Steelmakers, shipyards feud over price hike of steel plates

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SEOUL, May 12 (Yonhap) -- South Korean steelmakers are at odds with local shipyards over the price hike of thick steel plates used for shipbuilding, industry sources said Friday.

Industry leader POSCO and other steelmakers are pushing for hike prices of 6 millimeter or thicker plates, citing soaring iron ore costs and electricity rates in Asia's third-largest economy.

But shipbuilders, including Hyundai Heavy Industries Co., want steelmakers to refrain from raising prices, which they say would come as a big burden to their performances.

Shipbuilders and steel companies are very sensitive to hikes in prices of thick steel plates, a key material that accounts for about one-fourth of shipbuilding costs.

Local shipyards claim prices of thick steel plates remain high in spite of local steelmakers' decrease of 100,000 won (US$75) per ton last year.

Currently, the price of steel plates ranges from 1.1 million to 1.2 million won per ton, compared with around 600,000 won per ton in 2020.

Steel plate prices, however, have been on an upward spiral in the wake of jumps in raw materials costs amid the coronavirus pandemic.

"Ships are built usually one to two years after orders are won. That means a per-ton price hike to 1.2 million won or higher could lead to losses for shipbuilders," an industry source said on condition of anonymity.

This file photo shows a POSCO factory in South Korea's southern industrial city of Gwangyang. (Yonhap)

Shipbuilders and steelmakers usually have half-yearly negotiations on the prices of the plates. After the price is set for a certain period, shipbuilders make payments retrospectively.

Steelmakers, however, argue they have no choice but to jack up thick plate prices in light of surging iron ore costs and rising electricity costs.

International prices of iron ore, which came to about $80 per ton at the end of last year, have been hovering around $100 this year.

To cope with snowballing losses of state-run utility Korea Electric Power Corp., South Korea is tipped to hike electricity rates again for the second quarter of the year after an increase of 13.1 won per kilowatt hour for the January-March period.

An increase of 1 won per kilowatt hour is widely estimated to raise steelmakers' production costs by 10 billion won, which will inevitably lead to increased steel prices.

Industry watchers say steelmakers are seeking to push up prices of thick steel plates by more than 100,000 won per ton.

Stock market analysts predict steelmakers will mark up steel plate prices within the first half of the year.

"Price hikes of steel plates appear inevitable, given higher rates for industrial electricity and a near 50 percent jump in iron ore costs since November last year," Han Seung-han, an analyst at SK Securities Co., said. "That could increase cost burdens for local shipbuilders seeking performance turnarounds."

Local shipyards have been struggling with sluggish orders and rising costs for the past few years, selling non-core assets and shedding jobs to survive the prolonged slowdown.

South Korea is home to some of the world's biggest shipbuilders by sales: Hyundai Heavy Industries, Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co.

Hyundai Heavy Industries Co.'s shipyard in the southeastern port of Ulsan. (Yonhap)

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