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South Korean builders source more Chinese plate

South Korean builders source more Chinese plate

Seoul: South Korea's principal shipbuilders will be sourcing more steel plate from China in 2007 as they seek to procure sufficient supplies to build a record volume of new tonnage. According to a Bloomberg report earlier today, Samsung Heavy Industries Co, the world's third largest shipbuilder, will raise its purchases of Chinese plate from 9% to 21% in the year ahead because existing suppliers in South Korea and Japan are not producing sufficient quantities. A statement from Samsung Heavy, released by email earlier today, says the company has a preliminary agreement to buy 150,000 tons of plate from China's Shougang Group, taking the company's likely Chinese purchases to a total of 250,000 tons in 2007.

South Korea's other leading builders, Hyundai Heavy and Daewoo Shipbuilding & Marine Engineering are also buying more Chinese steel. According to the Bloomberg report, the shipbuilding companies are also examining the possible acquisition of Chinese steel manufacturers in a drive to constrain steel cost increases.

Separately, Bloomberg reports that the rate of iron ore price rises should ease during 2007.  According to the news agency, China's Baosteel Group, the country's largest steelmaker, has agreed 9.5% price rises with the world's three leading iron ore mining groups - BHP Billiton, RioTinto and CVRD. This is likely to provide a benchmark for other iron ore price negotiations and should set a more stable backdrop for steel manufacturers who have faced price hikes of more than 100% over the last three years. It is unlikely to lead to any easing in new ship prices, however. Tight supply of newbuilding capacity at leading Asian yards will ensure builders stay in a strong position in contract negotiations. [28/12/06]

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