South Korea announces KRW 80 trillion ($54 billion) package to stabilise steel sector amid Middle East crisis

• Large scale funding to ease steel supply chain pressures
  
  
• Targeted bond measures to lower borrowing costs by 50 bps
  
  

SteelOrbis: South Korea has unveiled a support package worth over KRW 80 trillion ($53.97 billion) to help its steel sector cope with the impact of the ongoing Middle East crisis. The plan was announced following a high-level meeting led by Financial Services Commission Chairman Lee Won-geon, with participation from major steel producers, financial institutions, and policymakers.

Rising costs and supply chain pressures: Authorities highlighted that the steel sector is facing mounting pressure from rising energy and logistics costs, alongside persistent supply chain disruptions linked to the crisis. At the same time, new trade measures in key markets such as the US and EU are adding to the strain, with the impact expected to extend to downstream industries including machinery and electronics.

Large-scale financing and liquidity support: In response to these challenges, the government has introduced a broad mix of financing and liquidity measures. The package includes KRW 25.6 trillion ($17.27 billion) in policy funding and more than KRW 53 trillion ($35.75 billion) through private-sector programs, with financial institutions set to expand lending to affected companies while also working to reduce borrowing costs in capital markets.

Bond market support measures: Support is also being extended to corporate funding channels, particularly the bond market, where authorities plan to ease conditions for P-CBO refinancing and reduce bond issuance costs by around 50 basis points. Market stabilisation tools, including bond purchase programs, will be deployed to support issuers across different credit segments.

Focus on long-term restructuring and competitiveness: Alongside these immediate measures, the government is also focusing on longer-term stability. A KRW 1 trillion ($674.62 million) Corporate Restructuring Innovation Fund will be used to support restructuring efforts and strengthen competitiveness in key sectors such as steel, semiconductors, automotive, and batteries.

Oil supply concerns and liquidity support: Concerns over raw material availability, especially oil, have intensified amid ongoing disruptions. In response, policy lenders such as the Korea Development Bank and Export-Import Bank of Korea have approved $3 billion in liquidity support for the Korea National Oil Corporation to help stabilise supply.

Industry calls for additional relief: Despite these measures, industry participants have indicated that cost pressures remain significant, with companies calling for additional support such as lower interest rates and extended loan maturities. Authorities noted that targeted programs for SMEs and mid-sized firms are already in place, while emphasising the need for continued monitoring.

Need for continued monitoring and coordination: Officials added that close coordination between the government, financial institutions, and industry will be critical in managing ongoing uncertainty, with support measures to be adjusted as needed to safeguard industrial stability and economic growth.

Note: This article has been written in accordance with a content exchange agreement between SteelOrbis and BigMint.