South Korea: Demand for heavy plates set to recover on bullish shipbuilding outlook

The demand for shipbuilding is expected to increase in Jan’22, thereby leading to demand recovery for heavy plates.

In Dec’21, the heavy plates market witnessed a price rebound. As inventory began to decrease due to a decline in imports, prices rebounded.

In Jan, the burden of price adjustment is expected to be alleviated due to inventory reduction and supply burden. However, it is uncertain whether demand will recover, owing to rapid market changes as prices of Chinese imports are increasing.

Raw material prices

Price expectation and demand seem to have improved since Jan. However, in Dec, prices showed a marginal rise due to hike in prices by retailers.

Inventories in the market have begun to decline and the possibility that domestic inflows would be limited has increased despite a move to keep import prices flat due to the uncertainty of the Chinese government’s export policy.

The possibility of price cuts by heavy plate manufacturers is low due to the burden of production costs as raw material prices such as iron ore and bituminous coal remain high.

Dongkuk Steel has announced that it would raise the price of custom-made heavy plates by KRW 30,000/t ($25/t) from mid-Jan as the cost burden has aggravated and the price hike has been decided in the first quarter of this year to minimise deterioration in profits.

In H2CY’21, sales of heavy plates remained suppressed due to sluggish downstream demand.

Which way will plate prices go? 

In a situation where demand for heavy plates is expected to increase steadily, the prospect of a slowdown in imports and domestic supply is expected to lead to a decrease in inventories and may lead to a price recovery.

In fact, this year’s demand for shipbuilding is expected to continue the sharp increase like last year. As steel cutting for container ships increases from the beginning of this year, it is anticipated that it would be difficult to expand supply to general non-shipbuilding and distribution markets.

However, low offers to South Korea are likely to lead to an increase in imports, given the uncertainty of the Chinese government’s export policy.

Export offers for Chinese heavy plates (SS400) recorded a marginal decline from the level of $855/t at the end of Dec to $845/t in the first week of Jan, based on Feb shipments.

Outlook

Heavy plates manufacturers will keep a close eye on the market and refrain from actively purchasing material for the time being given the uncertainty regarding price movement.

It is expected that prices will continue to remain stable for some time. This is because the possibility of rapid market changes before China’s Winter Olympics in Feb seems low.

~Inputs from SteelDaily