POSCO turns to red in Q4 on typhoon, weak steel demand

POSCO Holdings Inc., the holding company of South Korea’s top steelmaker, turned to the red in the fourth quarter of 2022 hit by a typhoon and weak global demand, although the company is likely to report a profit in the current quarter.

POSCO Holdings on Friday reported an operating loss of 370 billion won ($299.6 million) in the October-December period on a consolidated basis, compared with a 2.4 trillion won profit from a year earlier. Its quarterly sales slipped 9.6% to 19.3 trillion won.

For the whole of 2022, the company’s operating profit nearly halved to 4.9 trillion won, missing a consensus profit forecast of 5.8 trillion won, although sales rose 11.1% to 84.8 trillion won.

That came after Typhoon Hinnamnor in September hammered POSCO’s plant in Pohang, forcing the company to shut down all three of its blast furnaces for the first time in a near half-century.

POSCO Holdings estimated operating losses and rising one-time costs due to the production suspension of the plant may have slashed its total annual operating profit by 1.3 trillion won. In addition, the sluggish global steel demand, production disruption and truckers’ strike put further pressure on earnings in the last three months of 2022, the company said.

EXPECTED TURNAROUND

The steel industry and analysts, however, predicted POSCO Holdings’ profit to improve this year as the steelworks resumed normal operations earlier in the day after the plant has been fully recovered.

Global steel consumption is also expected to recover as the easing of China’s COVID-19 restrictions is likely to unleash pent-up demand for commodities and consumer goods.

Iron ore and steel prices already rebounded. The prices of iron ore futures recovered to around $120 per ton this month from about $80 a ton in November last year, according to Trading Economics, a market data provider. The domestic prices of hot rolled coil steel prices in China and the US also advanced some 6% and 8%, respectively, from the previous month.

“Production and sales volumes may be normalized as the steel market conditions are recovering from the first quarter,” said Lee Eugene, a steel sector analyst at Eugene Investment & Securities Co. in Seoul.

The company is likely to benefit from the production of lithium, a key material of electric vehicle batteries, industry sources said. POSCO International, which merged with its affiliate POSCO Energy Co., is also expected to provide another future growth engine by completing a liquefied natural gas value chain by 2025 and transforming its business into an eco-friendly sector.

Reflecting such optimism, POSCO Holdings’ shares closed up 2.7% to 308,500 won in the South Korean stock market, far outperforming a 0.63% gain in the wider Kospi.

The company is scheduled to unveil details of its quarterly earnings on Jan. 27.

Write to Kyung-Min Kang at kkm1926@hankyung.com
Jongwoo Cheon edited this article.