Steel­mak­ers, ship­builders in feud over steel plate prices

The Korea Times - - BUSINESS - By Nam Hyun-woo [email protected]­re­

POSCO, Hyundai Steel and other steel­mak­ers are at odds with ship­builders as they have failed to nar­row their dif­fer­ences over prices for thick plates of steel for ships, ac­cord­ing to in­dus­try of­fi­cials, Sun­day.

Steel­mak­ers are seek­ing hikes in plate prices, cit­ing soar­ing iron ore costs. But ship­builders, in­clud­ing Dae­woo Ship­build­ing & Marine En­gi­neer­ing (DSME), Hyundai Heavy In­dus­tries and Sam­sung Heavy In­dus­tries, want a price freeze amid slug­gish global de­mand for ships.

Their feud has es­ca­lated since the ship­builders have re­quested the gov­ern­ment to in­ter­vene in ne­go­ti­a­tions and help keep steel prices at cur­rent lev­els, which has an­gered steel­mak­ers, ac­cord­ing to the of­fi­cials.

Ship­builders and steel­mak­ers have been in ne­go­ti­a­tions over prices for 6 mil­lime­ter or thicker plates for the sec­ond half or the third quar­ter of this year since July, but have ex­pe­ri­enced a stale­mate in their ne­go­ti­a­tions.

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

In the first half of this year, steel­mak­ers mostly froze their thick plate prices at around 700,000 won ($586) per ton, but they are now de­mand­ing an av­er­age 30,000 won to 40,000 won hike.

“Steel­mak­ers and ship­builders are lit­er­ally in ne­go­ti­a­tions for 365 days over prices, but the on­go­ing ones are es­pe­cially in stale­mate, as the two sides are not mak­ing any com­pro­mises with their de­mands,” an of­fi­cial at a steel­mak­ing com­pany said ask­ing not to be named.

“Steel­mak­ers saw de­clin­ing prof­its ear­lier this year, but kept thick plate prices un­touched be­cause the ship­build­ing in­dus­try was in dis­tress at the time. How­ever, iron ore prices sky­rock­eted dur­ing the sum­mer, and steel­mak­ers have no choice but to de­mand re­al­is­tic prices.”

Ac­cord­ing to the Korea Re­sources Cor­po­ra­tion, the bench­mark 62 per­cent Fe iron ore price was $72.63 per ton, Jan. 4 but quickly soared to $88.39, Feb. 15; $104.30, May 24; and reached $122.20, July 5. Though the price has re­mained at around $90 since Septem­ber, steel­mak­ers said their ne­go­ti­a­tions are based on stored iron ore, thus the cur­rent prices are ir­rel­e­vant to the ne­go­ti­a­tions.

How­ever, ship­builders are de­mand­ing a freeze, say­ing they are still far from a re­bound.

Dur­ing a Sept. 24 event held by ship­build­ing com­pa­nies, Korea Off­shore & Ship­build­ing As­so­ci­a­tion Chair­man and DSME CEO Lee Sung-geun said “the en­vi­ron­ment for ship­builders is ag­gra­vat­ing due to ris­ing thick plate prices and la­bor costs”, and, “Pol­icy level in­ter­ven­tions are re­quired in thick plate price ne­go­ti­a­tions.”

“Ship­builders are des­tined to pay keen at­ten­tion to thick plate prices be­cause thick plate costs ac­count for nearly 20 per­cent of the en­tire cost of build­ing a ship,” a ship­build­ing firm of­fi­cial said.

“Since ship­build­ing takes time be­tween or­der and ac­tual man­u­fac­tur­ing, the ves­sels that com­pa­nies are cur­rently mak­ing are those or­dered at low prices dur­ing the global ship­build­ing in­dus­try slow­down. This does not cover the cur­rent price.”

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