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Corporate earnings generally come in line with estimates from market analysts, who closely monitor industry conditions. But this year, one sector analysts missed, by a big margin, was the steel industry.
In the case of POSCO, South Korea’s largest steelmaker, analysts’ consensus operating profit estimates were 16% above actual results in the first quarter and 24% lower in the second quarter. For the third quarter, they overestimated POSCO’s earnings by 39%.
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POSCO, the world’s fifth-largest steelmaker, said last month it has swung to an operating profit in the July-September quarter from the previous quarter, when it reported its first-ever loss due to the fallout from the COVID-19 pandemic.
The steeper-than-expected cut in global steel demand amid the pandemic has put market watchers in a bind, resulting in steelmakers' volatile share price movements.
But most analysts concur that Korea’s major steelmakers will stage a significant rebound next year, citing signs of an economic recovery, particularly in China, alongside aggressive stimulus spending by governments in many countries.
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Shares of POSCO have risen 14.7% this month to close Wednesday at 238, 500 won, a level seen before the coronavirus outbreak. Gains were led by institutional investors, who bought 102.2 billion won worth of POSCO shares. Foreigners have purchased 46.3 billion won in shares.
Hyundai Steel Co., the country’s No. 2 steelmaker, saw its shares rise 11.8% in the same period. Smaller firms have performed better, with Dongkuk Steel Mill advancing 14.5% and Daehan Steel gaining 33.7%.
Steel demand from automakers and builders dried up in the first half of the year as many countries around the world imposed lockdowns in efforts to contain the spread of the coronavirus.
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According to the World Steel Association (WSA), global steel demand is forecast to rise to 1.8 billion tons in 2021, up 4% from 1.73 billion tons this year as steel consumption is spreading from China to other countries, including India and Japan.
“With its economic rebound, China’s steel prices will remain at elevated levels for the time being, which is a good sign for Korean steel majors such as POSCO and Hyundai Steel, ” said Kim Yu-hyuck, a Hanwha Investment & Securities analyst. “Higher Australian iron ore prices will also provide a tailwind.”
Analysts expect POSCO’s operating profit to rise more than 50% to 3.46 trillion won ($3.14 billion) in 2021. The estimate is 9.1% higher than their consensus in October.
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POSCO has been favored by investors as a dividend stock as its dividend payout ratio, which currently stands at 4.18%, is higher than Hyundai Steel’s 2.33% and SeAH Besteel’s 2.9%.
Another positive for POSCO is the company’s planned share buyback. The company, which plans to buy 1 trillion won in treasury shares by April next year, has so far purchased 626 billion won worth of its own shares.
“Smaller steelmakers will likely post weaker earnings next year. In terms of shares to buy, you’d better focus on the majors, ” said KB Securities analyst Hong Sung-woo.
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During his presidential campaign, US President-elect Joe Biden vowed to impose a “carbon adjustment fee” on imports from countries that fail to cut emissions.
“One of the big risks for the steel industry is the Paris Agreement on Climate Change, which takes effect next year. Steelmakers account for about 7-9% of global carbon emissions and their businesses could come under pressure, meaning weaker share prices, unless they take action to lower emission levels, ” said Samsung Securities analyst Baek Jae-seung.
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SEOUL, Jun. 19 (Korea Bizwire) — As competition in the international steel industry stiffens due to oversupply, South Korean steel companies are embracing smart technology to prepare for the Fourth Industrial Revolution.
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At the forefront of this trend is South Korean steel-making company POSCO, which announced on Saturday that it has been adopting new artificial intelligence-based automation solutions for metal plating calculation at its production sites since January.
Previously, the amount of metal to be plated was controlled by workers, which left room for deviation depending on the various skill levels among workers.
However, the introduction of the AI-based automation technology is set to improve quality and decrease excessive steel plating, both of which could contribute to reducing the cost of production.
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POSCO’s move to go smart amid growing competition in the steel industry is led by CEO Kwon Oh-Joon, and began with his appointment in March.
From this month, POSCO is running a complimentary course on artificial intelligence for young people seeking employment in an all-out effort to cultivate talent in preparation for the Fourth Industrial Revolution.
Similarly, Hyundai Steel is also accelerating its efforts to develop AI-based automotive steel of a brand new generation, which will be 40 percent stronger than previous products.
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As competition in the international steel industry stiffens due to oversupply, South Korean steel companies are embracing smart technology to prepare for the Fourth Industrial Revolution. (Image: POSCO)
“POSCO will invest more and continue to improve production quality to widen the gap with Chinese rivals, ” Kim Chang-do, a researcher at POSCO Research Institute said.
The Korea Bizwire is committed to reporting on uniquely Korean stories for our readers. But we also provide enhanced coverage of useful news from all over the world if we find them of interest or relevance to our global audience.
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Kobiz Media, the parent company of this site, offers highly competent press release distribution and localization services aimed at South Korea -- an increasingly important and attractive market for global businesses who want to have an upper hand in the Asia Pacific region since Korea serves as a stepping-stone for forward-looking brands’ future success in these lucrative markets. We wish you all good luck for extraordinary success in your businesses and life.This year, Songshun Mould Steel Company expanded its export project in South Korea. We learned that with the development of the economy, the overall development of the Korean steel industry has been relatively fast, which can not only meet the domestic steel demand, but also export a large amount of steel.
For more than ten years, our Songshun Steel have been innovating and developing continuously, cooperating with customers one after another, and taking customers as the center to meet the needs of customers, so that every customer who cooperates with our Songshun steel manufacturer Can have a satisfactory and long-term cooperation.Songshun Steel has always adhered to the concept of sustainable development, pursued high-quality steel, only produces mid-to-high-end products, protects the environment and provides excellent services.
Last year, South Korea’s steel output reached more than 70 million tons, making it the sixth largest steel producer in the world, and their steel manufacturing technology has always been in a leading position. With the development of modern technology and economy, some steel manufacturers and steel producers in South Korea are committed to integrating digitalization into their production and organizational processes, promoting the development of digitalization, and promoting the continuous and rapid development of the steel industry. If you need to buy Korean steel, you can refer to the following Korean steel suppliers and steel manufacturers.
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Established in 1953, Hyundai Steel is the oldest steelmaking company in Korea, the earliest steel company in Korea, and the second largest electric arc furnace steel manufacturer in the world. It is a very reliable steel manufacturer in Korea.
Hyundai Steel continuously develops the best technology, has its own complete production process, produces high-end steel products, and has a production capacity of tens of millions of tons. Steel pipes, stainless steel, special steel bars and hydroformed steels, etc.
They adhere to the concept of sustainable development, continue to innovate and develop, pursue high-efficiency, durable and high-quality steel products, contribute to the country’s economic development, meet customer needs, take customers as the center, and respect the diversity of cultures and habits of various countries.
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Founded in 1968, POSCO has more than 50 years of rich experience.
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