As Raw Material Prices Surge... Steel and Shipbuilding Heavy Plate Negotiations in Focus

Chosun Cools Down Sujoo's Winning Streak... Strongly Insists on Price Maintenance
Steel Industry Demands Reflecting Increased Costs in Delivery Prices Linked to Performance

Dongkuk Steel Dangjin Plate Mill Rolling Process

[Asia Economy Reporter Oh Hyung-gil] As raw material prices soar, the price negotiations for shipbuilding steel plates between the domestic steel and shipbuilding industries are walking on thin ice.

Since the COVID-19 pandemic, the shipbuilding industry, which has struggled to secure supply due to reduced steel production in China, strongly insists on maintaining prices as the negotiation results will determine whether they can break even.

If steel plate prices rise again this year following last year, it will inevitably dampen the recently recovering order momentum. On the other hand, steelmakers argue that while maintaining prices at levels similar to last year, the recent sharp rise in iron ore prices must be reflected in the delivery price. Since steel plate prices are linked to performance, the tense tug-of-war between industries is expected to continue this year as well.

According to the Korea Resources Corporation on the 7th, the market outlook indicator for iron ore has remained at the "caution" level for two consecutive months this year. As of January 28, the price of imported iron ore from China was $139.5 per ton, up $40 (40.3%) from $99.4 per ton on November 26. Although this is not as bad compared to exceeding $200 per ton in the third quarter of last year, price volatility remains high.

The steel and shipbuilding industries plan to conclude negotiations this month to set the delivery price of steel plates, which account for a significant portion of shipbuilding costs. Steel plates are hot-rolled steel sheets with a thickness of 6mm or more and are said to account for about 20% of shipbuilding costs. It is known that a 20,000 TEU ultra-large container ship uses about 50,000 tons of steel plates.

According to the Korea Institute for Industrial Economics and Trade, even a 10,000 KRW increase per ton in steel plate prices leads to a cost increase of about 360 million KRW for ultra-large oil tankers and about 500 million KRW for ultra-large container ships. Losses can snowball depending on price fluctuations.

The shipbuilding industry emphasizes price stabilization for mutual coexistence. Having agreed last year to raise steel plate prices by 100,000 KRW per ton in the first half and 400,000 KRW per ton in the second half, marking the first increase in four years, voices are emerging that no further price adjustments should be made.

Especially, despite recording order achievements exceeding 7 trillion KRW last month alone since the new year, there are concerns that losses will be unavoidable if raw material prices, including steel plates, continue to rise.

The steel industry maintains the stance of keeping steel plate prices at levels similar to last year. However, they see price increases as inevitable if raw material prices soar.

Senior Research Fellow Hong Sung-in of the Korea Institute for Industrial Economics and Trade said, "Even though there are forecasts that iron ore and coking coal prices will fall, if steel supply from Korea, China, and Japan does not increase, steel plate prices are likely to remain high for the time being," adding, "Close strategic cooperation is necessary to expand the competitiveness of the steel and shipbuilding industries."

This content was produced with the assistance of AI translation services.