(Adds details, updates shares )
SEOUL, Feb 22 (Reuters) - South Korean steel maker POSCO 005490.KS said on Friday it planned to raise steel prices after a surge of 65 percent in iron ore prices, its main raw material, but had yet to decide by how much.
“With raw material prices soaring, wouldn’t it be necessary for us to raise steel prices?” Lee Ku-taek told reporters 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.
Lee 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-tonne-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 tonne 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 BHP.AXBLT.L and Rio Tinto RIO.LRIO.AX 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.
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 steel maker 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 unfavourable 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.
Shares in POSCO ended down 2.8 percent at 493,000 won, with dealers citing the India plant delay as one reason the shares underperformed the wider market’s 1.1 percent fall. (Editing by Keiron Henderson and Lincoln Feast)
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