South Korean Shipbuilders Ask Posco to Raise Output (US)

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Posco,has an annual output capacity of 6.5 million-7 million tons of shipbuilding plates from its two domestic plants in Pohang, above, and Gwangyang. (Credit Photo @ Wall Street Journal)

SEOUL—South Korean shipbuilders have asked Posco to increase production of shipbuilding plates as a hedge against a possible shortage of materials from Japan, the companies said Tuesday.Domestic shipbuilders along with cold-rolled steel companies last week asked Posco to produce a combined 600,000 metric tons steel products for “possible emergency needs” in the coming months, a Posco spokesman said.The request illustrates how the recent earthquake and tsunami in Japan could create supply bottlenecks for South Korean companies, and business opportunities for others.Shipbuilders sought an extra 200,000-300,000 tons of production of shipbuilding plates, or heavy thick plates, and “we are seriously considering their request,” Posco said.The shipbuilders include Hyundai Heavy Industries Co. Daewoo Shipbuilding & Marine Engineering Co., Samsung Heavy Industries Co., the world’s three top shipbuilders, as well as STX Offshore & Shipbuilding Co. Spokesmen for all of the companies confirmed the request.The country’s three cold-rolled steel majors—Hyundai Hysco, Dongbu Steel and Union Steel—confirmed that they had joined the shipbuilders in their request, but they said they don’t see any major impact on their businesses from the disruptions in Japan.”We can diversify our sourcing to suppliers in Korea and China in case of shortages from Japan,” an official at Dongbu Steel said. The rerollers said they have inventories that will last for one to two months.Rerollers process hot-rolled coils into cold-rolled coils used in the manufacture of high-end steel sheets for vehicles and home appliances such as liquid-crystal-display TVs and refrigerators.Separately, a Japanese steel-pipe maker “which is in urgent need (of supplies) to reconstruct the infrastructure” destroyed by the earthquake and tsunami has also requested that Posco supply 13,000 tons of hot-rolled and cold-rolled coil, the Posco spokesman said. The steelmaker has dozens of Japanese clients that make vehicles, auto parts and steel pipes, but, “We have not received an unscheduled collective request from them yet,” he said. The company didn’t identify the Japanese client that has made an unscheduled request.Posco, the world’s No. 3 steelmaker by output, has an annual output capacity of 6.5 million-7 million tons of shipbuilding plates from its two domestic plants in Pohang and Gwangyang. Its overall steel-output capacity stood at 36 million tons at the end of 2010.The three biggest shipbuilders said they purchase at least 20% of their shipbuilding plates from Japanese suppliers such as JFE Holdings Inc. and Nippon Steel Corp., ranging from 20% for Hyundai Heavy to 30%-40% for Samsung Heavy.STX Offshore said it buys shipbuilding plates from Japan only when its clients want Japanese steel used in the ships they have ordered. The company buys almost all of its shipbuilding plates from domestic suppliers including Posco, with delivery from China accounting for less than 10%, a company spokesman said.The shipbuilders said they have one to two months of inventories, so they don’t see any serious impact on their business from the natural disasters in Japan.”We asked for the extra production as there may be problems…delivering supplies previously contracted (to South Korea from Japan),” a Samsung Heavy spokesman said. “If domestic suppliers fail to fill a possible shortage resulting from quakes in Japan, we may consider purchasing more of the plates from China.”In South Korea, there are three suppliers of shipbuilding plates—Posco, Dongkuk Steel Mill Co. and Hyundai Steel Co.Hyundai Steel and Dongkuk Steel Mill, whose clients are domestic shipbuilders, said they haven’t received any official requests for increased output. Hyundai has an annual capacity of 1.5 million tons of heavy plates and Dongkuk has capacity of 4.4 million tons.

Source : Wall Street Journal

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