South Korea: POSCO diverting heavy plates to shipbuilding industry, prices may improve

POSCO has decided to reduce the distribution of heavy plates in the market by more than 30% and supply them to shipbuilders in the fourth quarter of this year, according to SteelDaily.

POSCO plans to reduce the supply in the secondary market, where the prices have fallen due to the inventory burden. It would rather cater to the increasing demand for heavy plates required in shipbuilding, heavy plate manufacturers informed.

This would resolve the shortage shipbuilders are facing in the face of continued expansion in demand for ships. The domestic shipbuilders' order books are full, while imports of heavy plates, mainly from China, witnessed a sharp decline.

In fact, until August, imports of heavy plates were at 569,800 tonnes (t), down 34.6% from the same month last year. Furthermore, it is expected that the imports will continue to decline significantly after September due to China's production cuts and export restraint policies.

Hyundai Steel, shipment disruptions continue

The illegal occupation of the control centre of Hyundai Steel's Dangjin Works has been prolonged. It has been estimated that there have been significant disruptions in the production and shipment of heavy plate products, resulting in increased orders and dependence on POSCO.

In addition, there are concerns that the shipment disruptions may get extended with direct employees Hyundai Heavy Industries directly participating in the shipment work at the Dangjin Steel Works.

Outlook

With heavy plates diverted to the ship-building industry the inventory pile-up in the secondary market may ease and the consequent price decline may be stalled.

China's December shipment offer price has increased by $10/t after the National Day holidays. If imports and domestic companies' supply in the secondary market are reduced, then prices in the secondary market, which have been weak, will improve, officials said.