South Korean steel maker POSCO said on Friday it was inclined to raise steel prices after a surge of 65 percent in raw material iron ore prices.
POSCO earlier this week agreed to the hike in iron ore prices with Brazilian mining company Vale. Iron ore is the main input in making steel.
"With raw material prices soaring, wouldn't it be necessary for us to raise steel prices?" said Lee Ku-taek following the company's annual shareholders meeting. "We will have to consult with our clients on how much we will raise the prices," he added.
The CEO said POSCO was in the middle of negotiations for coal deals after difficult iron ore talks, but could not make any predictions on prices at the moment.
Markets expect buyers to pay higher prices for coal negotiations as coal prices have surged this year due to high domestic demand from China and supply delays from Australia due to port conditions.
Lee also said POSCO will have to put back its expected April start date for work on a 12 million-ton-capacity steel plant in eastern India. The plant would be India's single largest inward foreign investment project.
Iron Ore Deals
Japanese and South Korean steel mills this week agreed to $78.90 a ton for fine ore in the year starting April 1. But the market expected Australian miners to hold out for more.
The market anticipates that BHP Billiton and Rio Tinto will demand prices that would better reflect the lower cost of shipping iron ore from Australia and sizzling spot prices.
The term price of iron ore, the main raw material used to make steel, has risen fivefold since 2001.
Japan's Nippon Steel, JFE Steel, a unit of JFE Holdings, Kobe Steel, Sumitomo and Nisshin, and South Korea's POSCO had all agreed to the increase.
Term ore prices had been widely expected to rise by at least 50 percent after spot prices soared to record highs in 2007 and Chinese demand showed no signs of abating.
POSCO had already increased its hot-rolled steel prices by 11.5 percent from Feb. 1 this year to 580,000 won ($611.7). The South Korean steelmaker also raised cold-rolled steel prices by 10.8 percent to 665,000 won.
Overseas Project Delays
Construction at POSCO's Orissa plant in India had been delayed by protests from villagers upset about how land for the plant has been acquired.
"April construction will be difficult, but we will start work within the current year," Lee said.
POSCO will also decide on whether to go ahead with its construction of a steel plant in Vietnam by the first-half of the year.
Although timing is unfavorable for upstream investment, POSCO will continue to seek more upstream investment opportunities in the future, Lee said.
He added POSCO needed to expand its iron ore production capacity and would aggressively invest in such areas.