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Nippon Steel, Korean yards settle yen-based plate prices

Friday, 08 February 2008

Nippon Steel has concluded new ship plate supply contracts with Korean ship builders, settling for ¥95,000/tonne ($892.94/t) fob for April-September shipments. The agreement marks a first for Nippon Steel to export plates to Korea under yen-based terms, and a reversion to half-year rather than one-year contracts.

Nippon Steel’s announcement via the Japanese press on 7 February came just days after JFE Steel revealed that it had struck a deal with the Korean yards concluding a $220-230 rise to take its new price to $870-880/t fob, as Steel Business Briefing reported. But JFE’s settlement applies only to April-September shipments.

Though Nippon Steel refuses official comment on the settlement, a company source tells SBB that the changes to contract terms were made to reduce its risk. “Because of the rises in raw materials, fuel oil and other costs, our business circumstances have been changing rapidly, and we felt that a one-year contract is too long in this rapid changing environment,” the Nippon Steel source tells SBB. The company only introduced full-year contracts last April.

Nippon Steel’s existing contract signed with Hyundai Heavy Industries and other Korean yards last March was settled at $630/t fob (a $20/t rise). At current exchange rates, the settlement this time translates to a rise of ¥30,000/t or about $281/t. The large increase reflects tight supply and demand, Nippon Steel says.

The Korean shipbuilders are observing the lunar new year holidays and were unavailable for comment. Dongkuk Steel Mill raised domestic prices of its ship plate by KRW 95,000/tonne ($100/t) from 11 February contracts, saying the increases are needed to offset higher slab costs, as SBB reported.

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