Steel Industry 'Brightens Up' with Huge Qatar Orders

Rising Expectations for Shipbuilding Heavy Plate Price Increase in Q2 This Year

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] As Korea's top three shipbuilders have signed slot contracts for more than 100 vessels with Qatar Petroleum (QP), the Qatar state-owned company, the steel industry is increasingly optimistic about a price hike for shipbuilding steel plates.

According to the steel industry on the 3rd, steelmakers such as POSCO and Hyundai Steel, along with shipbuilders, are currently negotiating shipbuilding steel plate prices for the second quarter of this year. The steel industry holds the view that while iron ore prices are rising, shipbuilding steel plate prices have effectively fallen compared to last year, making a price increase inevitable.

Last year, the steel industry raised shipbuilding steel plate prices by 30,000 KRW per ton in the third quarter, but due to a delayed recovery in the market, prices were lowered by 30,000 KRW again in the fourth quarter. In the first quarter of this year, prices were further reduced by 30,000 KRW amid concerns over a sharp drop in international oil prices and a cliff in orders for offshore plants. Meanwhile, iron ore prices have been rising, increasing losses in the steel plate sector. Iron ore prices surged from $83.25 per ton on May 22 to $96.40 per ton on May 28, approaching $100.

The steel industry has been flexibly adjusting steel plate production since 2015 due to the restructuring of the shipbuilding industry. This is because 70% of steel plate production is used for shipbuilding. Dongkuk Steel has sold or suspended operations at two of its three steel plate plants in Pohang. POSCO and Hyundai Steel, which own blast furnaces, are producing shipbuilding steel plates while effectively absorbing losses.

However, the steel industry is now optimistic following the 'jackpot' slot contract news from Qatar. If large-scale orders from not only Qatar but also Russia, Mozambique, and other countries in the pipeline materialize, demand for shipbuilding steel plates is expected to increase significantly.