In order to prevent Chinese aluminum producers from invading the Korean market, the Korean aluminum industry began jointly resisting a Chinese aluminum giant from entering the market in South Jeolla Province’s Gwangyang Bay Area since 2018.
In November 2018, Henan Mingtai Aluminum, a Chinese aluminum sheet manufacturer, signed an investment contract with the Gwangyang Bay Area Free Economic Zone Authority. It plans to invest $40 billion won ($32.8 million USD) to produce aluminum products. The groundbreaking ceremony was held in December 2018 to kick off the construction of the plant, but the project was opposed by the Korean aluminum industry.
Mingtai Aluminum is the second-most prolific producer of rolled aluminium in China. The Korean aluminum industry believes that its annual production of rolled aluminum is equivalent to over 80% of South Korea’s, which would severely undercut South Korea’s domestic aluminium producers.
Jiang Haoxiang, Vice Chairman of the Korea Nonferrous Metals Association, said, “The production scale of Mingtai Aluminum in South Korea is 100,000 tons of plates and 20,000 tons of foil a year, which is equivalent to the production scale of two Korean companies. Thus, losses are inevitable for Korea’s domestic producers.”
South Korean officials believe that introducing such a substantial player in the global aluminium market to South Korea will surely drive up aluminum production, with a corresponding drop in aluminum prices. The Korean industry suspects that by entering South Korea’s market under unfavorable cost conditions, Chinese manufacturing companies’ might be using South Korea as a roundabout export base. If this is the case, there may be potential trade friction between South Korea and the United States in the future.
Jiang Haoxiang said, “The Trump administration has proposed higher anti-dumping duties. We have concerns that China is using South Korea as a production base to enter the US market.”
The industry is doubtful about the “employment promotion” effect of the Foreign Investment Promotion Act. Meanwhile, it is concerned that unreasonable foreign investments will cause Korean companies to close down, leading to an increased unemployment rate and possible leakage of advanced technology.
Jiang Haoxiang said, “Our domestic companies and Mingtai Aluminum produce many similar aluminum products. South Korea’s ultra-thin technology is actually more advanced than China’s. Thus, we are worried about whether the ultra-thin technology and other advanced technology will flow into China.”
The Korean industry is very worried that if large Chinese companies such as Mingtai Aluminum successfully invest in South Korea, more investments will follow, leading to more domestic companies suffering losses.