[Asia Economy Reporter Hyungsoo Park] Daedong Steel's stock price is on the rise. News that an increase in thick plate prices is inevitable seems to be influencing the stock price.
As of 3:05 PM on the 19th, Daedong Steel is trading at 7,320 KRW, up 5.78% from the previous day.
Daedong Steel produces and sells hot-rolled products and thick plates, which are cut and processed for use in civil engineering, construction, automobiles, fabricated metals, and shipbuilding.
In 2020, it recorded sales of 106.3 billion KRW and an operating profit of 1 billion KRW. Last year, sales reached 165.4 billion KRW and operating profit was 17.6 billion KRW. Sales and profits increased significantly due to rising selling prices. Sales composition consisted of 53% hot-rolled thin plates, 38% thick plates, 3% patterned steel plates, and 6% other sales.
At the 'Meeting to Review the Impact on the Trade Industry Due to the Sharp Rise in Raw Material Prices' held by the Korea International Trade Association the day before, 16 industry associations including semiconductor, petrochemical, automobile, and shipbuilding sectors stated that the sharp rise in raw material prices is rapidly deteriorating the export profitability of companies.
The Shipbuilding Association reported that in April this year, thick plate prices reached a record high of 1.4 million KRW per ton, significantly worsening the profitability of domestic shipyards.
According to the industry, the steel and shipbuilding sectors have been negotiating for four months since December last year over thick plate price increases in the first half of the year. The steel industry is demanding price increases due to rising raw material costs such as iron ore and coking coal, which are raw materials for blast furnace steelmaking. The Shipbuilding Association maintains that it is difficult to accept the increase, stating that if the thick plate price increase is reflected in construction loss provisions, the accounting operating loss would reach 4.4 trillion KRW.
Last year, although the shipbuilding industry recorded strong performance by exceeding annual order targets, it reflected large loss provisions in its results due to two rounds of thick plate price increases. Accordingly, Hyundai Heavy Industries recorded an operating loss of 1.3848 trillion KRW, Daewoo Shipbuilding & Marine Engineering 1.7547 trillion KRW, and Samsung Heavy Industries 1.312 trillion KRW. The provisions set by the three shipbuilders for the first half thick plate price increase were 896 billion KRW, 800 billion KRW, and 372 billion KRW, respectively.
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