South Korean steelmakers, including the world’s
sixth-largest steelmaker POSCO, are facing a longer-than-expected winter in
steel demand as they are grappling with a triple whammy of the global real
estate market slowdown, rising raw material costs and a flood of cheaper steel
imports.
According to the steel industry on Sunday, hot rolled steel plates, the most
widely used steel product, were traded at 910,000 won ($670) per ton as of Oct.
20, falling 8.1% from five months ago.
That is 13.3% cheaper than the price at the beginning of this year.
The fall in the price of steel bars has been steeper due to the deepening slump
in the construction industry.
As of Oct. 20, the wholesale steel bar price hit 850,000 won per ton, down
12.4% from early June and 14.6% from the beginning of the year.
GLOBAL ECONOMIC SLOWDOWN
The Korean steel industry previously forecast a rebound in steel prices in the
second quarter of this year but the longer-than-expected economic slowdown has
delayed a recovery in the steel sector, elongating the steel industry winter.
Especially, the prolonged slump in the Chinese property market has
taken a big toll on steel prices, according to a third-quarter earnings call by POSCO Holdings Inc.,
the parent of POSCO, last week.
“The Chinese real estate market briefly recovered on the
government’s stimulus measures but the recovery is slowing,” the company said,
adding that Chinese steelmakers’ output cuts have also fallen short of
expectations.
A day later, another major Korean steelmaker Hyundai Steel Co. also
forecast a recovery in steel bar demand in the latter half of 2024, later than
the industry’s earlier projection.
Korean steelmakers expect steel prices will remain low until the first quarter
of next year at the least.
HIGHER RAW MATERIAL COST BUT CHEAPER
STEEL IMPORTS
Despite the weak steel demand, raw material costs have risen significantly,
partly due to labor walkouts in major coking coal-producing countries such as
China and India.
Steelmakers in India and Southeast Asia have also ramped up steel output.
As a result, the iron ore price in the third quarter added $10 per ton from the
prior quarter, while the coking coal price jumped $100 per ton over the same
period, dragging down steelmakers’ profitability.