Aftermath of Ukraine... Steel Price Increase Begins in Earnest "Real Economy Impact Inevitable"

Sharp Rise in Iron Ore and Thermal Coal Prices
Domino Effect on Steel Product Prices

Rebar Industry Demands Contract Price Increase
Cement Industry Appeals Against Price Pressure

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] As raw material prices surge due to Russia's invasion of Ukraine, economic damage is becoming a reality across domestic industries. With the prices of iron ore and thermal coal rising, steel product prices have increased, putting the shipbuilding and automotive industries on high alert for cost management. Construction sites are also being hit hard by price hikes in rebar and cement.

According to the industry on the 7th, Hyundai Steel raised rebar prices for the second consecutive month following last month. After increasing prices by 29,000 KRW per ton last month, they raised them by 31,000 KRW this month, pushing rebar prices close to 1,022,000 KRW per ton. This is the first time the base price of rebar has exceeded 1 million KRW.

For steel pipe products, a price increase of 100,000 KRW per ton has been applied starting from shipments on the 2nd. Due to continuous price increases of Chinese and Japanese products, they have no choice but to reflect the increased costs.

SeAH Besteel also raised prices of special steel products by up to 150,000 KRW per ton starting from shipments on the 7th. This is due to the strong prices of alloy raw materials such as chromium and molybdenum, as well as the continuous rise in energy costs like thermal coal.

The steel industry has not yet suffered direct damage as raw material imports have not been halted since the Ukraine crisis, but there are concerns that long-term disruptions in raw materials and semi-finished product supply are inevitable.

However, damage to related industries is already occurring due to steel product price increases. The immediate rise in rebar prices is increasing cost burdens at construction sites, and rebar companies are demanding contract price increases due to soaring construction material and labor costs.

Domestic cement companies, which heavily depend on Russian thermal coal, are also complaining about price pressure. The cement industry recently notified the ready-mixed concrete (Remicon) sector of an 18% price increase, raising cement prices from 78,800 KRW to 93,000 KRW per ton. Remicon associations are also reported to have conveyed their intention to raise Remicon prices to the construction industry.

With price hikes for shipbuilding heavy plates and automotive steel sheets also anticipated, the shipbuilding and automotive industries are engaged in tough negotiations with the steel industry.

The problem is that this steel-driven price surge is unlikely to be resolved in the short term. Even if alternative import sources are secured, it will take considerable time for the raw material price increases triggered by the Ukraine crisis to subside.

Due to Chinese government market intervention, iron ore prices, which had fallen to $136.89 per ton on the 25th of last month, rose over 6% in a week to $145.14 per ton on the 4th. Particularly, thermal coal, of which 16% of last year's total consumption was imported from Russia, saw prices jump 22.2% last week alone, reaching $172.10 per ton.

Steel scrap prices also surged 85.6% compared to the same period last year. Russia is a net exporter of steel scrap following the European Union (EU), the United States, and Japan, with imports of about 4.8 million tons, of which 573,000 tons (approximately 13%) come from Russia.

Researcher Bang Min-jin of Eugene Investment & Securities diagnosed, "The Ukraine crisis is not only affecting supply and demand but also stimulating raw material prices, adding upward pressure on steel prices."

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