Update on Sino Korean ship plate deals for Q2 shipments

According to information made available in Tokyo, it is likely that China's integrated steelmakers will enter the final stages of negotiations in the first week of February on their deals of ship plate exports to South Korea's various shipbuilding companies for shipments in the April to June quarter of 2009. Some deals under negotiation are intended for March to May 2009 period shipments. There are prospects that Shoudu Iron & Steel Co will try to settle its deals at USD 630 per tonne FOB, while Jiangsu Shagang Group Co Limited will do likewise at USD 620 to USD 610 per tonne FOB. The new prices, if agreed, will mark a major reduction of USD 200 as compared with the existing settlements for January to March period shipments. Most of the existing settlements are estimated at a level of USD 840 per tonne C&F, with that of USD 900 per tonne C&F in part.
In South Korea's shipbuilding industry, three major companies still find themselves in favorable operations. The three companies are Hyundai Heavy Industries Co, Samsung Heavy Industries Co and Daewoo Shipbuilding & Marine Engineering Co. But it is understood that the nation's small and midsize shipbuilding companies have an enhanced sense of crisis.
South Korea's various shipbuilding companies indicate moves to use heavy plates in hand as much as possible so that they can reduce stocks of bought in heavy plates while holding back on new purchases of heavy plates. Besides, they are said to be taking a tough position on purchased materials, particularly commodity grade heavy plates bought from China.
If the Sino Korean ship plate deals are settled at around USD 630 per tonne FOB this time, the new prices will become much lower than what POSCO currently charges for its domestic sales of ship plates. POSCO's domestic price is settled at KRW 920,000 per tonne. Also, the new prices of Chinese ship plates for export will become lower than domestic prices in China, where Baosteel Co Limited sets its domestic price of ship plates at CNY 4,622 per tonne after value added tax for March shipments.
Moreover, if the Chinese steelmakers' contract volumes of ship plate exports to South Korea increase markedly, it could lead to a diminution in POSCO's domestic supplies of ship plates, getting on the Korean steel giant's nerves. There is even speculation that the Chinese ship plate exports to South Korea may provoke dumping accusations there, given the Chinese export prices at a fairly low level.