POSCO likely to see strong 2021 following weak yearly performance

POSCO, the world’s fifth-largest steelmaker, is set to return to a strong performance this year following a lackluster 2020 hit by the fallout from the COVID-19 pandemic.

The top South Korean steelmaker said on Jan. 28 that its operating profit slumped to 2.4 trillion won ($2.2 billion) in 2020 on a consolidated basis, down 38% from 3.87 trillion won a year earlier as higher raw material prices ate into its profit margin amid sluggish steel demand.

Full-year net profit fell 9.8% to 1.79 trillion won on revenue of 57.79 trillion won, down 10% from the prior year.

The company didn’t provide a breakdown of its fourth-quarter figures, but calculations show operating profit in the October-December period jumped 55% on year to 863.4 billion won.

Providing an outlook for 2021, POSCO said in a regulatory filing that it aims to produce 37.8 million tons of crude steel this year and sell 35.3 million tons of steel products for revenue of 59.4 trillion won on a consolidated basis. It has earmarked 6.1 trillion won in capital expenditure for 2021.

Hyundai Steel Co., the country’s No. 2 steelmaker, posted 73 billion won in operating profit on revenue of 18.23 trillion won in 2020, down 78% and 12%, respectively, from the previous year.

REBOUND FROM Q3 LIKELY TO CONTINUE

Steel demand from automakers and builders dried up in the first half of last year as many countries around the world imposed lockdowns in efforts to contain the spread of the coronavirus.

Hit hard by the negative impact, POSCO posted its first-ever loss in the second quarter on an unconsolidated basis, which excludes performances at its non-steel affiliates.

But the company swung to an operating profit in the third quarter on the back of a gradual recovery in global economic activity and growing demand for high-margin steel products for automobiles.

“We managed to stage a meaningful rebound from the third quarter due to drastic cost-cutting efforts and flexible production and sales in accordance to market conditions,” said POSCO marketing chief Kim Young-joong on Thursday.

POSCO TO BENEFIT FROM CHINA’S OUTPUT CUT, HIGHER PRICES

Analysts expect POSCO to post a solid profit this year, with an operating profit close to 1 trillion won in the first quarter alone, as it is set to benefit from rising steel product prices driven by rebounds in the automobile and shipbuilding industries.

Sources said last week that both POSCO and Hyundai Steel plan to raise their hot-rolled steel plate price by 100,000 won ($91) next month to reflect higher prices of iron ore, a key raw material.

An expected cutback in China’s crude steel production due to its carbon emission reduction policy is also expected to provide a tailwind behind the global steel price uptrend, analysts said.

According to the World Steel Association (WSA), global steel demand is forecast to rise to 1.8 billion tons in 2021, up 4% from 1.73 billion tons in 2020 as steel consumption is spreading from China to other countries, including India and Japan.

Write to Man-Su Choe at bebop@hankyung.com
In-Soo Nam edited this article.