Historic Suspension at Dongkuk’s Incheon Giant

For the first time in its 71-year history, Dongkuk Steel will halt operations at its Incheon plant, which is the largest single-site rebar production facility in South Korea. The company announced the temporary shutdown from July 22 to August 15, in an official regulatory filing on May 26. This unprecedented move aims to control excess inventory and stabilize prices in a market suffering from dwindling demand. The Incheon facility contributes approximately 40% of Dongkuk Steel’s annual sales, making the decision a pivotal moment in the company’s operational history.

A Slumping Construction Sector Triggers Crisis

At the core of this crisis is a prolonged slump in South Korea’s construction industry. Traditionally the main consumer of rebar, the construction sector has seen a dramatic fall in activity. According to the Korea Institute of Construction Industry, the total construction area declined by 31.7% in 2023, a sharper fall than during the 2008 financial crisis, which saw a 22.2% drop. Industry insiders describe the situation as worse than the Lehman Brothers collapse era, with regulatory curbs on housing loans, high interest rates & shrinking household formation compounding the issue.

Freefall in Rebar Prices Pressures Margins

This downturn has led to a steep decline in rebar prices. The distribution price per metric ton of standard 10mm diameter rebar fell from ₩750,000 ($553) in October last year to ₩670,000 ($494) by December. Prices remained weak in early 2025, fluctuating between ₩670,000 and ₩690,000 ($494–$509) before briefly recovering in April to ₩730,000 ($538) due to a temporary halt at Hyundai Steel. However, by May, prices began declining again. With production costs around the mid-₩700,000 ($517) mark and profitability achievable only near ₩800,000 ($552), most rebar manufacturers now operate at a loss.

Soaring Electricity & Scrap Prices Compound Woes

Dongkuk Steel is further burdened by a sharp rise in industrial electricity prices, a key input cost for its electric arc furnace-based production. Unlike blast furnace giants POSCO and Hyundai Steel, Dongkuk uses electric arc furnaces, which are heavily impacted by electricity tariffs. Korea Electric Power Corp. increased industrial electricity rates by 9.7% last year, resulting in a 46% surge over two years. In tandem, scrap metal prices, the raw material for Dongkuk’s process, have been volatile and surged unpredictably in May, eroding margins further and pushing the firm toward its temporary shutdown decision.

Production Cuts & Potential Prolonged Closure

The Incheon facility has an annual production capacity of 2.2 million metric tons of rebar and is equipped with two electric arc furnaces and two rolling lines. Prior to this announcement, Dongkuk had already scaled back its night-time operations to 60% in mid-2024 and to 50% earlier in 2025. The current shutdown will eliminate roughly 200,000 metric tons of supply from the market. The company has signaled it may prolong the closure beyond August if the oversupply situation fails to improve, reflecting the depth of the industry’s uncertainty.

Hyundai Steel Echoes Dongkuk’s Strategy

Hyundai Steel, South Korea’s second-largest steelmaker, is also adopting a wait-and-watch strategy. It has already carried out a temporary shutdown of its Incheon rebar plant and may repeat the move if market conditions remain adverse. While Hyundai benefits from integrated blast furnace operations, it is still vulnerable to poor construction demand and falling steel prices. The company has indicated that without a notable improvement in domestic consumption, further production cuts remain a strong possibility.

Small Rebar Firms Caught in the Crossfire

While the two largest rebar suppliers, Dongkuk and Hyundai, have the scale and reserves to temporarily halt operations, smaller domestic firms are in a far more precarious position. These firms, often lacking the financial resilience to endure prolonged inactivity, are unable to shut down without risking bankruptcy. This dynamic raises concerns about continued oversupply, as smaller players continue production to survive, thereby nullifying the supply-balancing efforts of larger competitors. Consequently, a full market correction may be delayed or diluted.

Wider Implications for the Steel Industry

The crisis facing the rebar segment signals a broader structural issue within South Korea’s steel industry. Demand for rebar fell by more than 20% year-on-year in 2024 to 7.98 million metric tons and is projected to drop further to around 6 million metric tons in 2025, less than half the country’s total production capacity of approximately 13 million metric tons. Without government stimulus or a sudden surge in infrastructure projects, the imbalance between supply and demand is expected to persist, leading to more operational halts, job risks, and strategic realignments across the sector.

Key Takeaways:

• Dongkuk Steel will halt its Incheon rebar plant, 40% of its sales base, for the first time since 1954 due to oversupply and weak construction demand.

• Rebar prices in South Korea have plummeted below break-even points amid a 31.7% drop in construction activity and surging electricity costs.

• Smaller rebar producers are unable to halt operations, potentially undermining efforts by industry leaders like Dongkuk and Hyundai Steel to stabilize the market.