POSCO posts highest quarterly profit since 2011 on strong steel prices

Ohjoon Kwon, POSCO CEO and VP of World Steel Association – Image courtesy of POSCO

South Korea’s top steelmaker POSCO posted its highest quarterly profit since 2011 and said it expected sales revenue for all of 2018 to be lifted by higher steel prices.

The world’s fifth-largest steelmaker raised its revenue outlook for the full-year to 64.8 trillion won ($57.0 billion) from its previous forecast of 64.1 trillion won in July, POSCO said in its filing on Tuesday.

POSCO’s revenue in the third quarter rose 9.1 percent from a year earlier to 16.4 trillion won, beating the analysts’ estimate of 16 trillion won.

Steel prices in China, the world’s biggest consumer and producer of the construction material, have risen nearly 20 percent this year, supported by disruptions to output from policies aimed at tackling pollution and excess capacity.

Looking ahead, Kim Gwang-soo, executive vice president of POSCO, told an earnings’ call with analysts that steel prices are expected to stay strong in the fourth quarter on solid demand, helping the company’s fourth-quarter profit remain firm.

“An increase in (China’s) steel production in the third quarter and lower-than-expected steel production cuts have weighed on prices … but demand is expected to grow in the fourth quarter and China will reduce its steel production even though the cut may be smaller (than last year),” Kim said.

In September, China’s daily steel output hit a record high of 2.7 million tonnes on average, as mills in the world’s top producer ramped up production ahead of government-led winter production curbs to fight air pollution.

Production restrictions set by China’s top steelmaking city Tangshan, however, were seen as less strict this year than last year as the Chinese government allowed local governments to set their own output curbs.

POSCO’s consolidated operating profit rose 36 percent to 1.5 trillion won for July-September, versus 1.1 trillion won a year earlier, the steelmaker said.

The profit jump was higher than an average estimate of 1.4 trillion won from 11 analysts, according to Refinitiv data.

POSCO shares fell 2.1 percent on Tuesday, while the wider market dropped 2.6 percent.

($1 = 1,137.0800 won)

(By Jane Chung and Ju-min Park and Manolo Serapio; Editing by Tom Hogue)

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