Shipbuilders here are protesting a move by steelmakers to increase their prices of thick steel plates, claiming the hike will worsen their profitability at a time when they are still struggling with sluggish global demand, according to company officials Monday.
The two groups have engaged in an intense tug-of-war on the steel price hike since December, but have yet to reach an agreement.
The nation’s leading steel companies, POSCO, Hyundai Steel and Dongkuk Steel, have been moving to increase the price of shipbuilding plates by about 50,000 won ($45) per ton in the first half of the year.
Shipbuilders, Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, want the price frozen at its current level until their businesses are back on track. They claim the price has already been increased by between 30,000 won and 50,000 won on two separate occasions of last year.
Steelmakers said they have no choice but to increase the price of thick plates as the cost of raw materials such as iron ore have gone up. They claimed they have maintained abnormally low prices considering the recession in the shipbuilding industry.
“We have supplied shipbuilding plates at low costs even if we suffered losses in contracts with shipbuilders,” said a POSCO official. “We plan to increase the price as the shipbuilding industry appears to have entered a recovery phase this year.”
Steel plates with a thickness of more than 6 millimeters are mostly used in building ships, including container and very large crude-oil carriers.
Shipbuilders have long been struggling with declining global orders since the 2008 financial crisis. This has forced some companies to shed jobs to survive.
They said the price of thick plates accounts for 15 percent to 20 percent of ship manufacturing costs, claiming the hike will lead to heavy losses.
According to the Korea Offshore & Shipbuilding Association, a 50,000 won increase per ton would result in shipbuilders bearing an additional 300 billion won in manufacturing costs.
“It is true that market conditions appear to have improved recently, but it is premature to say shipbuilders’ performance has become better,” said an official from Hyundai Heavy Industries. “The amount of orders is still insufficient compared to an average year.”
Industry sources said shipbuilders are even considering increasing importing thick plates from China to secure price competitiveness if steelmakers push ahead with the price hike.
Source: Korea Times