A general view shows steelworks of Korea's largest steelmaker POSCO in Pohang, Feb. 13. AFP-Yonhap

Two Korean steelmakers said they were considering new investment options in the United States, while Europe's steel mills warned of a flood of surplus metal as increased tariffs on U.S. steel and aluminium imports came into force on Wednesday.

Major steelmakers POSCO Holdings and Hyundai Steel said the options include investment in operations in the U.S., although no final decisions had been made.

U.S. President Donald Trump's action to increase protection for U.S. steel and aluminium producers restores effective global tariffs of 25 percent on all imports of the metals and extends the duties to hundreds of downstream products made from the metals, from nuts and bolts to bulldozer blades and soda cans.

The countries most affected by the tariffs are Canada, the biggest foreign supplier of steel and aluminium to the U.S., Brazil, Mexico and Korea, which all have enjoyed some level of exemptions or quotas.

"We plan to focus more on high-value-added products and enhance our technological capabilities to produce existing products more economically," a spokesperson for Korea's POSCO Holdings said.

"We are also reviewing investment plans for upstream steel processes in the U.S. or India, but no final decision has been made yet," the spokesperson said.

Local rival Hyundai Steel is considering building a steel factory in the southeast United States but nothing has been decided, a spokesperson said, adding that the increased U.S. tariff would have a negative impact on the Korean steel industry.

Korea previously benefited from a duty-free steel quota under an agreement made in 2018 during Trump's first term as president.

Its trade ministry said on Wednesday the government will prepare measures that would include supporting domestic firms' investment overseas and expansion into new markets.

A steel worker at blast furnace 1 of German corporation ThyssenKrupp in Duisburg, Germany, Dec. 10 2024 / EPA-Yonhap

Meanwhile, European steelmakers, which have long complained about cheap imports, worry about a possible flood of steel into Europe at a time of surplus on the market.

"Indirect effects are more serious if exports destined for the USA are diverted to Europe to a considerable extent due to the tariffs. This would severely damage the European market in the long term," Thyssenkrupp Steel Europe, Germany's largest steel producer, said in a statement.

Its rival Salzgitter said protective measures would be needed quickly, calling on the European Union to pursue a sectoral agreement with the United States.

"This is because the tariffs on steel announced by the U.S. will lead to further volume diversions to Europe, which will further increase the already existing import pressure due to overcapacities from China and many other countries," the company said.

Luxembourg-based Aperam also called for dialogue, saying that neither the company nor its U.S. clients would benefit from a prolonged trade conflict.

"Even if an EU-U.S. agreement is reached, the tariffs will still lead to trade deflection, with exporters from countries like Korea and Taiwan shifting their sales to Europe," Aperam said.

Austria's Voestalpine, which has regularly urged the EU to implement countermeasures, reiterated the plea and said that tariffs would have a 2-3 percent impact on its revenue despite its "local for local" production strategy.

"We are also holding discussions with our customers about the extent to which tariff surcharges need to be passed on," it said.

Other European steelmakers are planning to ramp up production in the U.S., as announced by ArcelorMittal, the world's second largest steelmaker.

Other firms with less exposure to the U.S. market or with major manufacturing presence there hoped the increased tariffs would lift steel prices.

"As the U.S. tariffs come into effect, the company expects to see the positive impact from an improvement in steel prices," a spokesperson for Australia-listed steelmaker BlueScope said.

The company produces more than three million tonnes of steel a year at its plant in Delta, Ohio, but exports just 300,000 tonnes a year to the U.S.. The spokesperson said the company was disappointed that Australia had not received an exemption.

Australia's Prime Minister Anthony Albanese said on Wednesday his country will not impose reciprocal tariffs on the U.S. due to potential impact on inflation, and he would continue to lobby the U.S. administration for a reprieve.

The BlueScope spokesperson said the company is working closely with Australian trade and diplomatic staff in Canberra and Washington, and with senior representatives in Congress to ensure the BlueScope investment proposition is fully understood.

In Vietnam, the fifth-largest steel exporter to the U.S., traders said the new tariffs might benefit local companies, as most of them had been hit with 25 percent levies in 2018.

"I think Vietnam steel may benefit from this tariff," a Hanoi-based steel trader said, declining to be named because he was not authorised to speak to media. (Reuters)