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Partial Price Settlements In Q2 Japano-Korean HR Coil Deals
It is likely that Japan's integrated steelmakers will agree with South Korea's steel rerollers within this week on monthly prices to meet April and May shipments while settling the contract period at three months of April-June in the Japanese steelmakers' HR coil export deals under negotiation with the Korean steel rerollers for shipments in the April-June quarter. The agreement reached will provide for a phased price increase, according to market sources.

The Japanese steelmakers are slated to close intakes of HR coil orders this week for April and May shipments. Therefore, they will conclude no supply contract unless HR coil prices are settled because they favor shunning April-May shipments on provisional price terms.

For their part, the Japanese steelmakers are contemplating applying a considerable price increase to April shipments as the first of a phased markup, with another increase to take effect for May shipments. Besides, they are determined to negotiate for prices of US$750-780/ton FOB in June shipments, a price level that compares with the initial offer prices.

At present, China's HR coil export prices on offer to South Korea are reported as a level of US$600/ton FOB for April shipments, a price level that is much lower than what the Japanese steelmakers are trying to settle in their HR coil exports to South Korea for April-June shipments. Accordingly, the Korean customers reacted with strong resistance to the Japanese steelmakers' initial offer prices for Q2 shipments.

In South Korea, domestic supply-demand conditions for high-grade HR coils continue tight in strong demand from manufacturing industries such as autos. In this connection, integrated steelmaker Posco finds it difficult to provide sufficient HR coils for domestic supplies because of regular equipment repairs at the company's works. Therefore, local users need to take Japanese HR coils of high quality that cannot be replaced with Chinese HR coils.

The world's transaction prices of HR coils are on the upside in the wake of various users' moves to expedite HR coil purchases for new requirements at a time when global prices of raw materials such as iron ore and coking coal look set to soar. In Asia, HR coil prices have already moved up to a level of US$700/ton FOB in Southeast Asia for supplies from without.

Until now, South Korea's users too are said to have become well aware of a price increase they will have to live with in purchasing HR coils, given increased prices of raw materials. As a matter of fact, local electric steelmaker Dongbu Steel Co has voiced its intention to execute a domestic price increase of HR coils by W70,000/ton (US$60 plus) from April 1 shipments, a passalong to meet an advance in ferrous scrap prices. Also, there are whispers that Posco may price up its domestic HR coil shipments soon by W170,000/ton (US$150).

Under the present circumstances, it is understood that the South Korean steel rerollers have begun to turn to accepting a price increase for April shipments in the HR coils they take from the Japanese integrated steelmakers.

Meanwhile, the Japanese steelmakers admit that it is difficult to raise what they charge to a level of US$750-780/ton FOB at one stroke in their HR coil exports to the Korean customers for Q2 shipments. Accordingly, there are signs of the Japanese steelmakers considering negotiating for price terms of June shipments when they see a pronounced price increase in their iron ore imports for fiscal 2010 (April 2010-March 2011).
last modified : Fri 26 Mar, 2010 [10:06]
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