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Prospects Of Prolonged Talks On Japanese HR Coil Exports To ROK
There are prospects that Japanese integrated steelmakers will face prolonged HR coil export negotiations with South Korea's major steel rerollers such as Dongbu Steel Co for shipments in the October-December quarter of 2006, TEX Report learned Tuesday.

In South Korea, both integrated steelmaker Posco and Donbu Steel have made a formal denial of the former's acquisition of the latter. The denial means a lost relief to the straits of local CR sheet producers like Dongbu Steel, which will bring a stalemate of the Japanese steelmakers' HR coil exports under negotiation with Dongbu Steel and other Korean users.

The Japanese steelmakers are contemplating exporting HR coils to South Korea the assumption that negotiated prices are not lower than what Posco charges for domestic sales of HR coils. Posco's present domestic price is W520,000/ton (US$547). For the Japanese steelmakers, a minimum level of negotiable prices is described as US$535/ton FOB. Therefore, it follows that the Japanese steelmakers can push their negotiations as long as the asking price goes beyond US$535/ton FOB.

But what the Korean steel rerollers need is prices of US$500/ton FOB or less for imported HR coils so that they can compete with Posco in domestic sales of CR sheets, according to market sources. Posco's present domestic price for CR sheets is W600,000/ton (US$630). But actual sales prices are estimated at a level of US$600/ton, given a volume discount.

If the Japanese steelmakers provide HR coils for the Korean steel rerollers at around US$500/ton FOB, the Japanese steelmakers could collide head-on with Posco. As a result, the Japanese steelmakers find it difficult to negotiate HR coil supply contracts at prices to meet the Korean steel rerollers' bids such as US$499/ton FOB or US$490/ton FOB.

In South Korea, information recently circulated that Posco would acquire Dongbu Steel. At the end of June, Posco raised its domestic price for HR coils by W40,000/ton, but limited its price domestic increase to W20,000/ton for CR sheets. At the time, Posco was said to have opted for a limited price hike for CR sheets in an attempt to promote a structural improvement (by acquisition) of domestic CR mill operators.

Under the existing circumstances, it is likely that Dongbu Steel will find it fairly difficult to take imported HR coils from Japan for shipments in the October-December quarter. By comparison, it is considered possible for South Korea's pipe producers to substitute imported HR coils from China for Japanese HR coils. At present, sporadic offers to South Korea exist of Chinese HR coils at US$470/ton C&F.
last modified : Mon 25 Sep, 2006 [11:02]
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