South Korean steelmaker POSCO steel has ramped up its production to 100pc capacity. Amid the COVID-19 outbreak, the mill had reduced production below 50pc capacity in line with the subdued demand. Global steel demand is likely to remain upbeat in the second half of 2020.
POSCO’s idled blast furnaces at Gwangyang mill were fired in July. The company’s all three mills are now working at full capacity with anticipation that steel demand is likely to recover to pre-COVID-19 levels. The resumption could also help the mill lower fixed costs due to economies of scale in the coming days.
|Posco’s steel sales in Mn mt|
|* Forecast based on Hana financial report|
A positive outlook for H2
Global raw materials prices were largely on an uptrend in August raising finished steel prices. In September, many mills in South Korea, including POSCO hiked HRC sales prices by KRW50,000/mt ($43/mt), while CRC prices increased KRW20,000-40,000/mt. Another price hike in October also seems to be a possibility.
The Korea Iron & Steel Association believes domestic hot-rolled steel prices in South Korea could hit KRW690,000/mt ($590/mt) in line with global iron ore prices reaching a six-year high.
Though iron ore prices in the past few days fell by $15/mt from their peak of $130/mt cfr China for 62pc ferrous content, participants anticipate the downfall to stay limited and finished flat steel prices could rebound post-golden week holidays in early October.
In China, Baoshan Iron & Steel raised the hot-rolled steel price for October by CNY50/mt ($7.36/mt), marking a fifth successive hike. Albeit marginal, prices have increased by a total CNY500/mt ($73.3/mt) in the last three months, and market participants are hoping for a V-shaped recovery.
POSCO’s third-quarter earnings are likely to be above the market average, estimates a South Korean financial company. The consolidated operating profits could reach KRW615.1bn in the fourth quarter, rising four-fold from KRW167.7bn in the second quarter.
In the quarter ending June, the company had reported an operating loss for the first time ever of KRW104.9bn. Earlier than expected recovery in the automobile sector could drive POSCO’s steel sales in Q4 2020. Sales in the fourth quarter are expected to rise to 8.88mn mt from 7.76mn mt in the second quarter.