S. Korean CR producers focus on purchases of low-priced feedstock

South Korean cold rolled steel (CR) producers' main concern in their annual business plan for 2012 is how to improve their profitability, especially as their profits deteriorated in 2011, as reported by sources in the South Korean steel sector.
 
If they want to boost their profits, they have to raise their CR prices or purchase raw materials at lower prices.
 
Taking a look at recent market conditions, however, it is appears difficult for local CR producers to raise their selling prices at present due to weak demand for steel products in the domestic market and the large inflow of low-priced Chinese products. Thus, they are seeking rather to purchase raw materials at low prices. Moreover, they now have a wide range of feedstock sources unlike in the past when domestic steel giant POSCO was the sole supplier of feedstock, i.e., hot rolled coils (HRC).
 
In South Korea, POSCO, Hyundai Steel and Dongbu Steel produce HRC. To find how to purchase good quality HRC at low prices not only from these companies, but also from Japanese or Chinese HRC producers has become a matter of necessity, not a matter of choice.
 
Officials in charge of purchasing HRC at local CR producers state that they will buy POSCO's products if the price is at an optimum level. However, POSCO is not so keen to get involved in price competition with other companies because it believes that such price completion will likely be to the detriment of all HRC producers.