1Q Aluminium Price of ADC12 for Hyundai Motor: Korean Competitiveness Dropped

2013/12/25

ADC12 The long-term contract price of aluminium alloy in January to March for Korean Hyundai Motor is roughly fixed, as 2,384 won /kg for ADC12 and 2,503 won /kg for 2B. If we calculate at present exchange rate (100W=¥9.55), ADC12 is 227 yen/kg and 2B is 239 yen/kg. This 227 yen for ADC is a unit price that corresponds to the quarter of January to March in Japan.
 By the way, it was 2,450 won for ADC12 and 2,612 won for 2B in 4Q (October to December), as ADC12 is falling down by 6 yen/kg converted into Japanese yen.
 The unit price of ADC12 for Hyundai Motor has been fixed to 10~15 yen/kg higher price, as there is a determined formula between Korean main aluminum alloy maker, such as Sambo, and Hyundai , and it's reached under a certain agreed price. Underlying this has been a multiplied profit due to the export expansion of completed cars using weak won exchange rate. This favorite business model of Korea has been collapsing in recent years. The strong won continues, and the inflation rate is rising, too. The domestic production cost rises, and the export competitiveness will be gone. In other words, it becomes similar to Japan in 1990s, since the collapse of the bubble.
 Indeed, it is said that the production volume of Hyundai Motor is presently falling down to 30% decrease from the previous year. The fact that ADC12 price for Hyundai Motor "fell" down to the same level of Japanese price seems like to suggest the relative deterioration and declining of competitiveness in the future Korean aluminum alloy industry.
 70% to 80% of Korean aluminum alloy materials (scrap) are imported, and most of the purchases are paid in dollars. Most are from America, but it is said that the export from America to Korea has largely decreased recently (American scrap trader source). In addition, it also will be a sign of abnormal conditions that Korean scrap dealers' export to China, not domestic one, of aluminum scrap has increased, too.
 The modulation and decline in Korean Economy has long been reported. The Korean central bank has revised down the GDP growth rate of next year-2014 to 3.8% from original 4%, but this also seems a too optimistic outlook. In reality, I hear that the Korean economy is being driven into a considerably strict situation.
 From these objective circumstances and the ADC12 purchasing price of Hyundai Motor, deductively I predict that Korean aluminum alloy industry next year may be in unprecedented dire straits, due to a difficult profit caused by the high price of raw materials and the cheap price of products.
(IRuniverse Susan)

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