Skip to content
  • KOSPI 2745.82 -9.29 -0.34%
  • KOSDAQ 910.05 -1.20 -0.13%
  • KOSPI200 373.22 -0.86 -0.23%
  • USD/KRW 1350 -1 -0.07%
  • JPY100/KRW 892.24 -0.48 -0.05%
  • EUR/KRW 1458.27 -4.53 -0.31%
  • CNH/KRW 185.94 -0.31 -0.17%
View Market Snapshot
Steel prices

Korean shipbuilders baffled by steelmakers’ offer to hike prices by 64%

While steelmakers want further price increases, shipbuilders say they have not recovered from the pandemic yet

By Jul 12, 2021 (Gmt+09:00)

2 Min read

Steel products made at POSCO's Gwangyang steel mill
Steel products made at POSCO's Gwangyang steel mill

South Korea’s major steelmakers are demanding a sharp price hike for steel plates used in ships, adding to difficulties faced by domestic shipbuilders, which have yet to recover from the pandemic-caused slowdown.

According to the steel and shipbuilding industries on Monday, Korea’s two largest steelmakers, POSCO and Hyundai Steel Co., have proposed the prices of steel plates they offer to shipbuilders increase to 1.15 million won ($1,002) a ton in the second half, up 64% from 700,000 won in the first half.

Steelmakers and shipbuilders negotiate the contract prices of steel plates used to make ships twice a year. The first-half price of 700,000 won per ton is a 17% increase from 600,000 won earlier.

“There’s a big price gap between the two sides this time. It’ll take quite some time before they reach an agreement,” said an industry official.

The two steelmakers are currently in talks with Korea Shipbuilding & Offshore Engineering Co. (KSOE), Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co.

Industry watchers say steelmakers want to narrow the gap between the spot prices and the contract prices they offer to big clients such as shipbuilders.

Steel plates sell at about 1.3 million won a ton in the open market.

POSCO and Hyundai Steel have steadily increased the prices of their steel products to offset the rising prices of steelmaking raw materials such as iron ore.

A rebounding global economy has boosted the price of iron ore, a key raw material, from $154.9 per ton in February to $226.5 in May -- a 46% increase.

The steelmakers said further steel price hikes are overdue given that the local shipbuilders are enjoying a rally in ship orders with increasing cross-border cargo shipments.

SHIPBUILDERS YET TO RECOVER

The local shipbuilders, however, say that they are still struggling to recover from the pandemic-caused economic downturn and it normally takes a couple of years for the recent ship orders received to be reflected in their earnings.

KSOE, the intermediate shipbuilding holding company of the Hyundai Heavy Industries Group, posted a first-quarter operating profit of 67.5 billion won and is forecast to report similar earnings for the second quarter.

Hyundai Heavy doockyard
Hyundai Heavy doockyard

Meanwhile, Daewoo Shipbuilding and Samsung Heavy are expected to remain in the red for a second consecutive quarter in the three months to June.

Steel plates account for about a fifth of total shipbuilding costs and an increase of 50,000 won per ton usually costs a shipbuilding firm an extra burden of 300 billion won annually, according to shipbuilding officials.

“While the steelmakers are already posting decent earnings from price hikes and rising demand, we are not. Any steel price increase should be made at an appropriate level,” said an official at a local shipbuilder.

Last week, POSCO, the country’s top steelmaker, said its second-quarter operating profit soared to an all-time high of 2.2 trillion won on a consolidated basis from 167.7 billion won a year ago on strong demand from automakers and shipbuilders.

Write to Kyung-Min Kang at Kkm1026@hankyung.com
In-Soo Nam edited this article.
More to Read
Comment 0
0/300