Following the US and EU’s efforts to curb the flow of "underpriced" Chinese steel, South Korea has launched an anti-dumping probe into imports of Chinese-made heavy steel plates.

The Korea Trade Commission under the Ministry of Trade, Industry and Energy announced on Friday that it initiated an investigation against the Chinese steel suppliers, including Shagang Group. The steel products in question, sheets 6 millimeters thick or more, are primarily used in shipbuilding.

After a three-month preliminary review, the commission will close the case or proceed with a full-scale investigation and decide within three months whether to impose anti-dumping tariffs on the Chinese companies.

The move comes after Hyundai Steel, an affiliate of the carmaker and one of Korea’s largest steelmakers, filed a complaint to the Industry Ministry, claiming that domestic steel manufacturing companies are losing money as Chinese competitors flood the market with plates that were “unreasonably cheap.”

Sources say Chinese heavy steel plates are sold for around 700,000 won ($520) per metric ton here, 100,000 to 200,000 won less expensive than the ones made in Korea. Their market share was 11 percent in 2022 and 17 percent last year, but it has increased to over 20 percent in the first half of this year.

According to data from the Korea Iron & Steel Association, imports of Chinese heavy steel to Korea rose 12 percent on-year to 688,000 tons in the first six months of this year. In 2023, imports skyrocketed 73 percent on-year to 1.1 million tons.

“The issue is that Chinese companies, facing an oversupply of steel due to the nation’s economic slowdown, compounded by US trade sanctions, are dumping the excess into Korea and other countries including Europe, Canada and Chile,” said a steel manufacturing company official on condition of anonymity. “(Those countries) are experiencing the same problem, which makes it more of an international concern than one confined to bilateral relations.”

“The Korean government needs to intervene in the distorted market and promote fair competition among the players,” the official added. “Domestic shipbuilders are quietly profiting from reduced production costs by using cheaper plates. However, if Chinese companies continue to expand market penetration and shove Korean companies out, they will eventually raise the price.”

Experts say that Chinese steel suppliers have the upper hand in the Korean market as they receive government subsidies, amounting to a breach of international trade rules.

“Chinese companies’ selling cheap products is considered a ‘particular market situation’ because the price is not set by the market demand but with financial support from the government,” said Kim Tae-hwang, an international business professor at Myongji University. “Korea should impose anti-dumping tariffs, as it is highly likely that the current price of Chinese-made plates is lower than the cost of the constructive price, creating dumping margins.”

Constructive price is an estimate used to determine the fair value of a product in cases where dumping or unfair pricing is suspected.

While steel producers are pushing for higher tariffs on Chinese products, domestic shipbuilding companies are voicing concerns that higher steel plate prices could hurt the ship construction industry.