Dongkuk Steel requests for price cut in Brazilian slab imports
Tex reported that South Korea’s electric steelmaker Dongkuk Steel Mill Company is thought to have requested a more price reduction in its negotiated slab imports from Brazil’s integrated steelmaker Arcel or Mittal Tubarao for shipments in the October to December quarter.
Behind the request lies a possibility that Dongkuk Steel will fall into the red in its domestic sales of heavy plates due to a depreciating won against the US dollar, market observers believe.
Dongkuk Steel usually imports slabs from Brazil and Japan on dollar denominated terms for the company’s heavy plate production while selling heavy plates on won denominated terms to domestic customers such as shipbuilding companies. Brazilian slab exports to South Korea are under contract at USD 850 per tonnes FOB for October to December shipments, down USD 200 from a quarter ago, according to market sources. The contract price is estimated at a level beyond USD 900 per tonnes C&F after the ocean freight rate and other expenses.
Dongkuk Steel’s domestic sales prices of heavy plates are W1,410,000 per tonnes for ship plates and W1,440,000 per tonnes for commodity grade heavy plates after a price increase of W150,000 per tonnes from September 29 2008 order intakes. At present, South Korea faces a rapid depreciation of the won to the US dollar, a situation where there are even whispers that an exchange rate of USD 1.00 to W1 500 could emerge this week. Dongkuk Steel’s sales price of ship plates translates into USD 1,044 per tonnes at an exchange rate of USD 1.00 to W1 350. The price spread is a mere USD 100 per tonnes or so between the company’s ship plates and imported slabs, given a delivered slab price of US USD 950 per tonnes. There is a possibility that the company will end up selling heavy plates below cost if an advanced depreciation of the won occurs against the US dollar.
As a result, it is understood that Dongkuk Steel has requested a further price reduction in its negotiated imports of Brazilian slabs for October to December shipments.