South Korea: Demand for steel pipes expected to improve after Feb'22

South Korean steel pipe producers are concerned about purchasing and selling raw materials even as demand remains stagnant and raw material prices are fluctuating. Demand has hardly improved which has made purchasing decisions difficult. However, pipe demand is expected to recover after Feb'22.

Concerns over raw material prices and demand

There is no offer from China, but it has been learnt that the price is lower than $800/t based on March shipment. Chinese pipe producers are in a position to expand purchases, but it is difficult to decide on a contract owing to the uncertain export policy of the Chinese government.

Considering the low steel pipe prices due to stagnant demand, South Korean pipe manufacturers must actively purchase raw materials such as Chinese hot-rolled and hot-dip galvanised steel sheets, which are at even lower price levels. But producers cannot decide easily whether the inventory burden will increase in the near term.

POSCO also seems to be deeply concerned about the price in Feb. The prices of raw materials such as iron ore and coking coal are still high, and supply will be inevitably reduced due to facility renovations.

If domestic supply of Japanese hot-rolled products decreases in Q1 owing to the facility troubles at Japanese blast furnaces, it will be necessary to increase sales of hot-rolled products given domestic demand.

In the case of steel pipe producers, the burden of reduced HR supply due to stagnant demand is low. But producers are deeply concerned as they are forced to purchase low-cost raw materials to make up for the decline in product prices, thereby resulting in decline in profitability.

Low-priced raw materials have a high supply stability burden and domestic raw materials seem to have a high price burden.

Outlook

Considering the prices of iron ore and coking coal, the possibility of a further decline in HR prices from China seems to be low. However, it seems difficult to push ahead with unreasonable purchases in a situation where demand is not recovering.

However, pipe manufacturers are expecting a full-fledged improvement in demand after Feb. They will be able to increase purchases or improve prices once demand recovers.

This insight has been published as part of an article exchange agreement between SteelMint and SteelDaily.