It is expected that an increasing amount of thick plates made in China will be supplied to the Korean steel market, as multiple Chinese steel manufacturers are poised to penetrate the market one after another.
For example, Tangshan Iron and Steel recently signed a business agreement with an export agency to export 100,000 tons of thick plates to Korea per year. The agreement is due to the sluggish demand in the domestic market of China. Tangshan Iron and Steel’s annual crude steel production capacity reached 20 million tons last year, and 3.07 million tons of it was exported during the same period. The company is planning to increase its exports to Korea and some other countries this year.
“Tangshan Iron and Steel signed the contract with an exporter running branches in Beijing and Hong Kong,” said an industry source, adding, “It seems that things will be harder for Korean steelmakers down the road with a lot of other Chinese steelmakers, not just Tangshan, rushing into the Korean market.”
Korea recorded a trade deficit of US$2.07908 billion against China in the steel industry during the first five months of this year. The amount was US$3.10973 billion last year. In addition, the thick plate import volume surged by 29 percent from a year earlier to 517,632 tons in the first quarter of 2014.
At present, Korean construction companies depend heavily on Chinese thick plates for the sake of cost reductions. Some Korean shipbuilders are using the products for the same purpose, too. Under the circumstances, Korean steelmakers’ profitability is expected to keep deteriorating, as they are in no position to mark up the prices of their products. POSCO has recently cut the prices of its products earlier this year in this vein.
The per-ton price of imported thick plates is around 600,000 to 610,000 won (US$584-593) now. Those supplied by POSCO and Hyundai Steel are priced at 650,000 to 660,000 won (US$632-642) per ton.
“It is likely that Chinese companies will continue penetrating the Korean steel market to cope with the sluggish domestic demand,” said an industry expert, continuing, “For Korean manufacturers, there is no option but to focus on the production of high value added products based on higher product competitiveness.”