The negotiations for automobile steel plate prices in the second half of the year between Hyundai Motor and POSCO ended at a lower level than expected. According to industry experts, it is known that the automobile steel plate price negotiations between POSCO and Hyundai Motor in the second half are being concluded at lower level of 100,000 won/tonne ($85/t), and detailed adjustments such as the time for retrospective application are in progress.
Considering this negotiation, it is highly likely that Hyundai Steel’s increase in automobile steel plate prices will be at a similar level, according to SteelDaily.
Low price levels compared to cost increase
The steel plate negotiations of the automaker did not take into account raw material prices like iron ore, coal etc, and the situation of intermediate distributors and component makers. It seems that steelmakers have taken a step back, considering the recent sharp drop in iron ore prices and domestic and overseas automobile demand.
The price of iron ore in the second half of the year has fallen but prices exceeded $200/tonne per ton when demand was soaring. In the end, the agreement to raise the prices is proof that the price negotiation method that the steel industry has adopted keeping in downstream demand is no longer meaningful.
Notably, the price hike in the first half of the year, when steel prices rose by only 50,000 won/t ($42/t), was not sufficient. In the second half of the year, negotiations to increase prices was too low compared to the increase in real demand and retail prices.
However, Hyundai Motor’s operating profit margin fell short of expectations, as steel plate suppliers are increasingly pressured to raise prices.
Auto component makers will also be impacted, especially those who have purchased hot-rolled or cold-rolled sheet materials from POSCO or Hyundai Steel and supplied to automakers.
With respect to hot-rolled (HR), the price increase of 680,000 won/t ($576/t) was made based on demand from the second half of last year to the third quarter of this year.
“It is difficult to predict how much delivery will be possible in this situation where the product is still being delivered at a loss, and for that counter-measures are urgently needed,” said a sales manager in a related company.
An official from another company also pointed out that such an unreasonable pricing system can be improved only if there are no small and medium-sized parts suppliers in between large steel companies and automakers.
Meanwhile, Hyundai Steel announced that it negotiated the domestic price of automotive steel through a company briefing for the third quarter on 28 Oct’21.
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