South Korea: Hyundai Steel adopts new pricing system for rebar

Hyundai Steel, a leading steel producer in South Korea, has recently adopted a new system for rebar pricing. The main goal of the new mechanism is to reflect cost factors that were excluded from the previous system.

Earlier, Hyundai Steel was working with a formula whereby it consulted construction companies, and linked the price of ferrous scrap. Since then, there have been changes in the method, such as linking prices from the fourth quarter of CY’20 and setting the standard price every month from Jun’21. But, fundamentally, only ferrous scrap prices were being reflected.

Cost factors other than ferrous scrap have increased the cost of production, the major factor that is driving Hyundai Steel in changing the pricing system.

Price increase to reflect inflation
Hyundai Steel is planning to raise rebar prices by won 30,000 ($25/t). This price reflects the increase in labour costs and various subsidary materials, which had been omitted previously.

For Jan’22, the steel major is offering rebar at around won 962,000/t ($808/t), but it is expected to be at around won 992,000/t ($833/t) after the increased costs are applied.

The application is likely to come into effect in Feb’22. It is unlikely that the steel major will delay the new pricing system due to the increase in the cost of production.

Adding electricity rates
Electricity cost is expected to increase this year. Therefore, Hyundai Steel shall include this along with the base increase of won 30,000/t in rebar prices, on a quarterly basis.

Korea Electric Power Corporation announced a ‘fuel cost adjusted per unit’ to be used as an indicator for the fluctuations in electricity rates and a new reasonable formula is expected to be prepared keeping in mind the electricity required for production.

Construction body opposes new price formula
The Korea Construction Materials Workers Association is expressing strong opposition to Hyundai Steel’s new price system because it does not include their opinion.

The current system had been prepared through joint discussions between the construction and steel industries.

“Hyundai Steel is indicating that it will arrive at the pricing system at will rather than through consultation or cooperation…” a representative of the association said.

Note: This article has been published in accordance with an article exchange agreement between SteelMint and SteelDaily.