Prices heat up at big steelmakers

A plan by major steelmakers to raise the prices of hot-rolled coils has shaken smaller firms, which purchase the coils to manufacture cold-rolled sheets.
Hyundai Steel Company said yesterday it would raise the price of hot-rolled coils, which are roughly rolled heated steel blocks, by 10 percent to 640,000 won ($679) per ton from the current 580,000 won, beginning tomorrow. The company said it has no choice because the prices of raw materials such as scrap iron have increased by 90,000 won per ton this year.
Posco, the world’s fourth-biggest steelmaker, is also on the verge of raising its hot-rolled coil prices, which it has kept unchanged at 520,000 won per ton for a year and a half.
In a quarterly briefing for investors held last week, Lee Ku-taek, Posco’s chief executive officer, said the company is considering raising hot-rolled coil prices now that even Chinese hot-rolled coils sell for more than Posco’s.
“The main concern of management this year will be how to properly reflect price hikes for raw materials such as iron ore and coal in our product prices,” Lee said.
Posco represents 34 percent of the local hot-rolled coil market. Hyundai Steel accounts for 19 percent, and imports make up the rest. Dongbu Steel Company, Hyundai Hysco and Union Steel Manufacturing Company purchase hot-rolled coils from the big two to make cold-rolled steel sheets for automobiles and home appliances by further rolling the coils.
Representatives of these smaller firms said they are paying great attention not only to how much Posco raises prices of hot-rolled coils but also to how much it bumps up cold-rolled sheets, which it also produces.
“Over the recent several years, Posco has raised its cold-rolled sheet prices slowly compared to its hot-rolled coil price increases,” said a representative of a hot-rolled coil buyer, who refused to be identified. “Accordingly, we and other companies in competition with Posco in the cold-rolled sheet market could not raise the prices enough, and so our profits have been reduced.”
He pointed out that while Posco made 4 trillion won in annual operating profit in recent years, Dongbu and Union Steel saw annual operating losses for the period.
A spokesman for Posco said, “It is not right to simply compare the price policies of our company, which has an integrated steel mill, with those of firms specializing in cold-rolled sheets.”

By Shim Jae-woo JoongAng Ilbo/ Moon So-young Staff Reporter [symoon@joongang.co.kr]