South Korea steel major – POSCO announced its yearly results for 2017 on on 24 Jan’ 18. The steel maker recorded decrease in production and sales volume amid maintenance and revamping at blast furnace.
1. Crude steel production decline marginally in CY 17- POSCO crude steel production reported marginal decline of 1% on yearly basis to 37,207 thousand tons in CY17 in comparison to 37,496 thousand tons in CY16. Production volume down from blast furnace revamping and facility rationalization
2. Product sales went down by 3.2% in CY17 – Company’s sales volume decreased by 3.2% Y-o-Y basis to 34,709 thousand tons in CY17 against 35, 875 thousand tons in previous quarter.Besides this,product sale volumes of HRC declined by 1,091 thousand tons and plates by 136 thousand tons in 2017.
3. Carbon steel prices rose by 22% in CY17 – Company’s carbon steel prices registered a surge of 22% Y-o-Y in CY17 to 691thousand KRW/tons from 566 thousand KRW/tons in CY17.Also an increase of 293/KMT of stainless steel has been made in CY17.
4. Export Sales ratio down to capture domestic market – Export ratio witness the fall in CY17 which lead to growth in domestic sales volume by 54%.However export ration went down by 7% in 2017.
5. Net profit up by 43% in CY17 – Company’s net profit in CY17 showed the significant growth of 43% to 2,546 billion KRW in comparison with 1,785 billion KRW in CY16. Decrease in impairment losses and gains in disposal of investment securities can be attributed for rise in net profit of the company.
6. Operating profit from steel sector up by 23% in CY17- Operating profit from steel segment increased 23% Y-o-Y basis to 3,605 billion Won in CY17 which was at 2,927 billion won in CY16.
7. POSCO Maharashtra achieves highest sales volume in CY17-Owing to growth in domestic and overseas market,company has achieved historic high sale volumes in CY17 since’15.
8. POSCO increased its production and sales projection – POSCO aims to produce 37.4 MnT crude steel in CY18 slightly higher by 1% against 37.2 MnT acquired in CY17.
Similarly, it has revised its sales business plan to 35.3 MnT up by 2% compared to 34.7 MnT attained in 2017.
9. Chinese steel prices continue to show uptrend amid supply constraints – As per company report Chinese steel prices continues to show upward momentum in CY18 backed by continued impact of production reduction amid strict environmental regulations and restocking demand
Also,blast furnace utilization rate fell by 80% in early ‘18 and further production cut is expected by 35 MnT in CY18.
10. Global steel demand outlook –Global steel demand may witness gradual increase in CY18 on account of strong demand in emerging markets.Advance countries is expected to remain stagnant in terms of demand while developing countries’ demand is expected to grow about 5-6% owing to expansion in infrastructure investment.
As per company reports demand forecast from India is estimated to rise by 6% to 92.1 MnT in CY18 against 87.1 MnT in CY17.
11. Korean steel demand in automobile sector may remain slow- Auto production is expected to remain at lower levels owing to slowdown of both domestic and export markets in CY18.As per Korea Automobile Manufacturers Association the production of automobiles in Korea will increase marginally by 1% in CY18 to 4144 thousand cars against 4115 thousand in CY17.
12. Demand from Construction sector to remain slow – Weaker sentiments in housing market and reduction in SOC budget by government will result to slowdown of construction investment in CY18.It is projected at 0.6% in CY18 which was assessed at 7.5 % in CY17.
13. New orders from shipbuilding likely to increase- In CY18 new orders from shipbuilding is forecasted at 17.8 MnT which was at 16.1 MnT in CY17.
14. Global iron ore prices to remain on higher side – In Q1CY18 iron ore prices is anticipated at USD70-75/MT since the steelmakers are replenishing the inventories ahead of spring festival in China.Also typhoon in West Australia has lead to temporary disruption in supply which may lead to strong prices trend for shorter duration.
15. Coking coal prices expected to remain around USD 220-240/MT- However Q1CY18 coking coal prices is expected at USD 220-240/MT FoB Australia. Increasing price trend in Q4 CY17 has started to show decline as shipping delay in East Australian ports has been resolved. However, supply may become tight due to seasonal reasons, which will hold the price to remain hovering USD 200/MT.
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