Completion of Car Steel Sheet Price Increase... 150,000 Won Cost Increase per Vehicle Occurs

by Oh Hyungil

Published 24 Apr.2022 15:39(KST)

▲Hyundai Steel Dangjin Steelworks operates an integrated system that produces steel slabs, semi-finished steel products, by extracting molten iron from blast furnaces and electric furnaces, and then manufactures hot-rolled steel, cold-rolled steel, automotive steel sheets, and parts materials. The photo shows a 25cm-thick slab heated to 1250℃, being stretched under pressure to create a 3mm-thick hot-rolled steel sheet, then coiled and uncoiled like a roll.

[Asia Economy Reporter Oh Hyung-gil] The price increase of automotive steel sheets has caused a price hike of 150,000 KRW per vehicle.

On the 24th, the steel and automotive industries reportedly concluded negotiations to raise the price of automotive steel sheets by about 150,000 KRW per ton in the first half of the year.

So far, the steel industry has expressed that a price increase is inevitable due to the sharp rise in raw material prices such as iron ore and coal. 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, have surged.

As of the 23rd, the price of iron ore was $150.5 per ton, up 22.5% compared to the beginning of the year. The price of coking coal also surged 47.4% to $530 per ton as of the 22nd compared to the start of the year.

A steel industry official said, "Negotiations have virtually been completed to raise prices by about 150,000 KRW per ton, and only signing remains."

Considering that the price of steel sheets has been between 1.15 million and 1.25 million KRW per ton, the future price will rise to around 1.3 million to 1.4 million KRW per ton. Generally, producing one medium to large-sized vehicle weighing 1.7 to 2 tons requires about 1 ton of steel, so this results in a minimum price increase factor of 150,000 KRW per vehicle.

On the other hand, negotiations over the price of thick plates between the steel and shipbuilding industries continue to be a tense tug-of-war. Although the shipbuilding industry’s order performance last year was not bad, due to the nature of the industry, it is difficult to immediately reflect the increase in manufacturing costs, so there is a possibility that negotiations may be further delayed.

In particular, the shipbuilding industry must minimize the price increase because thick plate prices, which account for 20% of total manufacturing costs, are expected to have a significant impact on profits if they rise.

Last year, shipbuilders recorded considerable overseas orders after a long slump, but since most cost increases were not reflected in delivery prices, if thick plate prices rise, profits are inevitably expected to deteriorate accordingly.