South Korea's steel exports to the European Union (EU) dropped significantly in July compared to the same period last year, following the EU's implementation of new steel measures.

While industry insiders note that the EU's measures alone do not fully explain the drop in exports, they analyze that the policy has had some impact.

According to data from the Korea International Trade Association (KITA) on Sunday, steel product exports (based on MTI 61) to the EU last month stood at $188 million, down 41.2% from $320 million in July of last year.

This marks the lowest level for the month of July since July 2013, when exports stood at $166 million.

In terms of volume, EU-bound exports last month reached 180,948 tons, down 44.8% from the same period a year earlier.

The EU, South Korea's second-largest steel export market after ASEAN, implemented new steel measures starting July 1. These include a 46% reduction in tariff-rate quotas (TRQs) on imported steel products and an increase in tariffs from 25% to 50% for volumes exceeding the quota.

Following rounds of negotiations, the South Korean government significantly lowered the quota reduction margin, but dedicated quotas still decreased by 19.7% from 2,581,000 tons to 2,073,000 tons.

Additionally, there is a common quota of 1,735,574 tons that exporting countries can secure through competition.

"While South Korea fared relatively well in securing quotas compared to other countries, the partial reduction in quotas appears to have led to a decline in European sales compared to the same period last year," an industry official said.

"Given that it is the early stage of the EU measures' implementation, uncertainty likely dampened exports," the official added, noting, "We understand that some companies reduced export volumes months in advance, considering the time lag involved in customs clearance."

The official explained that some companies began taking preemptive measures even before quotas were finalized, following the EU's announcement of strengthened protectionist policies.

Exports to the EU recorded 307,668 tons in March—up 15% year-on-year—before dropping 17.5% to 249,072 tons in April.

Exports also fell by 15.1% and 15.2% year-on-year in May and June, respectively.

At the same time, opinions suggest it is still too early to evaluate the ripple effects of the EU's measures.

"While the new steel measures certainly have an impact, it is still difficult to determine the extent," another industry official said. "Steel product conditions vary by item, and import-export volumes can fluctuate depending on various variables such as inventory levels, so we need to monitor the trend."

An official from the Ministry of Trade, Industry and Energy also stated, "While uncertainty may have reduced exports, we need to give it more time to assess the true impact of the new steel measures. When the U.S. raised tariffs last year, exports dropped initially, but they have actually increased now."

Steel product exports to the U.S. stood at $231 million in July of last year—down 19.6% year-on-year following the U.S. tariff hikes—but surged to $537 million in July of this year.

The government plans to closely monitor the impact of the EU measures while supporting efforts to minimize damage to domestic companies.

To generate domestic demand exceeding the 510,000-ton quota reduction, the government is pursuing relevant measures, such as supporting connections between demand-side and supply-side companies.

(Photo: Yonhap News)