According to F&G on the 14th, POSCO Holdings is expected to post sales of 18.68 trillion won and operating profit of 880.2 billion won in the third quarter of this year. This is down 1% in sales and 26% in operating profit from the third quarter of last year. Compared to the second quarter of this year, sales are expected to increase by 1% and operating profit by 17%.
However, securities firms that released reports on the steelmaker this month are lowering their expectations. The reasoning is that the profitability improvement from the production cuts will be slower than expected as steel demand shows no signs of rebounding.
On the 11th, Baek Jae-seung, a senior researcher at Samsung Securities, set a third-quarter operating profit forecast of 822.8 billion won for POSCO. This was 6.4% below the consensus. “We do not expect overseas steel subsidiaries to show much improvement due to sluggish market conditions,” Baek said.
The slump in the domestic steel industry began in earnest in the first half of last year. Due to the prolonged economic slowdown in China, local steelmakers have shifted their strategy to expand exports. The downward pressure on prices from China's “low-cost offensive” has led to a significant deterioration in the profitability of domestic steelmakers.
The domestic steel industry has recently welcomed the Chinese government's strong commitment to stimulate the economy. As Chinese demand is digested at home, domestic oversupply pressure will be reduced and overall steel prices will benefit.
However, the consensus is that the timing of the rebound in steel demand should be approached conservatively, given the lack of specificity in China's stimulus program.
“We have seen two years of disappointment in the past when Chinese policy announcements were not followed by a recovery in real data,” said Baek senior researcher, ”It remains to be seen whether a positive change in the Chinese government's attitude will trigger a real recovery in Chinese steel demand through the flow of macro data in the coming months.”
Gwak Horyung (horr@fntimes.com)
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