POSCO and Hyundai Steel, the No. 1 and No. 2 domestic steelmakers, are pushing to raise prices for automotive steel sheets and shipbuilding plates. As higher costs hurt results in the first half, they are moving to restore profitability by raising prices for automotive and shipbuilding supplies, where steel demand is relatively solid.
According to the steel industry on the 6th, Hyundai Steel has notified major automakers of its plan to raise automotive steel sheet prices and is in price talks. The company aims to reflect cost increases—driven by higher raw material prices in the second quarter and a strong dollar/weak won—into product prices.
Hyundai Steel typically negotiates automotive steel sheet prices in February and August. A Hyundai Steel official said, "Price talks for automotive steel sheets are almost finished, and we plan to apply the higher prices starting this month."
POSCO is also negotiating with automakers in line with its policy to reflect cost increases not captured in first-half supply prices into second-half prices. A POSCO official said, "Rather than raising prices sharply all at once, we plan to normalize them through gradual increases."
POSCO and Hyundai Steel are also pushing to raise prices for shipbuilding plates. With the domestic shipbuilding industry having secured three to four years' worth of orders, keeping steel demand stable, the companies aim to charge higher prices.
The distribution price for plates rose from 910,000 won per ton at the start of the year to 1 million won at the end of June. The current distribution price for plates is around 1.01 million won. For shipyards, which are major buyers, the negotiated price is set lower because of large volumes.
A Hyundai Steel official said, "We plan to raise second-half plate prices as well to reflect cost increases, but the exact size of the hike has not been decided yet."
POSCO and Hyundai Steel posted sluggish first-half results due to higher prices for raw materials such as iron ore, coking coal, and steel scrap, a stronger dollar, and rising energy and logistics expenses.
POSCO's operating profit in the first half was 490 billion won, down about 43% from the first half of last year. Hyundai Steel posted an operating profit of 11.1 billion won in the second quarter, returning to the black from the second quarter of last year, but recorded a cumulative operating loss of 61.4 billion won in the first half.
The steel industry says that although key raw material prices and the exchange rate have been trending lower in the third quarter, price increases are inevitable because second-quarter cost increases are reflected with a two- to three-month lag.
Australian coking coal futures rose from the $210-per-ton range at the start of the year to the $250 range in early June, then recently fell back to the $210 range. Iron ore prices topped $110 per ton in early May but have been below $100 since July.
Park Seong-bong, an analyst at Hana Securities, said, "Given that second-quarter cost increases are reflected with a lag, POSCO's blast furnace materials and supplies input unit cost is expected to rise by 25,000 won per ton in the third quarter."