steel producers. The package includes dedicated industry support accounts and a legal framework for investment-related tax assistance. It also calls for streamlining certain project approval and investment procedures.
The Democratic Party’s Eo Gi-gu has introduced a separate set of steel-industry legislation. That package includes potential relief from the Electric Power Industry Infrastructure Fund surcharge for qualifying industrial areas. The surcharge is described as accounting for approximately 2.7% of industrial electricity bills under the arrangements addressed by the proposals.
The reporting also notes that other lawmakers have introduced additional measures concerning steel-sector competitiveness and the transition to lower-emission production technologies. None of the proposals has yet changed applicable electricity tariffs. Their eventual impact is described as dependent on qualification criteria, government approval, implementation details, and available public financial resources.
Government reservations about broad electricity bill subsidies
The South Korean government has expressed reservations about providing widespread support for industrial electricity bills. Officials cited concerns about equal treatment across industrial sectors and possible conflicts with international trade rules. The reporting says direct financial assistance that reduces energy costs for export-oriented manufacturers may face scrutiny if trading partners interpret it as an unfair competitive advantage.
This approach leaves policymakers balancing two objectives: encouraging investment in cleaner steelmaking while ensuring that electricity costs do not undermine the commercial case for new production facilities. The reporting adds that government support could accelerate investment, but scheme design could also create trade-policy exposure if viewed as an export-related advantage.
Market pressures alongside decarbonisation investment decisions
The electricity-cost debate is occurring amid a difficult domestic market environment for South Korean steel producers. The reporting says producers face competition from lower-priced imports alongside subdued demand from the construction sector. It also cites declines in primary metals production value at the Pohang Steel Industrial Complex of approximately 4.0% in 2023, 7.4% in 2024, and 9.0% in 2025.
The reported figures are linked to deterioration in the regional industrial environment preceding the latest proposals on electricity-cost assistance. The reporting also describes uncertainty around major new investment economics, including requirements for electric arc furnace projects such as dependable electricity supplies, sufficient scrap or suitable iron inputs, and customers willing to purchase output at sustainable prices.
For hydrogen-based production, additional cost and infrastructure challenges are highlighted, particularly securing affordable hydrogen supplies. These constraints are presented alongside ongoing discussions about how power costs could affect whether decarbonisation investments proceed under changing market conditions.
CBAM requirements affecting EU-bound steel exporters
South Korean producers exporting covered steel products to the European Union must account for requirements under the EU’s Carbon Border Adjustment Mechanism (CBAM). The reporting says producing steel with lower embedded emissions could improve a manufacturer’s competitive position against more carbon-intensive suppliers if emissions performance is documented according to applicable requirements.
A lower emissions profile does not automatically translate into higher sales in the European market, according to the reporting. Customs duties, import quotas, freight costs, exchange rates, and customer demand remain relevant factors shaping commercial conditions for exporters.
The investment case for electric arc furnaces and hydrogen-based production is described as needing to account for both electricity expenditure and future access conditions for export markets. Recent European forecasts cited in the reporting indicate low-emission steel imports could become more significant through 2035, while restrictive tariff-rate quotas may limit volumes foreign suppliers can place on the EU market.
Southeast Europe comparison: Serbia and regional financing considerations
The reporting frames South Korea’s experience as a comparison point for Serbia and other Southeast European markets facing similar questions on industrial electricity prices and financing lower-emission technologies. It states that assessing the shift to cleaner steelmaking cannot rely on carbon prices alone. It cites additional elements affecting project economics including electricity procurement, grid access, capital expenditure, operating costs, and availability of suitable raw materials.
For banks financing industrial investments, exposure to electricity-price changes is described as potentially decisive when assessing project viability. The reporting also notes that long-term power purchase agreements (PPAs) could provide greater predictability in electricity procurement, with effectiveness dependent on contractual structure, production requirements, and the creditworthiness of involved parties.
Electricity pricing as a policy issue under carbon-border rules
The reporting characterizes electricity pricing as a strategic issue within steel policy discussions tied to maintaining manufacturing competitiveness while reducing industrial emissions. It says carbon-border measures may increase the commercial importance of lower-emission steel products but that production cost remains central to investment decisions.
Countries able to offer favourable electricity prices and reliable supplies may become more attractive locations for new low-emission steelmaking capacity, while expensive electricity could weaken project economics even where carbon-border policies create incentives for lower-emission products. It adds that National Assembly consideration of proposed legislative changes is relevant to steel producers, electricity suppliers, and industrial investors evaluating South Korea’s future manufacturing conditions.
The central policy question described in the reporting concerns how to support substantial electricity requirements for cleaner steel production without creating subsidy arrangements that generate additional trade risks or shift excessive costs onto other parts of the economy.