South Korea: Pipe makers to raise prices in March

South Korean structural pipe manufacturers plan to raise prices in March following a change in current market dynamics. They also plan to raise shipment prices in March in line with the raw material price hike.

Demand is expected to remain stable in the short-term owing to concerns over raw material supply and potential demand from rising prices. However, it seems unlikely that steel pipes' prices will edge down.

Along with the rise in raw material prices such as hot-rolled and hot-dip galvanised steel, the possibility of a decrease in supply of hot-rolled products seems to have increased due to the renovation of POSCO's blast furnace No. 4 at Gwangyang works.

In addition, as the market was extremely low on inventories in anticipation of a price drop, purchases were made aggressively in line with the news of the price increase.

In the second half of last year, the recovery of major consuming industries like construction delayed which led to intensifying competition for orders for steel pipe products, lowering prices and profit margins.

According to steel pipe producers, it seems impossible to raise prices as high as last year, but it is difficult to predict the outcome of variables such as the possibility of a surge in raw material prices due to the impact of international disputes and the price management policy for iron ore and steel materials to revitalise China's domestic economy. Also, it is difficult to find variables that will pull down steel pipe prices for the time being.

An additional hike in steel pipes' prices in March is inevitable to recover profitability.
The structural pipe companies are expected to raise their prices further in early to mid-March, and it is expected that profitability will be secured only if the price is raised by at least KRW 70,000-100,000/t ($58-83/t). The price hike may differ depending on the company or product, but despite the similar level of increase, it is impossible to secure the actual profitability.

Above all, there was no price increase during the period when prices of hot rolled products (raw materials) rose by more than KRW 150,000/t ($124/t) in the third quarter of last year.

However, even before the price revision, additional price declines continued owing to intensifying competition for orders, and sales were happened at a price less than KRW 1.1 million/t ($912/t).

Although, prices have recovered to KRW 1.1 million/t ($912/t) when a hike was announced in February. If the price of hot rolled and hot-dip galvanised steel sheet rises to the level of KRW 50,000 ($41) in March and the import price also rises, then an additional increase is inevitable.

Pipe manufacturers are of the view that as market demand has not yet recovered, the supply of raw materials seems difficult, so they expect to at least escape the loss of sales through price hikes.