S. Korean steelmakers¡¯ Q3 OP down due to poor demand

steelmakers

South Korean steelmakers¡¯ profits contracted sharply in the third quarter mainly due to a plunge in global steel demand from the economic slowdown, coupled with the strong U.S. dollar that pushed up raw materials¡¯ import prices.

According to multiple industry sources on Monday, steel giant POSCO Holdings raised 920 billion won ($644.7 million) in consolidated operating income in the July-September period on sales of 21.16 trillion won. Its operating profit in mainstay steel business alone plunged 71 percent on year in the third quarter amid sluggish steel demand from the global economic downturn, as well as operation suspension of its plants due to the flooding caused by Typhoon Hinnamnor in September.

POSCO has resumed operations of six of 14 waterlogged factories in Pohang. It is seeking to resume operations of the remaining factories in November and December.

Another steelmaker Hyundai Steel Co. also faced a decline in operating income due to weak global steel demand. It raised 373 billion won in consolidated operating profit in the July-September period, down 55 percent from the same period a year ago.

SeAH Besteel Holdings¡¯ operating profit also declined 68.9 percent on year due to higher energy costs and reduced sales. Dongkuk Steel¡¯s operating income plummeted 50.2 percent on year to 148.5 billion won.

Earnings in the Korean steel making industry are expected to remain weak without a sign of imminent recovery in steel demand, according industry observers.

The steel industry is also threatened by the strong U.S. dollar against the Korean currency in the 1,400 won range. The stronger U.S. dollar will hike the import prices of raw materials like iron ore and metallurgical coal for iron making for steel production.

The World Steel Association in April projected global steel demand for this year to grow 0.4 percent from last year but it revised downward the outlook in October to a 2.3 percent decline. For next year, it revised its earlier forecast of a 2.2 percent growth to 1 percent growth.

Recovery in demand is expected to be slow due to continued high inflation. They are also expected to face a rise in energy costs during winter as OPEC+ member states are expected to cut oil production.

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