As Raw Material Prices Rise, Steel Prices Soar... Cost Burden on Car, Shipbuilding, and Construction Industries

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[Asia Economy Reporter Oh Hyung-gil] Due to Russia's invasion of Ukraine and other factors, the prices of raw materials used in steel production, such as coking coal and iron ore, continue to soar. Domestic steelmakers are also raising product prices in succession. This is expected to become a burden for industries that primarily use steel products, such as automotive, shipbuilding, and construction.

According to the Ministry of Trade, Industry and Energy and the steel industry on the 20th, the price of coking coal (Australian origin), used as fuel in molten iron production, recorded $658.75 per ton on the 17th. On the 15th, it rose to $662.75 per ton, reaching an all-time high.

The price of coking coal hit a low of $110.69 per ton in May last year and has been on the rise since. After surpassing $500 earlier this month, it has increased by nearly $200 per ton in just the past two weeks, showing a sharp upward trend.

This is interpreted as a chain effect caused by sanctions against Russia, which have prevented the use of Russian coking coal. Demand has surged for Australian coking coal as a substitute for Russian coal, causing prices to skyrocket. Russian coal accounts for about 16% of the total coking coal imports of the domestic steel industry, making it the second largest after Australia.

Iron ore prices (Qingdao Port, China) have decreased significantly compared to last year's peak but still remain at a high level. As of the 18th, the price was $151.35 per ton, 23.15% higher than at the beginning of the year. This price has fallen recently after the Chinese government announced crackdowns on iron ore speculation; on the 7th, it had risen to $162.75 per ton.

The price of iron scrap, the raw material for rebar, shows a similar situation. As of the 1st of last month, it reached 680,000 KRW per ton, marking the highest level in over a year.

Due to rising costs, the steel industry has no choice but to raise product prices. They are demanding price increases in negotiations with large-scale customers who require automotive steel sheets and shipbuilding plates.

POSCO has raised the price of shipbuilding plates sold to steel distributors twice this year by 60,000 KRW. The price of hot-rolled steel distributed has also been increased by 50,000 KRW per ton this month, with plans to raise it by an additional 100,000 KRW in April.

Hyundai Steel also raised the distribution prices of hot-rolled and cold-rolled steel by 50,000 KRW per ton this month, and shipbuilding plate prices by 30,000 to 50,000 KRW per ton. It is reported that they are considering raising hot-rolled and cold-rolled prices by 100,000 KRW per ton in April as well.

Rebar prices were increased by 29,000 KRW per ton last month and 31,000 KRW per ton this month. As a result, the base price for rebar has risen to 1,022,000 KRW per ton, surpassing 1 million KRW for the first time.

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