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NEWYORK Mar. 18 -- Hyundai Heavy Industries Co., the world's biggest buyer of steel plates, may pare purchases from China for the first time in five years as it builds fewer vessels and considers getting supplies from a new Korean mill.
&quot;There's no reason for us to buy more from overseas,&quot; Chief Operating Officer Kang Chang June said in a March 16 interview in Ulsan, South Korea. &quot;It's not like Chinese steel plates are cheaper than those from Korea and Japan.&quot;
The world's biggest shipyard may also buy more Korean steel plates this year as Hyundai Steel Co.'s new 5.84 trillion won ($5.2 billion) furnaces and expansion by Posco and Dongkuk Steel Mill Co. help boost domestic production capacity by about 37 percent. Korean yards' overall use of plates may decline following a drop in ship orders amid the global recession.
&quot;This could hurt Chinese steelmakers,&quot; said Cho In Karp, head of research at Heungkuk Securities Co. in Seoul. &quot;Steel- plate prices in China have been too volatile and that makes it difficult for companies to predict costs.&quot;
Hyundai Heavy and affiliates Hyundai Samho Heavy Industries Co. and Hyundai Mipo Dockyard Co. used more than 3 million tons of steel plate last year, less than the 4 million tons projected, as ship orders fell. The material is the biggest expense for shipbuilders, accounting for as much as 20 percent of sales.
Plate Prices
The shipyard has increased use of Chinese steel plates since 2006 as South Korean steelmakers were unable to meet demand from record ship orders. The company also agreed to buy 20 percent of Qinguangdao Shouqin Metal Materials Co. the same year to ensure a steady supply.
Hyundai Heavy dropped as much as 2.8 percent to 226,000 won and traded at 227,500 won as of 10:39 a.m. in Seoul. Hyundai Steel fell as much as 0.8 percent to 89,100 won. Posco declined as much as 1.4 percent to 551,000 won.
Posco, which supplies about half of the plates used by Hyundai Heavy, said earlier this month that steel-product prices may need to increase by as much as 20 percent on &quot;signs of rising&quot; raw-material costs.
&quot;It's not the time to raise prices if you consider the demand&quot; from shipbuilders, Kang said. &quot;We are appealing to the steelmakers to consider the difficulties the shipbuilding industry is going through.&quot;
Posco Expansion
Rising capacity and falling demand caused Posco and Dongkuk Steel to cut plate prices by as much as 42 percent in the first half of last year after more than doubling charges in 2008.
In China, the average steel-plate price rose 11 percent this year to 4,358 yuan per ton yesterday, the highest since October 2008, according to Beijing Antaike Information Development Co.
Posco, South Korea's biggest steelmaker, plans to boost steel-plate production 38 percent by 2011. Dongkuk Steel started operating a new plant today, boosting capacity by 52 percent. The two companies meet about 70 percent of the nation's demand for the steel material.
Hyundai Steel, which focuses on supplying the construction industry, intends to begin producing steel plates from next month after opening one of the new furnaces in Dangjin, south of Seoul. Hyundai Heavy may buy steel plates from the steel mill, Kang said. The shipyard and steel mill, both formerly part of the Hyundai Group, are no longer connected.
Hyundai Steel may provide steel sheets to affiliates Hyundai Motor Co. and Kia Motors Corp., the steelmaker's Chief Executive Officer Park Seung Ha said in January.
Baoshan Steel
Further South Korean capacity will squeeze Chinese mills, which also have expansion plans. Baoshan Iron &amp; Steel Co., China's largest mill, in 2008 said it will raise capacity for plates by 29 percent.
The Shanghai-based steelmaker, which supplies Hyundai Heavy and Samsung Heavy Industries Co., the world's second-largest shipyard, dropped as much as 0.9 percent to 8.20 yuan in Shanghai trading.
South Korea's production capacity for heavy plates, used mainly in shipbuilding, may climb to 13 million metric tons this year from about 9.5 million tons last year, according to data from Korea Iron &amp; Steel Association.
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