“People say Gumi is enjoying a semiconductor boom, and South Jeolla is in a frenzy building chip plants, but we have to worry first about whether we even have work right now.”

On the 2nd, at the Pohang Steel Industrial Complex in Nam-gu, Pohang, North Gyeongsang Province, Kim Seong-min (55), whom we met, said this as he looked at a large freight truck parked by the roadside with an empty bed. He hauls steel raw materials to the steelworks and transports finished steel products to clients.

Having done this work for more than a decade, he said, “From the second half of 2024, the amount of work began to drop sharply and the slump continues,” adding, “It feels like the workload has been cut by about half. With the semiconductor sector drawing so much attention, there is a sense of relative deprivation.”

Pohang, the ‘city of steel’ that was a symbol of industrialization in South Korea, has struggled to break out of the tunnel of recession. A supply glut from China, weak domestic demand, and trade barriers in the United States and the European Union (EU) have combined to depress the steel industry, weighing on the local economy.

According to the Pohang Chamber of Commerce and Industry on the 6th, the Business Survey Index (BSI) for the third quarter of this year, based on a survey of 72 local manufacturers, came in at 64, down 11 points from the previous quarter. A BSI below 100 means more firms expect the economy to worsen. By sector, the steel industry BSI was only 62.

The atmosphere around the industrial complex is not what it used to be. Hyundai Steel Pohang Plant 2 has been on ‘indefinite shutdown’ since June last year, and POSCO has in succession closed its Pohang No. 1 steelmaking plant and No. 1 wire rod plant. As major steelmakers adjust output and scale back facilities, small and midsize partner firms report falling orders.

The downturn is also visible in industrial park indicators. The operating rate at the Pohang Steel Industrial Complex fell from 92.7% in 2024 to 89.3% last year. Output value also fell from 16.3247 trillion KRW in 2023 to 13.8705 trillion KRW last year, a sharp drop of nearly 15% over two years.

The slump is evident in tax flows as well. Corporate local income tax in the Pohang area peaked at 149.1 billion KRW in 2022 and fell to 57.1 billion KRW last year, a decline of 92.0 billion KRW, or 61.7%, in three years.

An official from the Pohang city government said, “Pohang is a region where dependence on the steel industry reaches 80%,” adding, “When work decreases for steel processing, maintenance, and transport firms, restaurants and shops frequented by industrial park workers and truck drivers are hit together.”

The slump in the local commercial sector is also clear. According to the Korea Real Estate Board’s lease market trends survey, in the second quarter of this year, vacancy rates in the Pohang area were 20.8% for small shops, 30.7% for general shops, 33.7% for medium-to-large shops, and 24.8% for collective commercial properties. These figures are roughly twice the national averages (8.5%·13.4%·14%·10.5%).

South Korea’s steel industry has been in a slump due to the combination of high interest rates and economic downturn since 2024, along with a flood of low-priced Chinese steel. The United States raised tariffs on steel imports from 25% to 50% last year, further narrowing export channels.

Although there are some expectations of improvement this year due to China’s stance on production cuts, trade barriers remain, including reduced EU steel import quotas and Japan’s imposition of anti-dumping duties.

North Gyeongsang Province and the city of Pohang argue that the introduction of regionally differentiated electricity tariffs should be fast-tracked to strengthen the competitiveness of the steel industry. North Gyeongsang is the nation’s largest power-producing area, generating 18% of the country’s electricity, with an energy self-sufficiency rate of about 251%.

A North Gyeongsang Province official said, “The region has shouldered the burdens for power supply, such as power plants and transmission lines, yet we pay the same electricity rates as the Seoul metropolitan area,” adding, “A region-based electricity tariff is not a special favor for specific companies; it is a system to correct cost imbalances between power-producing and power-consuming areas.”

On the 4th, Minister Kim Seong-hwan of the Ministry of Environment announced during a presidential policy briefing a plan to overhaul the pricing system to reflect regional power supply and demand conditions.

A representative from the local industrial community said, “Analysis shows that if industrial electricity rates fall by 10 won per ㎾h, local industry could save 276.9 billion KRW per year,” adding, “Because the steel industry is a key national industry, government support is urgent.”