South Korea’s Hot Rolled Steel Plate Production Will Decline this Year

South Korea’s Hot Rolled Steel Plate Production Will Decline this Year

It is predicted that Korean domestic production of hot rolled steel plate will decline this year due to weak market demand. In the first half of the year, Korean domestic production of hot rolled steel plate was 6.048 million tons, a decrease of 4.8% year-on-year.

The main reason for the reduction in production is the large-scale maintenance of related equipment, especially in September and October. Another reason is the recent weakening of demand in the domestic market in Korea. In the second half of this year, besides the small rebound in market demand in the construction industry, the consumption prospects of other downstream steel industries are bleak. However, considering the intensification of trade tensions between Japan and South Korea, South Korea may cut import of hot rolled steel plate, cold rolled steel sheets and pipes from Japan. Therefore, Korean hot rolled steel plate producers can appropriately adjust their production plans for the second half of the year to cope with changes in a timely manner. According to data released by the Korea Iron and Steel Association, in the first half of this year, South Korea imported a total of 9,976,900 tons of hot rolled steel plate from Japan.

In addition, iron ore prices continue to be bullish, and producers’ production cost pressures increase. Although iron ore import prices have declined recently, the current level is still higher than last year’s average import price. Due to the decline in global iron ore supply, iron ore prices soared. Posco Steel, Hyundai Steel and other Korean steel manufacturers were hit. Industry analysts said that unless the price of the steel product is raised, the profitability of steelmakers will be weakened. However, price increases are not easy, as cars, shipbuilding and other downstream steel industries are also affected by the global economic slowdown.

According to data from Korea Resources Corporation, as of now, iron ore prices have risen more than 60%, and the price may rise further this year. The rise occurred after the Brazilian mining company Vale mine accident, which forced Vale to cut iron ore sales. At the same time, iron ore exports from Australia, another iron ore exporting country, are also in a downturn, with severe weather in April affecting the country’s largest mine production. Another factor driving the price is China’s strong demand for iron ore. Chinese steel producers produced 80.9 million tons of crude steel in May, up from 85.03 million tons in April. This put pressure on Korean steelmakers who tried to raise prices but were strongly opposed by customers.

It’s predicted that Posco’s operating profit for the second quarter can reach 718.2 billion won ($608 million), down 13% year-on-year and Hyundai Steel’s second-quarter operating profit can reach 224 billion won ($190 million), down 33% year-on-year. Hyundai steel is experiencing upward pressure on iron ore prices. Steel prices will rise at least 50,000 won ($42.35) in the second half of the year due to rising iron ore prices.