POSCO Stainless Steel Halts Full Operations: What Impact Will It Have on the Global Market?

The stainless steel plant of South Korean steel giant POSCO in Pohang has been ordered to fully suspend operations starting November 6 due to a major industrial accident.

The incident, which resulted in one death and three injuries, has not only raised deep concerns about industrial safety but also, given POSCO's central role in the global stainless steel supply chain, may potentially disrupt the global stainless steel supply chain.

1. Short-Term Supply Gap and Price Volatility Risks

The Pohang facility is one of POSCO's two major stainless steel production bases, equipped with a complete production line from smelting to cold rolling, with an annual capacity of over 2 million tons.

This full shutdown directly impacts critical processes such as annealing and pickling, potentially halting the production of downstream products like cold-rolled steel.

Market analysis suggests that this could lead to a short-term supply gap for high-end stainless steel plates, thereby triggering price fluctuations in the global market.

2. Potential Reshaping of Global Trade Flows

POSCO's unexpected production halt has brought structural adjustments to the global stainless steel market, and other major production regions are already responding.

Industry players in the Taiwan region of China have pointed out that due to recent weak demand in the South Korean steel market, there have been instances of South Korean buyers canceling orders. Currently, the Taiwan region of China still has unused sales quotas for South Korea. If domestic supply in South Korea tightens due to the shutdown, these remaining quotas could be activated, providing opportunities for steel mills in regions like the Taiwan region of China to fill the gap.

At the same time, production capacities in mainland China and Indonesia may also absorb the spillover orders, leading to a realignment of global trade routes.

Historical experience shows that when POSCO suspended production due to a typhoon in 2022, it significantly weakened South Korea's net export capacity and raised expectations for increased stainless steel exports from China. This incident could similarly reshape trade flows.

3. Pressure on Order Deliveries in Downstream Industries

POSCO's global customers are urgently assessing the impact of this incident on existing order delivery schedules. Downstream industries, such as home appliances and automotive manufacturing, may face production delays if their inventories are insufficient, and they will need to actively seek alternative supply channels.

4. Operational Challenges and Responses

This safety incident has placed direct pressure on POSCO's operations. Although the group's overall performance has been positive recently, the full shutdown will undoubtedly affect the production and sales of its stainless steel products.

More importantly, the accident has once again exposed vulnerabilities in the safety management of its outsourcing operations, which may accelerate the reform of its internal safety control systems.

The full shutdown of POSCO's stainless steel production is not merely a matter of "reduced output" but will trigger a series of chain reactions. In the short term, will it cause price fluctuations? In the medium term, who can seize the opportunities presented by new trade flows? In the long term, who can build true core competitiveness in safety management and supply chain resilience?

The uncertainty lies in the duration of the shutdown. If it is only a brief suspension for inspections, the impact may be quickly absorbed by the market. However, if the investigation is prolonged or large-scale rectifications are required, the aforementioned medium- to long-term impacts could become profound and significant.

Participants in the global stainless steel market are holding their breath for further updates from POSCO.