Chinese shipbuilding plate attracts strong overseas demand

SteelOrbis Shanghai Several days ago, South Korea's main producer of shipbuilding plate, Dongkuk Steel, sought a large hike in heavy plate prices citing the price increases of raw materials. The move will result in a sharp cost increase for the shipbuilding industry. Furthermore, the Korea Shipbuilding Association has indicated that the country's shipbuilders will increase their imports of shipbuilding plate from China in 2007. Looking at the actual prices involved, Dongkuk Steel's heavy plate price has risen from Won 585,000/mt ($623/mt) to Won 635,000/mt ($676/mt), up Won 50,000/mt ($53/mt). Meanwhile, the price of China's heavy shipbuilding plate is $480/mt, thus indicating a great price advantage compared to the Koreans. With the ongoing improvements in Chinese shipbuilding plate, some products are now able to replace their Korean or Japanese equivalents, consequently leading to a rise in Chinese plate exports. In 2006, the nine enterprises comprised in the Korea Shipbuilding Association consumed 5.6 million mt of heavy plate. Of this figure, South Korean POSCO and Dongkuk Steel accounted for two million mt and 1.5 million mt respectively, while Japanese and Chinese imports accounted for 1.5 million mt and 600,000 mt, in that order. However, with a view to reducing their costs, South Korean shipbuilders Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering plan to import 900,000 mt of plates from China in 2007, up 330,000 mt compared with 2006. Hyundai Heavy Industries and Samsung Heavy Industries have already ordered 400,000 mt of plates from Shagang for 2007. It is thought that Shagang will commence operating its wide and heavy plate production lines in early 2007 and will be able to produce products in accordance with ISO, ASTM, JSM, EN, and DIN standards. In spite of the strong international demand for China's shipbuilding plate, it is still impossible for Chinese products to completely replace Japanese and Korean high value-added shipbuilding plate. In passing, it may also be remarked that, the quotation of Japanese shipbuilding plate at the start of 2007 remains unchanged at $650/mt FOB. Thus, the Japanese shipbuilding plate price is only $30-40/mt higher than Baosteel's domestic market price, and so is still attractive to Korean shipbuilding plants.