South Korea: Automotive steel plate producers to push for price hikes in H1 CY'22

South Korean automotive steel plate makers are pushing for price hikes in the first half of this year to lower their manufacturing cost burden.

Meanwhile, negotiations with overseas automakers to raise prices are in progress, the price increase in CY'21 for automobile steel sheets did not properly reflect the burden of manufacturing costs so it seems the prices are to be raised from the beginning of CY'22.

Automotive steel prices

The price of hot-rolled steel sheet increased by 570,000 won/tonne (t) ($479/t)in CY'21 as iron ore and coking coal prices exceeded $200-400/t, and the price of hot-rolled products has risen by 680,000 won/t ($571/t).

Negotiations on price increase with overseas automakers

However, the price increase for overseas automakers was significantly lower than the price of automobile steel for domestic automobiles was also raised by 170,000 won/t ($143/t) including 50,000 won ($42) in the first half and 120,000 won ($101) in the second half of CY'21.

Inadequate reflection of cost burden, rising raw and subsidiary material prices

Given the demand for hot-rolled products, prices fell by 100,000 won/t ($84/t) in Dec'21 and Jan'22. The difference in the increase compared to the increase in raw material prices or other steel prices is because the realistic manufacturing cost burden was not property reflected.

As iron ore prices are in the mid-to-mid range of $120/t and coking coal prices are still hovering above $400/t, the manufacturing cost burden of automotive steel sheets which has not been properly raised should be reflected in the first half of CY'22.

However, it would be difficult in reality to fully reflect the increase in manufacturing costs as they are large demanding companies, with the proportion of demand for finished vehicles accounting for 25% of domestic blast furnace materials. Therefore, price negotiations are governed by small and medium-sized parts suppliers who are unable to properly raise the supply unit price.

The steel plate makers should break away from the exhausting and inefficient price negotiation method by establishing a mutually reasonable pricing process and reflecting manufacturing costs.

Note: This insight has been published in accordance with an article exchange agreement between SteelMint and Japan Metal Daily.