South Korea: Pipes makers see further hike in prices on raw material cost push

South Korean mills see a high possibility of further increase in prices of steel pipes following an increase in the prices of major raw-materials like hot-rolled coils (HRCs) and hot-dip galvanised iron (HDGI) in February and March.

Iron ore prices have surpassed $150/tonne (t) and coking coal has soared to $550/t, raising the manufacturing cost of the blast furnace route mills more than ever.

Structural pipe makers, who raised prices by KRW 70,000-100,000/t ($57-81/t) in mid-February, are now planning to raise prices further in March.

Although the extent of the increase may vary among companies and products, the additional price increases are urgently needed to recover profitability.

While prices of hot rolled products have increased by KRW 150,000/t($121/t), those of structural pipes, the end product, did not see any uptrend.

Chinese hot-rolled offers

Accordingly, ahead of the HR price hike in March, the company plans to raise product prices once in mid-February, followed by an additional increase in March.

In the second half of last year, when it was difficult to achieve profitability due to a drop in product prices amid competition for securing orders, each company raised prices by around KRW 100,000/t ($81/t) owing to the rise in the prices of raw materials like HRCs in March.

However, it is highly likely that HR products will see a further price hike. In a situation where prices of raw materials such as imported HR continue to rise for shipments in April, securing sufficient quantities in order is also becoming difficult.

Given the uncertainty of the Chinese government over its export policy and the resulting volume re-adjustment by exporters, it is difficult to make up for the decrease in domestic supply.

"The increase in raw material prices is only reflected in product prices due to the February-March hike," stated a South Korean steel manufacturer.

Outlook

It is expected that the recovery in key downstream industries like construction will have the greatest upward impact on prices for steel pipes.

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