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For Official Use DSTI/SU/SC(2006)29 Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 11-May-2006 ___________________________________________________________________________________________

English text only DIRECTORATE FOR SCIENCE, TECHNOLOGY AND INDUSTRY STEEL COMMITTEE

INDIA KOREA'S STEEL INDUSTRY -- RAW MATERIALS & ENVIRONMENTAL POLICY --

Joint India/OECD/IISI Workshop, New Delhi (India), 16-17 May 2006

Presentation by Mr. Hak-Loh Lee, Director of Metals & Petrochemical Industries Division, Ministry of Commerce, Industry & Energy.

Contact : Mr. Wolfgang Hübner, Head of Structural Policy Division and Steel Unit Tel: +33 1 45 24 91 32; Fax: +33 1 44 30 62 63; E-mail: wolfgang.hubner@oecd.org

JT03208731

Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format

DST

I/SU/SC

(2006)29 For O

fficial Use

English text only

DSTI/SU/SC(2006)29

2

Korea’s Steel Industry-- Raw Materials & Environmental Policy --

Korea’s Steel Industry-- Raw Materials & Environmental Policy --

The Joint India / OECD / IISI Workshop on SteelNew Delhi, India

May 17, 2006

Hak-Loh Lee, Director of Metals & Petrochemical Industries Div.Ministry of Commerce, Industry & Energy

The Joint India / OECD / IISI Workshop on SteelNew Delhi, India

May 17, 2006

Hak-Loh Lee, Director of Metals & Petrochemical Industries Div.Ministry of Commerce, Industry & Energy

Current StatusCurrent Status

Major ChallengesMajor Challenges

Development TasksDevelopment Tasks

Presentation Outline

1111

2222

3333

Stable Supply of Raw Materials Stable Supply of Raw Materials 443-13-1

EnvironmentEnvironment--Friendly Technology Friendly Technology 443-23-2

DSTI/SU/SC(2006)29

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Current StatusCurrent Status1111

4

Production

• Korea’s Crude Steel Production: 4.2% of global share• Since 1965, crude steel production has increased 209 fold.

• 1981: Production reached 10M tons and maintained avg. annual growth of 7%• 1998: Financial crisis temporarily slowed production

0

10

20

30

40

50

‘65 ‘68 ‘71 ‘74 ‘77 ‘80 ‘83 ‘86 ‘89 ‘92 ‘95 ‘98 ‘01 ‘04

Crude steel production surpassed

10M tons (1981)

Electric furnace facility expansion(mid 90s)

Financialcrisis (1997)

Crude steel production surpassed 30M tons

(1993)

POSCO Gwangyang Works completed(1992)

Crude steel production:230,000 tons (1965)

Crude steel production:47.82M tons (2005)

(Mil. tons)

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Demand & Supply

• Crude steel production: total 47,820 (in thousand tons)• 26,728 converters; 21,092 electric furnaces• 7,468 specialty steel; 40,351 ordinary (carbon) steel

• Demand of steel products: total 63,385 (in thousand tons, including semi-finished)• 16,261 export; 47,124 domestic consumption

• Steel products production: total 55,065 (in thousand tons)• 18,589 long products; 30,715 flat products; 4,072 steel pipes; 1,083 castings &

forgings

44% 56%

84%

16%

74%

26%

Demand by Industry

Construction

Automotives

Shipbuilding

Home appliance

Fabricated metal

Machinery

Others

39.5 20.0 17.7 7.4 7.0 4.3 4.1

49.4 15.1 7.4 7.9 11.8 5.92.5

(Unit: %)

• Demand in construction has been decreasing since 1995 while demand in the automotive and shipbuilding sectors has increased

• 2004 Steel consumption by industry (%)• Construction 40; Automotive 20; Shipbuilding 18; Home appliance 7.4 • Fabricated metal products 7; and Machinery 4

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Trade

• 2002: Shift to a net steel importer• 2005: export 16.3; import 18.9 (in million tons)

• Import-export structure by region• Korea’s trade concentrated on China, Japan, and Southeast Asia• Sharp increase in bilateral trade with China since mid 1990s

41

35.9

5.843.310

Korea's Steel Im ports

O thers

Australia

EU(25)

Brazil

China

Japan

28.8

18.7

17.8

11.22.9

20.6

Korea's Steel Exports

O thers

EU(25)

USA

Japan

Southeast Asia

China

Major ChallengesMajor Challenges2222

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Raw Materials

• Korea relies heavily on imports for raw materials making it vulnerable to external conditions

• 100% of Iron & Coking Coal; 30% of Steel Scrap• Korea’s annual imports

• Iron Ore: 430mil tons; Coking Coal: 210mil tons; Steel Scrap; 7mil tons

Australia Canada China

55% 20% 20%Coking Coal 21.3 mil ton

Japan USA Russia

42% 26% 25%Steel Scrap 6.82 mil ton

Australia Brazil India

57% 33% 3%Iron Ore 42.8 mil ton

Environmental Regulations

• The Kyoto Protocol, which entered into force on 16 Feb 2005, is emerging as a new economic guideline and technology yardstick

• Stricter and target-specific regulations, such as CO2 reduction, have compelled industries to adopt environment-friendly practices

• Korea is the world’s 10th largest CO2 emitter

Emission By Industry (’03)

Emission Emission By Industry By Industry ((’’03)03)

Emission By Gas Type (’03)

Emission Emission By Gas Type (By Gas Type (’’03)03)

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Energy Consumption

• As an energy-intensive industry, steel production costs may rise with stricter international environmental regulations

• The steel industry consumes 10.5% of energy in Korea, but the proportion is declining: 12.8% (’90) → 11.0% (2000) → 10.5% (2004)

Domestic Energy Consumption (Unit: thousand TOE)

-

50,000

100,000

150,000

200,000

250,000

1995 2000 2001 2002 2003

Korea

Overall Industry

Steel

Development TasksDevelopment Tasks3333

Stable Supply of Raw MaterialsStable Supply of Raw Materials443-13-1

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Raw Materials Supply

Steel Scrap Steel Scrap Korea is the world’s 3rd largest steel scrap importerSteel Scrap the only raw material obtainable domesticallySystematic scrap management and improvement of scrap recovering and processing technology

Korea is the world’s 3rd largest steel scrap importerSteel Scrap the only raw material obtainable domesticallySystematic scrap management and improvement of scrap recovering and processing technology

Mine Development & Overseas Steel Mill ConstructionMine Development & Overseas Steel Mill Construction

Partnering with international raw materials suppliers- Investments in coal, iron ore mines or joint ventures with firms in

Australia, Canada, Brazil- Overseas steel mills with India, Brazil, among others

Partnering with international raw materials suppliers- Investments in coal, iron ore mines or joint ventures with firms in

Australia, Canada, Brazil- Overseas steel mills with India, Brazil, among others

Overseas Mines Investment

l

KOBRASCO(Pellet 5Mtpa)

POSMAC (Iron Ore 22Mtpa)

Start-up

1998

20032010

2.738.550%KobrascoBrazil

Australia 3.2-

Offtake(Mt)

Investment($M)

OwnershipProjects

12.22.4

20%5.5%

POS-MACJack Hills

Jack Hills(Iron Ore 7.5Mtpa)

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Development TasksDevelopment Tasks3333

EnvironmentEnvironment--Friendly TechnologyFriendly Technology443-23-2

Overview of Gov’t Measures

UNFCCC Task Force CommitteeUNFCCC Task Force Committee

Implementation of the 1st-3rd comprehensive action plan (CAP) (’99~’07) in line with UNFCCC

- Future commitments: establishment of GHG emission statistics & statistical framework for policy building

- Energy saving/efficiency improvements & GHG reduction efforts

Results from the 1st-2nd CAP: annual GHG emission decreased from 5% to 3%

Participation in APP on Clean Development and Climate including Steel Task Force

Implementation of the 1Implementation of the 1stst--33rdrd comprehensive action plan comprehensive action plan (CAP) ((CAP) (’’99~99~’’07) in line with UNFCCC07) in line with UNFCCC

-- Future commitments: establishment of GHG emission statistics & sFuture commitments: establishment of GHG emission statistics & statistical tatistical framework for policy building framework for policy building

-- Energy saving/efficiency improvements & GHG reduction effortsEnergy saving/efficiency improvements & GHG reduction efforts

Results from the 1Results from the 1stst--22ndnd CAP: annual GHG emission CAP: annual GHG emission decreased from 5% to 3%decreased from 5% to 3%

Participation in APP on Clean Development and Climate Participation in APP on Clean Development and Climate including Steel Task Forceincluding Steel Task Force

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`

아태 6개국 파트너쉽 참가아태 6개국 파트너쉽 참가

Establishment & Operation of Task Force for steel industry together with 7 other designated sectors

- UNFCCC promotion & education; reviewing GHG emission protocol & framework; case studies on successful UNFCCC measures in other countries

Increased participation rate of steel companies in VA (Voluntary Agreement): 2 in 1998 → 25 in 2005

- POSCO signed on a demo agreement in Dec. 1998 / the number of KOSA (Korea Iron & Steel Association) members : 34

- Reduction of energy use in overall industry from 1998 to 2004: 9,427 thousand TOE (2.5 trillion won)

- The number of VA participatory companies: 15 in 1998 → 1,288 in 2005

Establishment & Operation of Task Force for steel Establishment & Operation of Task Force for steel industry together with 7 other designated sectors industry together with 7 other designated sectors

-- UNFCCC promotion & education; reviewing GHG emission protocol & UNFCCC promotion & education; reviewing GHG emission protocol & framework; framework; case studies on successful UNFCCC measures in other countriescase studies on successful UNFCCC measures in other countries

Increased participation rate of steel companies in VA Increased participation rate of steel companies in VA (Voluntary Agreement): 2(Voluntary Agreement): 2 in 1998 in 1998 →→ 25 in 200525 in 2005

-- POSCO signed on a demo agreement in Dec. 1998 / the number of KOPOSCO signed on a demo agreement in Dec. 1998 / the number of KOSA (Korea SA (Korea Iron & Steel Association) members : 34 Iron & Steel Association) members : 34

-- Reduction of energy use in overall industry from 1998 to 2004: 9Reduction of energy use in overall industry from 1998 to 2004: 9,427 thousand ,427 thousand TOE (2.5 trillion won)TOE (2.5 trillion won)

-- The number of VA participatory companies: 15 in 1998 The number of VA participatory companies: 15 in 1998 →→ 1,288 in 20051,288 in 2005

Government & Industry Information Exchange NetworkGovernment & Industry Information Exchange Network

Overview of Gov’t Measures

• Development of environment-friendly and energy-saving technologies• Commercializing next-generation iron-smelting process: FINEX is scheduled

for completion in December 2006; strip-casting in June 2006• Extending production of environment-related products: automotive steel sheets

(hydroforming, TWB); chrome-free steel sheets

Reducing energy consumption by 75~85%

1/340%Eliminating

manufacturing process of semi-finished

products

Strip Casting

Reducing emission of pollutants

(SOx 100%→8% NOx 100%→4%

Dust 100%→21%)

22%19%Eliminating pre-

processing, such as sinter plant and coke

ovens

FINEX

Eco-friendliness

Cost cuts in production

Cost cuts infacility &

investment

Improvements in Production

Process

Sustainable Development

DSTI/SU/SC(2006)29

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Strip Casting

Casting RollingGrinding Reheating

Con

vent

iona

l

200 mm 2.7 ~ 6 mm

500 m

32 mm

70 mHR

Steelmaking

Strip

Cas

ting

1.6 ~ 3. 0 mm

70 mHR

S/C

elimination

Steelmaking

FINEX

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LNG electricity generationLNG electricity generationLNG electricity generation

Participation in international efforts asIISI “CO2 Breakthrough Programme”

Participation in international efforts asParticipation in international efforts asIISI IISI ““COCO2 2 Breakthrough Breakthrough ProgrammeProgramme””

Energy Conservation through recovery facilities

Energy Conservation Energy Conservation through recovery facilitiesthrough recovery facilities

Promotion of recycling by-products and waterPromotion of recycling Promotion of recycling byby--products and waterproducts and water

Energy-Saving Measures

Thank you for your attention!Thank you for your attention!

Ministry of Commerce, Industry & EnergyRepublic of Korea

Ministry of Commerce, Industry & EnergyRepublic of Korea