Posted on 23 Apr 2010
Prices of hot-rolled steel would rise by 25 percent to 850,000 won a tonne from May 3, a statement released Friday said.
The move marks the first price increase by the steelmaker since it unexpectedly cut its domestic product prices by up to 20 percent last May, its biggest ever reduction.
The hike takes place as "major raw material suppliers asked for 90-100 percent increases in their iron ore and coking coal prices from last year...while international steel prices have risen sharply," the POSCO statement said.
POSCO, which ranks behind ArcelorMittal, Nippon Steel and Baosteel, also said, it would adjust its steel prices on a quarterly basis if raw material prices were set quarterly instead of annually.
"POSCO plans to adjust product sales prices quarterly, if raw material suppliers switch to quarterly contracts from their 40-year-old annual pricing schemes," the statement said.
The top three global iron ore miners -- Vale, BHP Billiton and Rio Tinto-- have shifted from fixing prices annually to quarterly.
POSCO last week said it had sealed a preliminary agreement with Brazilian miner Vale for an 86 percent year-on-year price hike in April-June iron ore imports to $110 per tonne.
For hard coking coal, the mill agreed to pay $200 per tonne, or a 55-percent hike from last year's benchmark prices
ENOUGH TO PASS COSTS; TO ADJUST QUARTERLY
The steelmaker, which relies completely on imports of iron ore, said it would raise prices of cold-rolled steel products mainly used for automobiles and electronics by 22.9 percent or 180,000 won per tonne to 965,000 won.
Prices of plates used for shipbuilding will rise 9.8 percent or 80,000 won per tonne to 900,000 won, considering the slow recovery in the global shipbuilding industry.
"The price increases look enough to pass through higher raw material costs...(and) will improve POSCO's margins in the second quarter," Hana Daetoo Securities analyst Kim Jung-wook said.
"With raw material cost negotiations switched into a quarterly system, there would be further increases in the third quarter when it enters into new negotiations."
NH Investment & Securities analyst Kim Mi-hyun said: "I am not ruling out a potential further raise in the second half of this year, but the possibility is low, given that it has to think about how it will be accepted by buyers."
ThyssenKrupp Steel Europe said on Thursday it aims to raise steel prices from July.
The China Iron and Steel Association stressed in research published on Monday the difficulties steel mills will face in trying to pass costs on to consumers, saying prices were unlikely to rise significantly in the coming months.
POSCO raised its 2010 sales target by 8 percent earlier this month, saying a recovery in demand would continue this year.
