Steelmakers pressured to lower prices

South Korea’s POSCO and Hyundai Steel are in a tug-of-war with carmakers seeking to lower the price of automotive steel sheets, adding more pressure to the steel manufacturers’ prolonged slump.

Hyundai Motor and Kia Motors are reportedly pushing POSCO and Hyundai Steel to mark down steel plate prices by 70,000 won ($64) per ton this year.

The move comes less than a year after the steel firms cut prices by 130,000 won to 140,000 won per ton, according to local reports.

“It is true that the company’s sales department is currently in talks with carmakers, but we cannot reveal the details,” Hyundai Steel spokesman Jang Young-shik said.

POSCO spokesperson Kim Sang-young said, “The company cannot confirm the price information due to confidentiality reasons.”

Car manufacturers claim that POSCO and Hyundai Steel should slash the prices of steel products due to lowered costs of raw materials such as iron ore. Iron ore prices have collapsed about 50 percent in the past year to sit at about $60 a ton.

The steel industry, however, argues iron ore trade deals were made in the past over the long term, so the international price and actual price may vary.

The price cuts are likely to hurt the steelmakers’ earnings this year, further deepening their worries with the industry’s lackluster performance, market watchers say.

POSCO’s net profit tumbled 58.9 percent to 557 billion won last year compared with the previous year. Hyundai Steel posted a 10.1 percent increase in its net income to 751 billion won over the same period, largely spurred by the takeover of its affiliate Hyundai Hysco’s core business.

Analysts said price cuts by one manufacturer could lead to a domino effect as the industry players move to match each other’s offers.

POSCO chairman Kown Oh-joon said in last year’s investor relations session that “steel products used for cars are one of the seven strategic product categories for the group’s future growth.”

POSCO currently supplies high-value-added car steel sheets to Hyundai Motor Group, BMW, Toyota, GM and Volkswagen.

Hyundai Steel is a supplier for Hyundai Motor and Kia Motors.

By Suk Gee-hyun (monicasuk@heraldcorp.com)