Steelmakers face a double blow - high costs and low demand

South Korean steelmakers are facing a double hit from rising iron ore prices and weak demand from major customers, industry sources said Wednesday.

Steelmakers pass high prices for raw materials like iron ore and coking coal onto customers, but find it difficult to demand that their customers like shipbuilders and auto makers pay more as they go through recessions and restructuring, according to sources.

“Customers are pushing manufacturers to freeze or cut product prices as they are undergoing restructuring or suffering from slowing sales in global markets,” he said.

As of April 26, iron ore prices continued to rise to $ 93.90 per tonne from $ 82.10 on February 1 and from $ 72.60 on January 4. On April 12, prices hit $ 95.10 per tonne, their highest level in five years, according to the data. Mineral Information Provider from Korea Resources Corp.

The price hikes come as Brazilian mining giant Vale SA is busy handling the deadly collapse of its mine waste dam in January, and Anglo-Australian mining concern Rio Tinto Ltd. is cutting its estimates for iron ore shipments in 2019 after a tropical cyclone hit supplies in the first quarter.

Steelmakers, now in talks with customers, are looking to raise steel product prices in the second quarter to reflect higher raw material costs for automotive steel, shipbuilding plates and bar steel prices.

POSCO and Hyundai Steel Co. saw their first quarter net income fall from a year earlier due to higher costs. POSCO's net profit in January-March fell 28% to 778 billion won, while Hyundai Steel's net income fell 36% to 114 billion won.