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Posco Q4 profit tipped to jump despite pandemic

This photo taken June 30, 2019, shows Posco's steel products stored at the company's plant in Pohang, South Korea. (Yonhap)
This photo taken June 30, 2019, shows Posco's steel products stored at the company's plant in Pohang, South Korea. (Yonhap)
Posco, the world's fifth-largest steelmaker by output, is expected to have logged double-digit operating profit growth in the fourth quarter on increased demand despite the coronavirus pandemic.

Strong demand for steel products in China and a hike in steel prices likely buoyed the company's bottom line in the October-December period, analysts said.

Posco is estimated to have posted an operating profit of 838.3 billion won ($760.1 million) in the fourth quarter, up 50.3 percent from a year earlier, according to a median forecast of market research firm FnGuide.

Still, its fourth-quarter sales are forecast to fall 5.3 percent on-year to 15.19 trillion won.

The quarterly results reflect a quick recovery of steel demand amid short supplies in the United States and Europe and a hike in steel prices, analysts said.

Posco's quarterly results also "got a boost from increased demand for steel in China," Park Hyun-wook, an analyst at Hyundai Motor Investment & Securities Co., said in a research note.

Looking ahead, Kim Hyun-wook, an analyst at Shinhan Investment Corp., said Posco could enjoy the effects of a price hike of its steel products, noting a spike in raw material costs could lead to an increase in Posco's steel prices.

The price of iron ore jumped to $173 per ton on Jan. 18 from about $80 in May last year, according to Shinhan Investment.

A spike in raw material costs can weigh on Posco, but the company can increase prices of its steel products amid strong demand, which could help improve the steelmakers' bottom line.

Posco has nine blast furnaces in South Korea -- five in the southwestern city of Gwangyang and four in the southeastern industrial city of Pohang. (Yonhap)
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