South Korean steelmaker Posco posted an operating profit of 1 trillion won ($848 million) in the second quarter this year, buoyed by its lucrative infrastructure and trade operations despite the sluggish steel business, the firm said Tuesday.

The company also posted 16.3 trillion won in sales, with a net profit of 681 billion won. Sales rose 1.5 percent, but operating profit and net income declined 14.7 percent and 14.7 percent on-year, respectively. 

The decline was mainly due to its sluggish steel business, which accounts for around 80 percent of the total operating profit. The operating profit of its steel business fell 21 percent on-quarter due to a price surge in iron ore, a key material for manufacturing steel.

In the wake of Brazil’s Vale Dam collapse and cyclone in Western Australia, the price of iron ore jumped from $65 per ton in the second quarter of last year to $100 per ton this year.

Despite this its trade and infrastructure businesses were lucrative.

Its global infrastructure business posted 299.4 billion won in operating profit, a 9.9 percent rise from the same period last year.

Posco International, its trading arm, said it posted 6.4 trillion won in sales, 180 billion won in operating profit and 121 billion won in net income. Operating profit rose 32.4 percent and net income increased 216 percent on-year.

The strong earnings of the trading firm were driven by the rise of gas sales from Myanmar’s gas fields and profit increase in trading steel, food, chemicals and parts, according to the company.

The company predicted a brighter outlook in the second half of the year. The firm expects steel demand in China to recover due to the government’s measures to stimulate the economy. It revised up its sales goal from 357 million tons to 362 million tons this year.

Posco also hinted that it plans to increase steel prices as the price of raw materials, including iron ore, are seeing an upward trend.

“Japanese steelmakers announced a price increase of 5,000 yen ($46.20) per ton. Chinese and US steelmakers are also increasing the price. Posco too plans to reflect the price rise of raw materials in the selling price,” said a Posco official in a conference call.

“Although it may take some time to negotiate with the auto, shipbuilding and home appliance industries, we will reflect the price rise considering the condition of each industry.” 

By Shin Ji-hye (shinjh@heraldcorp.com)