The Korea Herald


POSCO operating income forecast to fall

By 황장진

Published : April 12, 2011 - 11:27

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Korea’s leading steelmaker POSCO is expected to report an operating income of less than 1 trillion won ($917 million) for the January-March period due to a price freeze amid soaring raw materials costs, analysts said Tuesday.
POSCO, the world’s third-largest steelmaker, is set to report its first-quarter earnings next Friday. The steelmaker has been reporting a quarterly operating profit of more than 1 trillion won for the past three years.
Its first-quarter sales are expected to range from 8.5 trillion won to 9.7 trillion won, they said.
The steelmaker has held domestic steel prices flat for two consecutive quarters and has come under pressure from the Korean government to contain prices due to rising inflation.
Local steel mills also benefited as the global economic recovery spurred demand for steel used in cars and appliances, but there was criticism that increased costs of raw materials are passed on to customers, mainly smaller firms.
POSCO increased prices by as much as 32 percent last year to offset higher costs of iron ore and coal.
“POSCO has been struggling to cope with rising costs of raw materials, which should be reflected into prices,” Byun Jong-man, an analyst at LIG Investment & Securities. “However, it did not pass along costs to customers.”
POSCO may decide next week on possible price hikes, but may raise prices by less than previously expected, analysts said.
“Investors are worried that potential government pressure may lead to smaller-than-expected price increase,” said Choi Moon-sun, an analyst with Korea Investment & Securities Co.
Last month, local media reported that POSCO may raise steel prices by 20 percent this month.
However, possible price hikes, though they may not be enough to fully cover rising costs, will help improve earnings and boost its shares, Choi said. (Yonhap News)