Shipbuilders pressed to pay more for steel plates

By Jhoo Dong-chan

The nation’s shipbuilders, who have long suffered from worsening global demand, are engaging in an intense tug-of-war on a steel price hike with their suppliers

Shipbuilders claimed the hike would deal a severe blow to their businesses since they have already experienced difficulties in sales while steelmakers said they can’t supply products at lower price than current market rates.

According to sources, the nation’s major shipbuilders and steelmakers have yet to reach an agreement in negotiations about thick steel plate prices, which started in the first half of the year. Thick steel plates are products with a thickness of more than 6 millimeters and are mostly used in building various types of ships, including container and very large crude carriers.

Last month, the Korea Offshore & Shipbuilding Association urged the nation’s top two steelmakers, POSCO and Hyundai Steel, to cut the prices of thick steel plates used for shipbuilding, emphasizing local shipyards’ struggle against falling prices for their products and increased competition.

Alongside a rise in the price of iron ore, the price of thick steel plate reached 700,000 won ($610.55) last month, up 240,000 won from last year’s 560,000 won.

“The nation’s big three shipyards, Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, have suffered a combined operating loss of more than 10 trillion won over the last two years,” said a shipbuilding industry insider.

“In a bid to cut production costs, they carried out massive self-rescue plans that included firing more than 20,000 employees. If steelmakers raise the price of thick steel plates as planned, it will take more time for them to stabilize their business operations next year.”

Steelmaker, however, said the price hike is attributed to the rise in iron ore prices.

“Steelmakers cannot withstand losses through supplying steel products to shipbuilders at lower than market rates,” said an industry observer.

“Due to a rise in the price of iron ire, steelmakers have already raised the price of hot-rolled steel plate to 800,000 won per last month. The price of hot-rolled steel plate was 590,000 won in the same period last year, similar to the price of thick steel plate. Considering shipbuilders’ struggling in business, steelmakers did not raise the price of thick steel plates as much as hot-rolled steel plate.”