Posco Posts Biggest Profit Since ‘13 as Steel Prices Rebound

01 November 2016

Posco, South Korea’s largest steelmaker, posted the largest quarterly profit since 2013 as a property and infrastructure boom in China boosts global prices, lifting earnings at Asian mills. Moody’s Investors Service revised the company’s ratings outlook to stable from negative.

Net income, excluding minority interests, was 539.3 billion won ($476 million) in the three months through September, after a 550 billion won loss a year earlier, the Pohang-based company said in a statement Wednesday.

Steel prices have climbed more than 40 percent in 2016, rallying from five years of losses. Baoshan Iron & Steel Co., the listed unit of China’s second-biggest supplier. Posco’s margins expanded on increased sales of higher-value products and restructuring efforts.

The company’s operating profit of 1.03 trillion won beat the 904.6 billion won estimated by analysts, and compared with 651.9 billion won a year earlier, according to the company. Sales of 12.7 trillion won missed estimates of 13.4 trillion won and compared with 14 trillion a year earlier.

Sales of higher-value items increased to about 4 million tons in the third quarter, or almost half of the total, while the mill has restructured 16 units this year and will deal with a further 19 by the year-end.

The industry faces the challenges of Chinese overcapacity and soaring prices of coking coal, a steelmaking ingredient. China, which supplies half the world’s steel, expanded production in the first nine months, defying calls to curb output, while exports increased 2.4 percent to 85.1 million tons, the highest ever for the period. Hard coking coal prices have more than tripled this year.

Source – Bloomberg