Wednesday, 14 Jul 2010
TEX reported that it remains to be seen whether Japan's integrated steelmakers will see a turning point this week in negotiations on their export deals of ship plates with South Korea's shipbuilding companies for August to September 2010 shipments. The Japanese steelmakers face a stalemated situation for the negotiations so far.

Offers of heavy plate exports to South Korea by China's various steelmakers are dwindling, behind which there is a major influence from the abolition of the Chinese government's export value added tax rebate for heavy plates from July 15th 2010. With the abolition of the export VAT rebate, there are forecasts that heavy plate exports out of China will fall off for a short term. As a result, it is a matter of attention whether falling Chinese offers of heavy plate exports to South Korea will help the Japanese steelmakers make progress in the negotiations on their ship plate exports to the Korean shipbuilding companies for August to September 2010 period shipments.

China's heavy plate exports to South Korea totaled 1,578,000 tonnes in January to May 2008 period; 693,000 tonnes in January to May 2009 period and 682,000 tonnes in January to May 2010 period. With a flat level of the exports in January to May 2010 period, it is uncertain whether the Chinese exports to South Korea have trended upward since June. On the contrary, it is uncertain, too, whether the Chinese exports there will take a nosedive in the future.

China's major steelmakers have heavy plate exports under negotiation with South Korea's various shipbuilding companies at prices of somewhat below USD 700 per tonne FOB for August shipments. It is a matter of attention how the two sides will settle the matter of bearing the expense to meet the abolition of China's export VAT rebate for heavy plates. A Chinese export price of USD 700 per tonne FOB for heavy plates would go up to USD 819 per tonne FOB with the addition of the 17% export VAT. The two sides may come to terms at a price level of USD 760 per tonne FOB if they agree to share the burden of the 17% export VAT. It is understood, however, that the Korean shipbuilding companies indicate no interest in settling the matter of bearing the expense to meet the 17% export VAT. Therefore, the negotiations between the two sides could face rough going.

Meanwhile, there are signs that the Japano Korean ship plate deals under negotiation are on track to a turning point this week. The Japanese steelmakers vary from company to company in bargaining positions. One company is insisting on a price settlement of USD 900 per tonne FOB, given that a price increase of JPY 15,000 to JPY 20,000 per tonne is under negotiation in ship plate supplies to Japan's domestic shipyards. Another company hopes to expedite the negotiations for the conclusion of supply contracts. Also, a third company sees the need to win a price level of at least USD 820 to USD 850 per tonne FOB amid raw materials costs on the advance.

(Sourced from TEX Report Limited)