South Korean midsize steel companies may face financial problems as the US attempts to raise anti-dumping duties on imported oil pipelines (OCTG) amid global trade uncertainty and rising raw material prices.
On Wednesday, July 31, the US Department of Commerce imposed anti-dumping tariffs of 38.87 percent for local steel company Nexteel and 22.7 percent for Seahsteel. As for other metallurgical companies, the tariff rate was set at 29.89 percent.
Last year, duties were 18.87 percent for Nexteel, 14.39 percent for Seahsteel and 16.58 percent for other firms.
Korea exported $ 350 million worth of oil pipelines to the United States last year.
The United States called the “special market situation” a legal basis.
The Korean Ministry of Industry is not preparing any action in response to this move, considering tariff changes as part of an annual practice.
An industry source said the tariff hike could have a negative impact on local steel companies, which face uncertainty over global trade disputes and surges in raw material prices.
The price of iron ore, a key material for steel production, rose about 70 percent from $ 70 a tonne earlier this year to $ 120 in July. Higher prices could also indirectly affect midsize steel companies, which will have to buy more expensive base products such as hot rolled steel from steel companies Posco and Hyundai Steel.
As raw material prices continue to climb, the two steelmakers are set to raise steel prices in the second half of this year following the publication of weak second-quarter numbers.
Hyundai Steel's operating profit declined by about 40 percent in the last quarter, while Posco's operating profit fell 11.2 percent on a quarterly basis.
Ham Young-Chol, head of sales for Hyundai Steel, said at a conference call on Tuesday that profits will improve in the second half only if higher operating costs are reflected in product prices.
Posco also hinted that it plans to increase steel prices as prices for raw materials, including iron ore, are on the upward trend.