Posco likely to return to $1 bn profit zone in Q1

South Korea’s top steel maker Posco will likely keep up growth momentum and may return to $1 billion profit zone in the first quarter, given the recovery in global demand and product prices.

Posco’s operating income for the fourth quarter ended December 2020 is estimated at 872 billion won ($801 million), up 56 percent on year.

The first-quarter outlook is even better.

The highest estimate for Posco’s first-quarter earnings was made by Yuanta Securities Korea at 1.1 trillion won. Samsung Securities project 1 trillion won and Hanwha Investment & Securities 973 billion won.

The last time the steel giant has kept up an operating income around 1 trillion won until the third quarter of 2019.

Its earnings plunged to 557.6 billion won in the fourth quarter 2019, 705.3 billion won in the first quarter, 167.7 billion won in the second quarter, and 666.7 billion won in the third quarter.

The rosy earnings outlook for the steel maker stems from rebounding steel demand in line with recovery of automakers, shipbuilders and other clients. The recovery in steel demand also has allowed the steel maker charge more for its steel products.

The hike in sale price is to reflect the jump in raw materials prices, said a Posco official.

According to the trade ministry, the benchmark iron ore with 62 percent content at Qingdao reached $167.86 a metric ton on Tuesday, more than doubled from February last year. It is only $23 off from historic high of $191.70 in 2011.

Posco is expected to have the upper hand in price negotiation with clients in the first quarter as iron ore price continues to rise, triggered by China’s massive projects to aid economic recovery, projected Cape Investment & Securities.

On Thursday, Posco shares finished 3.9 percent higher at 291,000 won.

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