POSCO Expects Four-Fold Increase in Operating Profits by End of Year

Integrated steel manufacturer Pohang Iron and Steel Company (POSCO; Pohang, South Korea) recently said that its exports to China have grown from 558,000 tons in the second quarter of 2008 to 926,000 tons this year, on a year-on-year basis. Industrial Info Resources (Sugar Land, TX) reports that the first quarter of 2009 saw a 3.5 percent year-on-year drop. While POSCO saw 31.3 percent of its products being exported in the first quarter, the number jumped to 39 percent in the second quarter.

The increasing demand for steel from China is proving to be very beneficial for POSCO. The company expects to enjoy the benefits of the booming trade for the rest of the year. Overall, POSCO produced 13.3 million tons of steel over the first six months of the year and sold 13 million tons. The second half of the year is expected to show production figures of 16.5 million tons and sales figures of 15.1 million tons. POSCO expects operating profits to grow four-fold and reach $1.7 billion in the second half of the year. Analysts are optimistic about the estimates. More than 97 percent of the company's facilities are expected to be operating from the fourth quarter of the year.

POSCO is expecting to gain from the rise in steel prices brought about by the increasing demand for steel. Prices have risen by about 20 percent in recent days. Meanwhile, several Chinese steelmakers are increasing product prices, an indication that global prices are likely to increase, too. China's largest steel maker, Baosteel Group Corporation (Shanghai, China), already has announced a higher price of $117.1 per ton for September. Another major player, Wuhan Iron and Steel Group Corporation (Wuhan, China), has announced plans to raise prices by $102 to $234 per ton from September.

Automobile manufacturer Kia Motors Corporation (Seoul, South Korea) has reported second-quarter earnings that are four times higher than last year's, on a year-on-year basis. Tax incentives offered by the government and an increasing demand for small cars worldwide have given the company's sales a major boost. Kia Motors reported second-quarter net profits of more than $275 million, an increase of 303.5 percent year-on-year. While year-on-year operating income saw a hike of 182 percent to $262 million, sales increased by 11.5 percent to $3.8 billion. A company statement said that in spite of the severe global downturn, Kia Motors generated substantial profits based on a weak local currency and government tax incentives. Kia Motors also expanded its market presence in Europe and the United States, and its overall market share in the second quarter increased from 2.1 percent last year to 2.5 percent this year.

South Korea's largest automaker, Hyundai Motor Company (Seoul, South Korea), has similarly reported a 48 percent hike in the company's quarterly net profits. The company reported a net profit of $649.9 million in the second quarter, which is significantly higher than the $434 million net profit it posted a year ago.

According to the latest Oil & Gas Report released by Business Monitor International (BMI) (London, England), South Korea will consume 8.31 percent of the Asia Pacific region's oil by 2013, and imports will account for a major portion of this. The 2008 demand for gas from South Korea was 37.5 billion cubic meters, with the major portion imported in the form of liquefied natural gas. The nation consumed 2.08 million barrels per day of oil in 2008 and exported 910,000 barrels per day. The exports do not include crude oil but encompass oil derivatives such as gasoline, diesel and light oil.

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Pohang Iron and Steel Company, www.posco.co.kr.