일반산업
Key Issues Affecting the Korean Steel Industry in 2010
2010-02-12KIM, Eu-Gene
목차
Impact of Changes in the Chinese Steel Market on the Korean Steel Industry
A recovery to pre-crisis levels is unlikely due to continuing excess supply from China
In 2010, Chinese domestic demand and production will increase YoY, but excess supply and capacity will reach 45 million tons and 120 million tons respectively. Prices will remain above $500, and will fluctuate in the rate of $550~$650 with seasonal factors. As a result, a recovery to pre-crisis levels is unlikely.
Excess supply and exports of plate related products from China will affect Korean
supply and demand, particularly for hot rolled steel and HR plates
Domesticaly, the recent completion of upstream investments will ensure that hot rolling and plate production can cover demand. Unless Chinese exports of hot rolled products and plates to Korea decline by over 50%, the domestic market will face excess supply.
In particular, plate prices are likely to fall due to the continuing downturn in shipbuilding, a major downstream industry. However, since raw material contract prices are expected to rise 20~30% in 2010, it will be difficult for manufacturers to cut their product prices. As a result, the lack of demand is likely to drive down market prices through discounts.
Within the Chinese market, the proportion of wire rod production that is exported is lowest among steel rod products, and demand in this sector is tightest. Also, steel industry restructuring policies have focused on SMEs, which will further tighten supply and demand.
Impact of the Exchange Rate on the Korean Steel Industry
The falling exchange rate will raise the continuing operations margin by 3%p in 2010
Assuming that sales, purchasing, and export ratios for domestic steel firms will be unchanged YoY and that the exchange rate will be 1,120 \/$, operating income will rise by \3.4 tn, the COGS ratio will fall by 4.1%p, and the continuing operations margin will rise by 3.0%p
Implications
Monitoring of small, downstream firms and firm-specific management are needed
Loss-making, small, downstream firms should monitored. In particular, market conditions for each product should be considered, and the related firms should be managed individually.
요약
A recovery to pre-crisis levels is unlikely due to continuing excess supply from China
In 2010, Chinese domestic demand and production will increase YoY, but excess supply and capacity will reach 45 million tons and 120 million tons respectively. Prices will remain above $500, and will fluctuate in the rate of $550~$650 with seasonal factors. As a result, a recovery to pre-crisis levels is unlikely.
Excess supply and exports of plate related products from China will affect Korean
supply and demand, particularly for hot rolled steel and HR plates
Domesticaly, the recent completion of upstream investments will ensure that hot rolling and plate production can cover demand. Unless Chinese exports of hot rolled products and plates to Korea decline by over 50%, the domestic market will face excess supply.
In particular, plate prices are likely to fall due to the continuing downturn in shipbuilding, a major downstream industry. However, since raw material contract prices are expected to rise 20~30% in 2010, it will be difficult for manufacturers to cut their product prices. As a result, the lack of demand is likely to drive down market prices through discounts.
Within the Chinese market, the proportion of wire rod production that is exported is lowest among steel rod products, and demand in this sector is tightest. Also, steel industry restructuring policies have focused on SMEs, which will further tighten supply and demand.
Impact of the Exchange Rate on the Korean Steel Industry
The falling exchange rate will raise the continuing operations margin by 3%p in 2010
Assuming that sales, purchasing, and export ratios for domestic steel firms will be unchanged YoY and that the exchange rate will be 1,120 \/$, operating income will rise by \3.4 tn, the COGS ratio will fall by 4.1%p, and the continuing operations margin will rise by 3.0%p
Implications
Monitoring of small, downstream firms and firm-specific management are needed
Loss-making, small, downstream firms should monitored. In particular, market conditions for each product should be considered, and the related firms should be managed individually.