South Korea: Stainless steel distributors brace for margin pressure in H2CY'26 despite strong H1

• H1 prices climb up by nearly 20%, boosting distributor earnings
  
  
• Replacement costs rise, but slow demand limits cost pass-through in H2
  
  

SteelDaily: South Korea's stainless steel distribution sector reported improved profitability during the first half of 2026, supported by higher stainless steel prices and inventory gains. However, market participants expect margin pressures to intensify in the second half as weak demand and rising procurement costs weigh on the market.

Imported 304-grade cold-rolled (CR) stainless steel prices increased by 18.6% during the first six months of the year, rising from around KRW 2.95 million/t in January to KRW 3.5 million/t in June. Prices of domestic import-substitute materials also increased by nearly 17%, boosting sales values across the distribution chain.

The price rally particularly benefited medium and large distributors that had accumulated lower-cost inventories before prices increased. Higher selling prices enabled these companies to improve margins while liquidating existing stocks.

However, market conditions have started to soften since late June. As replacement costs for both imported and domestic stainless steel have moved closer to prevailing market prices, distributors have limited scope to rely on low-cost inventories to support profitability. At the same time, elevated import costs and sluggish downstream demand are restricting their ability to pass on higher costs to customers.

The seasonal slowdown during July and August is also expected to weigh on stainless steel consumption. Although distributors may partially offset rising costs by selling a mix of lower-cost and newly procured inventory, sustained weak demand beyond September could significantly impact both sales volumes and profitability.

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