There is growing interest in South Korea on whether domestic automakers, shipbuilders, and steelmakers will agree on price hikes in the first half of this year. This is because, since the amount is not small, the profitability of this year can be greatly affected by how the price is determined.
In the case of POSCO and Hyundai Steel, the automobile steel plates and shipbuilding heavy plates are being sold at a loss in the first half of this year because an agreement to raise prices has not been reached owing to a sharp rise in raw material prices.
Price negotiation rumours
In the case of automotive steel sheets, rumours are being heard that POSCO, Hyundai Steel, and Hyundai Kia Motors will agree to a price increase of KRW 150,000- 200,000/tonne (t) ($122-162/t) in the first half price negotiations.
On the other hand, it is also heard that the prices are still in the process of being negotiated and it remains to be seen how much the price can be raised. Although the first quarter of this year has passed, the supply is being made without a price agreement still being reached, so it is expected that considerable sales and profitability will change depending on the extent of the increase and the time of application.
In the case of POSCO, domestic supply to Hyundai Motor is estimated to be around 700,000 tonnes (t), so it has little effect on sales or profitability, but it is because Hyundai Steel is known to supply 6 mnt of automotive steel sheeta to Hyundai and Kia Motors annually.
The price negotiations for heavy plates for shipbuilding are also delayed. In the case of shipbuilders, although ship prices are rising, and the current heavy plate purchase price alone is causing losses.
As the two hikes were made in the first half of last year and the second half of last year, supply is being made at KRW 1.15 million per/t ($932/t).
However, the position of domestic heavy plate makers is also firm as the manufacturing cost burden from raw materials such as iron ore and coking coal, as well as energy and logistics costs, increases.
The price negotiations of steelmakers with shipbuilders are getting delayed because according to them an increase of at least 100,000 won to 150,000 won per tonne is necessary.
Outlook
Particularly, the situation in which products with undetermined prices are being delivered will inevitably have a unilateral adverse effect on steel companies during the price negotiation process.
Note: This insight has been published in accordance with an article exchange agreement between SteelMint and SteelDaily.
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