Posted on 26 Dec 2022
South Korean shipbuilders have announced successes with new orders at the close of the year, just as news emerged that Hyundai Steel has finally conceded to a KRW 100,000/tonne ($77/t) reduction in ship plate prices with domestic yards for the current July-December half of the country's business year.
On Thursday, Samsung Heavy Industries (SHI) announced that it had won a contract worth a staggering KRW 2 trillion to build a floating liquefied natural gas facility for delivery by August 2027. SHI did not name the client, but media reports said it was Malaysia's state-run energy company Petronas. So far this year SHI has secured $9.4 billion worth of orders in 49 vessels.
On the same day, Korea Shipbuilding & Offshore Engineering (KSOE), the shipbuilding holding entity of Hyundai Heavy Industries Group, announced the signing of a $500.8 million deal to build two liquefied natural gas carriers for Asyad Shipping Company in Oman for delivery from the first half of 2026.
The contract takes KSOE's total number of orders won this year to 197 vessels worth $23.95 billion, well exceeding its 2022 target of $17.44 billion.
The announcements coincide with reports from Korean steel media that Hyundai Steel had recently concluded negotiations for ship plate sales with three domestic shipbuilding companies, including KSOE, at KRW 1.1 million, lower by KRW 100,000/t. The talks had been dragging on for months. POSCO reportedly said that its negotiations are still ongoing.
In a commentary, Korea's Steel & Metal News noted that depending on the class of vessel, ship plate can account for 20-30% of the building cost and that during 2021, the major shipbuilders including KSOE consumed 4.3 million tonnes of ship plate.
"Subsequently, shipbuilders will be able to reduce the cost of production by over KRW 400 billion a year as a consequence of the KRW 100,000/t cut," it argued.
In the first half of last year, the yards had agreed to a KRW 100,000/t increase and to another KRW 400,000/t rise in second half, to take the average price to KRW 1.1 million/t, the industry daily noted.
In such negotiations, the Korean steelmakers are wary of their foreign competitors, the Japanese and Chinese mills that are ever eager to supply their plate. Korean data show that during January-November this year, Korea's heavy plate imports topped 1.56 million tonnes, a near 60% jump on the first 11 months of last year.
Japan Iron & Steel Federation data showed that to October, Japanese mills shipped 835,000 tonnes of heavy plates to Korea, a 45% surge from January-October 2021. The Japanese statistics also showed that the average FOB price of the 65,800 tonnes Japanese shipped in October was $836/t.
At present exchange rates, KRW 1.1 million per tonne for Korea-made plates translates to $836/t, Mysteel Global noted.
Source:Mysteel Global
