Different Positions

South Korean steelmakers are having a hard time coming to an agreement with shipbuilders with regard to the prices of their thick plate products.
South Korean steelmakers are having a hard time coming to an agreement with shipbuilders with regard to the prices of their thick plate products.

 

South Korean steelmakers are having a hard time coming to an agreement with shipbuilders with regard to the prices of their thick plate products supplied to the shipbuilders. The former are insisting that the prices be raised with the current price of iron ore, a raw material for their products, being about 30% higher than in the beginning of this year. Meanwhile, the shipbuilders are maintaining that a higher price will further affect their already dire business conditions.

According to industry sources, POSCO is continuing to have negotiations with the shipbuilders with the prices of its thick plates fixed since the beginning of this year. Things are the same for Dongkuk Steel. It is currently taking a close look at how the talks between POSCO and Hyundai Heavy Industries will turn out as the result of the negotiations between the industry leaders is likely to determine the results of the talks between the others.

Hyundai Steel, in the meantime, has raised the prices of its thick plates supplied to non-shipbuilders on several occasions and by 120,000 won to 130,000 won per ton since the first month of this year. However, those of the products for use in ships have been raised only once, by 20,000 won to 40,000 won per ton.

Between January and this month, the international iron ore price rose from US$43 to US$55. Under the circumstances, the prices of steel products other than thick ship plates continued to rise whereas the prices of thick ship plates remained at the same level due to the severe recession in the industry. “As of now, the prices of the products are even lower than the manufacturing costs,” Hyundai Steel explained. POSCO echoed by saying, “Our thick ship plate sale was made at the BEP last year, and Chinese and Japanese steelmakers are currently raising the prices of their thick plates.”

Shipbuilders are dead set against any upward price adjustment though. “Thick plates account for 2% to 9% of costs in the shipbuilding industry and a 1% increase in thick plate price results in a 1% to 3.3% decline in shipbuilders’ operating profits,” one of them said. Steelmakers are planning to increase the production of thick plates for non-ship applications next year at the sacrifice of thick plates for supply to shipbuilders as the number of ships newly built by them is likely to plummet. 

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