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Shipping & Shipbuilding

Korean shipbuilders find relief in falling iron ore prices, rise in new orders

The drop in iron ore prices nicely positions shipyards for talks with steelmakers over steel prices

By Aug 23, 2021 (Gmt+09:00)

Hyundai Heavy dockyard
Hyundai Heavy dockyard

South Korea’s major shipbuilders expect to post improved earnings in coming quarters as falling iron ore prices put them in a stronger position in negotiations with steelmakers regarding steel plate procurement.

According to trade ministry data on Monday, the benchmark Chinese spot price for iron ore was quoted at $140.44 per ton as of Aug. 20, down 40.9% from a record high of $237.57 just three months earlier. It's the first time in eight months that the price has fallen to the $140 range.

Lower iron ore prices often lead to a drop in the prices of steel plates used in ships, boding well for shipbuilders.

The sudden sharp drop in iron price prices comes as China, the world’s top steelmaker, is reducing production on weaker demand amid a resurgence of the COVID-19 pandemic and market jitters over US monetary tightening.

China’s crude steel production reached 86.79 million tons in July, down 8% from a year ago.

China is also urging its steelmakers to drastically cut their output of low-quality steel products as part of the government’s carbon emission reduction efforts.

Steel plates used in shipbuilding
Steel plates used in shipbuilding


Analysts say the Chinese move bodes well for Korean shipbuilders, which have been reeling from higher steel plate prices.

Korea’s "Big Three" – Korea Shipbuilding & Offshore Engineering Co. (KSOE), Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. – posted a combined 3 trillion won ($2.56 billion) in operating losses in the first half despite a steady stream of new orders from the start of the year.

The significant loss was largely due to their heavy provisioning in their earnings against higher prices of steel plates.

The three shipyards are in negotiations with the country’s major steelmakers, including POSCO and Hyundai Steel Co., over the prices of steel plates to be supplied under contracts for the rest of the year.


Steelmakers are known to be demanding a 64% increase from the first half, to bring the selling price to 1.15 million won a ton for the second half, citing higher prices of raw materials, including iron ore.

Samsung Heavy's LNG carrier
Samsung Heavy's LNG carrier

With the significant drop in iron ore prices, however, the contract steel plate prices could fall to around 1 million won, according to industry watchers.

“Given the steady stream of new shipbuilding orders, Korean shipbuilders’ earnings are expected to rise further into next year,” said an industry official.

Samsung Heavy said on Monday it has won a 461 billion won ($392 million) order to construct two liquefied natural gas (LNG) carriers from an Oceanian shipper.

Samsung said it will deliver the vessels by September 2024.

With the latest order, the shipbuilder has attained 78% of its annual order target of $9.1 billion, with 54 ships worth $7.1 billion.

The Big Three has said they have already secured close to 90% of their annual order target in the first half.

Write to Jung-hwan Hwang at

In-Soo Nam edited this article.

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