News Room - Steel Industry

Posted on 10 Apr 2008

POSCO raises steel prices by up to 21 pct

South Korea's POSCO, the world's fourth-largest steel maker, said on Thursday it would raise steel prices by up to 20.7 percent, a move widely expected in markets to help it pass on soaring prices of raw materials. 

The price rise, its second this year following a February increase, comes after POSCO agreed to a 65 percent rise in iron ore prices with Brazilian miner Vale and a 205-210 percent jump in coking coal prices with an Australian supplier from the beginning of April.

POSCO said it would raise prices of its hot-rolled steel by 120,000 won, or 20.7 percent, to 700,000 won ($717.4) a tonne from April 17.
 
Prices of both cold-rolled steel and shipbuilding plates will also rise by 120,000 won, or 18.0 percent, to 785,000 won a tonne.

Analysts had been widely expecting a rise of between 120,000 won and 150,000 won, as POSCO has lagged rivals in raising prices and as iron ore and coking coal prices, which account for more than a fifth of production costs, are seen soaring by around 70 percent and 200 percent respectively this year.

"A price rise was inevitable because of rising cost pressure and it continues to remain difficult to secure raw material supplies as mining firms are lukewarm on negotiations, despite soaring prices," POSCO said in a statement.

The term price of iron ore has risen fivefold since 2001, while coal prices have surged this year because of strong demand from China and supply disruptions in Australia caused by port conditions and poor weather.

Despite price increases and strong demand, steel makers face ballooning costs as tight coal supply is forcing them to turn to the spot market, where prices are about triple those in term contracts, while other cost pressures stemming from freight, scrap prices and alloy-iron prices mount.

By 0405 GMT, shares in POSCO, the second-largest company in South Korea with a market value of $45 billion, had pared earlier losses, trading down 0.3 percent at 497,500 won, versus a 0.1 percent gain in the broader market.

POSCO shares had touched a session low of 481,500 won.

"The price hike is slightly less than we had expected but the increase will help absorb rising raw material costs and put it on track to meet its 2008 target of 4.8 trillion won in operating profit," said Jung Ji-yun, an analyst at CJ Investment & Securities.