Steelmakers raise prices amid higher material costs

Korean steelmakers are raising the prices of their products to reflect increased costs of raw materials, industry sources said Monday, though the price hikes are likely to be lower than expected.

POSCO recently agreed with a local carmaker to raise the prices of its automobile steel sheets, according to the sources.

This is the first time since 2017 that POSCO has raised prices.

POSCO also increased the prices of its cold rolled steel, picked oiled steel and galvanized steel in recent months.

“We can’t confirm the deal with our customer, but it’s true that the company has been trying to raise the prices of our products due to increased raw material costs,” a POSCO spokesperson said.

The price of iron ore jumped from $72.63 per ton in January to $124.05 in July — a more than 70 percent increase — before decreasing again.

This hike in raw materials ate into steelmakers’ bottom lines in the first half of the year.

POSCO saw its operating profit drop 15.3 percent year-on-year to 1.5 trillion won ($1.2 billion) in the first half, while No. 2 player Hyundai Steel posted an operating profit of 445 billion won, down 33.5 percent from a year ago.

Japan’s Nippon Steel recently inked a deal with Toyota Motor to raise the price of steel sheets for automobiles, and industry insiders have said local steelmakers are in talks with their customers to raise steel prices.

“We are still negotiating with our customers over automobile sheets prices,” a Hyundai Steel spokesperson said.

“If POSCO and others have raised their product prices, then it will serve as a good reason for us to push for a price hike.”

Korea’s major steelmakers are also pushing to raise the prices of steel products used in the shipbuilding industry, though negotiations have not been easy.

Local shipbuilders have been demanding a freeze in prices of thick steel plates in the second half so that they can stay competitive amid the global economic slowdown.

Industry observers said that steelmakers will eventually raise the prices of steel plates for shipbuilding to recoup their losses.

“The recent drop in iron prices may weaken steelmakers’ calls for a price hike, but since there are no alternatives, steelmakers are in a better position (in price negotiations),” said Jung Ha-neul, an analyst at Korea Investment & Securities.