South Korea: Price negotiations between POSCO, white goods industry become difficult

The price negotiations between South Korea's home appliance (white goods) manufacturers and steel major POSCO for the second quarter (Q2) of CY'22 are becoming even more difficult due to rising raw material prices of both the industries.

As per latest reports, POSCO proposed to increase prices of cold-rolled (CR) plated materials which are directly used for home appliances by KRW 50,000-100,000 per tonne (t) ($41-82/t) for the second quarter. Meanwhile, the home appliance industry is urging steelmakers to minimise the increase in prices owing to the uncertainty in demand this year.

Last year, the home appliance manufacturing plants were fully operational because of robust demand for white goods, but this year, the demand outlook does not seem to be positive. Hence, amidst this uncertainty, the white goods manufacturers find increasing raw materials prices to be burdensome.

The average price of steel, resin and copper, which are the main raw materials for home appliance and air solution (H&A) products, increased by 21.9%, 18.2%, and 15.1%, respectively, in CY'21 compared to CY'20, according to the business report recently released by LG Electronics.

On the other hand, the average selling price of refrigerators, washing machines, air conditioners and TVs in CY'21 increased by 7.2%, 9.8%, and 26.4%, respectively, compared to CY'20.

While the home appliance industry is emphasising on the increase in raw material prices, the steel industry is also making the same argument. As a result, the negotiations between the two parties could not reach an agreement yet.

Particularly, the situation is more serious in the case of re-rolling mills as POSCO raised the prices of hot-rolled (HR) products by KRW 50,000/t ($41/t) in March and KRW 100,000/t ($82/t) in April.

The color steel sheet manufacturing industry is focusing on the conclusion of the home appliance industry and POSCO's cold-rolled Q2 price negotiations.

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