Iron Ore Prices Hit Lowest Point This Year... Will It Revive Shipbuilding and Automobile Industries?

Price Drops 33% from Yearly High to $109 per Ton
Market Outlook Adjusted from 'Risk' to 'Caution'

Steel Industry Forecasts Profit Decline, "Production Cut Due to Facility Maintenance"
Shipbuilders & Auto Industry Expect "Reduced Raw Material Cost Burden After Sharp Increase"

[Asia Economy Reporter Oh Hyung-gil] 'The $100 mark could also collapse'

The price of iron ore, which has been leading commodity inflation, has been plunging sharply since the beginning of this month. It has dropped to as low as half the price compared to the same period last year. With the price of coking coal, a raw material for steelmaking, also falling significantly, expectations are growing that steel raw material prices will stabilize.

While the steel industry, which has reflected the increased raw material prices in product prices, is concerned about reduced profits, the shipbuilding and automobile industries expect some relief as steel product prices return to a stable trend.

According to the raw material price information from the Ministry of Trade, Industry and Energy on the 23rd, the import price of iron ore (62% FE) from China (CFR) fell 5.6% to $109.4 per ton as of the 22nd compared to the previous day. It dropped by as much as $53.35 (32.7%) from the year's highest price of $162.75 recorded on March 7. The market outlook indicator for iron ore, which had recorded 'risk' for three consecutive months from March to last month following the Russia-Ukraine war, has been downgraded one level to 'caution.'

Despite the lifting of China's COVID-19 lockdowns, which had restrained demand, iron ore prices have been plunging sharply since mid-month as the market entered the seasonal off-season.

Byun Jong-man, a researcher at NH Investment & Securities, diagnosed, "Due to China's economic slowdown and the off-season effect, prices have fallen to the lowest level in six months since December last year," adding, "Steel inventory levels are high, and the average daily crude steel production has increased to the level of the first half of last year, making it difficult for production to increase further."

The price of coking coal, the main raw material for steel products, is also on a downward trend. The export price of coking coal from Australia is $364.15 per ton, down 29.0% from the previous month. This is about half of the all-time high of $662.75 recorded on March 15.

The steel industry had somewhat anticipated the simultaneous price drop of iron ore and coking coal but is responding that the timing has been brought forward. It was expected that prices would remain strong to some extent due to global supply disruptions caused by the Russia-Ukraine war, but recently, Chinese steel prices have fallen, and due to fatigue from price increases, the trend has rapidly shifted downward.

A steel industry official said, "It will take some time for raw material prices to be reflected in actual sales prices," but added, "We are planning natural production cuts through facility maintenance rather than production due to the price decline."

Currently, the June distribution price for hot-rolled steel shipments has been frozen, but distribution prices are declining. The distribution price of hot-rolled steel fell from 1.41 million KRW per ton on April 11 to 1.25 million KRW per ton as of June 20.

If steel product prices stabilize, shipbuilders and automobile manufacturers are expected to alleviate their cost burdens. Automobile steel sheet prices increased by 150,000 KRW per ton in the first half of this year alone, and shipbuilding heavy plate prices have also risen for three consecutive quarters since last year.

Recently, Hyundai Steel is negotiating second-half heavy plate prices with the three major shipbuilders. A shipbuilding industry official said, "We need to watch a bit longer, but recently raw material prices have somewhat stabilized compared to the beginning of the year," emphasizing, "Heavy plate prices in the second half must be at least frozen."

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