POSCO may see Q1 operating profit reach $900 mn

Hot-rolled steel plates produced at the Pohang steel mill (Courtesy of POSCO Newsroom)
Hot-rolled steel plates produced at the Pohang steel mill (Courtesy of POSCO Newsroom)
Man-su Choe 2
Jan 17, 2021 (Gmt+09:00) bepop@hankyung.com
Steel industry

South Korea's largest steelmaker POSCO may see its operating profit climb to the 1 trillion won ($906 million) range as domestic steel companies expect to benefit from rising steel product prices driven by rebounds in the automobile and shipbuilding industries.

Next month, POSCO and Hyundai Steel Co. both plan to raise their hot-rolled steel plate price by 100,000 won ($91), which will bring the cost to around 950,000 won ($861) per ton, according to the steel industry on Jan. 17. Hot-rolled steel plates are created by rolling out slabs produced from a casting system. They are used as a basic material for steel products.

Domestic steel companies have increased their product prices to accommodate the spike in price of iron ore, the raw material for steel products, which was recently reported as $169.80 per ton. This marks the highest figure since September 2011, soaring by 39.2% over the last three months.

Production costs have risen due to the skyrocketing iron ore price, prompting Korean steel companies to negotiate prices with the automobile and shipbuilding industries. For several years, steel companies have avoided raising product prices in consideration of the woes facing these industries.

“Companies will have no choice but to agree with the price increase given that imported steel prices have also surged,” said a steel industry official.

Recently, hot-rolled steel imported from China stood at around $730 per ton, up at $100 per ton compared to the end of last year. The price has also rose for seven consecutive months in India, reaching $780 per ton in the domestic market.

CUTBACK IN CHINESE SUPPLY TO FACILITATE STEEL PRICE UPTREND

Industry watchers expect the steel price uptrend to persist for some time as China has decided to lower its crude steel production this year as part of its carbon emission reduction policy. Also, China's political dispute with Australia, the world's largest iron ore producer, has caused a setback in its raw material imports.

Despite the rising production costs, domestic steel companies' profitability has improved, thanks to concurrently rising steel product prices.

According to financial data provider FnGuide, POSCO is expected to post an operating profit of around 975 billion won ($883.3 million) in the first quarter on a consolidated basis. However, it may even top 1 trillion won, considering that market consensus continues to revise upwards.

The last time POSCO posted quarterly operating profit in the 1 trillion won range was in the third quarter of 2019. Meanwhile, Hyundai Steel is expected to report 108.5 billion won in operating profit in the first quarter.

Write to Man-su Choe at bepop@hankyung.com
Danbee Lee edited this article.

Dongkuk Steel wows industry with color steel plates, earnings surprise

Dongkuk Steel wows industry with color steel plates, earnings surprise

Dongkuk Steel employees inspect color steel plates at the Busan plant. GAMMANDONG, BUSAN -- The global steel industry underwent an unprecedented slump in 2020, with demand from the shipbuilding and automobile industries plummeting, alongside surging iron ore prices. Even the world's leading ste

Battery boom to drive POSCO Chem's $1.1 bn rights offering

Battery boom to drive POSCO Chem's $1.1 bn rights offering

POSCO Chem researcher runs quality test on battery cell (Courtesy of POSCO Chem) South Korea-based POSCO Chemical Co. has begun preparations for its rights offering, to the delight of shareholders as the company’s share price has been on a solid uptrend backed by the thriving secondary ba

POSCO Chem eyes No.1 spot in battery materials sector

POSCO Chem eyes No.1 spot in battery materials sector

POSCO Chemical CEO Min Kyungzoon South Korean steelmaker POSCO launched in 1968 with a mission to aid the country's economic growth through its steel business. True to its intent, the company is credited for contributing to the rise in Korea's exports, becoming the world's fifth-largest ste

POSCO Chem becomes supplier for GM-LG Energy Solution JV

POSCO Chem becomes supplier for GM-LG Energy Solution JV

POSCO Chemical researcher runs quality tests on battery cells POSCO Chemical Co., a secondary battery materials unit under POSCO, saw its share price surge on announcing that it has secured a contract worth billions of dollars with Ultium Cells LLC, a US-based joint venture between General Moto

Dongkuk makes strongest steel bar in S.Korea

Dongkuk makes strongest steel bar in S.Korea

Dongkuk Steel's newly developed giga rebar Steelmaker Dongkuk Steel Mill Co. has become the first South Korean company to develop a reinforcing bar, or rebar, that can withstand 12.2 tons per square centimeter -- equivalent to the weight of 7.6 mid-sized cars, the company said on Dec. 3. Rebars

POSCO aims for top spot in EV battery materials market

POSCO aims for top spot in EV battery materials market

Electric car batteries are often dubbed as "another semiconductor" in South Korea, a reference to the importance of semiconductor chips, key drivers in the country’s economic growth for decades.With competition heating up in the global race for eco-friendly vehicles, Korea’s thre

Korean steel majors positioned as 2021 market darlings

Korean steel majors positioned as 2021 market darlings

Corporate earnings generally come in line with estimates from market analysts, who closely monitor industry conditions. But this year, one sector analysts missed, by a big margin, was the steel industry.In the case of POSCO, South Korea’s largest steelmaker, analysts’ consensus operating

POSCO swings to Q3 operating profit vs Q2; steel demand on rise

POSCO swings to Q3 operating profit vs Q2; steel demand on rise

POSCO, the world’s fifth-largest steelmaker, has swung to an operating profit in the third quarter from the second quarter, when it reported its first-ever loss due to the fallout from the COVID-19 pandemic.The South Korean steelmaker reported in an Oct. 23 regulatory filing that it posted 261