Local steelmakers are on the verge of coming to a consensus with heavy industry companies in setting the steel plate price for the second half of this year.
According to the industry, Wednesday, the steelmakers and local big three heavy industry companies ― Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering (DSME) and Samsung Heavy Industries ― went through tough negotiations and came to a compromise on the price, which is expected to be a little lower than POSCO’s initial offering of 1.15 million won ($977) per ton. The deal is set to be finalized within this week.
“We came to a compromise with the heavy industry companies on a price that will be beneficial for all affected parties,” a POSCO representative said.
Local shipbuilders initially wanted to negotiate a price of around 1 million won, claiming that a sudden rise in the steel plate price will affect their profitability. However, steelmakers say the rise in commodity prices, including iron ore, made a price increase inevitable, so they had to lower their initial price slightly in consideration of their long-term relationships with the shipbuilders.
The set price has not been made public but industry watchers say that it is around 1.1 million won per ton.
“The steel plate price is a sensitive issue as it directly affects shipbuilders’ profitability. But we were expecting the price to be raised to around 1.1 million won per ton,” a heavy industry official said.
Local steelmakers and shipbuilders agreed to cooperate to secure their competitiveness in the shipbuilding sector, including plans to cooperate with each other in constructing eco-friendly vessels.
The increase comes amid rapid rises in commodity and iron ore prices.
According to the Korea Resources Corp., the price of mainland Chinese iron ore came out to $163.20 per on ton last week. The price of iron ore peaked at $219.90 per ton on July 9, and has since been on a gradual decline for five consecutive weeks.
The price negotiations took into consideration the fact that the iron ore price, at over $200 per ton, will result in an increase in the steel plate price. Steel plates are widely used in shipbuilding as well as in construction, heavy equipment manufacturing and plant construction.
The steel plate price soared in the second quarter, with suppliers charging over 1.2 million won per ton, but price negotiations with shipbuilders are held only semiannually, so the steelmakers were unable to reflect that increase in price in their price negotiations.
Source: The Korea Times