Steel Stocks Heating Up Fiercely

Record Highs for POSCO and Hyundai Steel Amid Expectations of Demand Rebound Next Year

[Image source=Yonhap News]

[Asia Economy Reporter Eunmo Koo] With the steel demand expected to rebound next year, the stock prices of Korea's two major blast furnace companies, POSCO and Hyundai Steel, have been soaring, hitting new all-time highs day after day.

According to the Korea Exchange on the 25th, POSCO's (POSCO) stock price closed at 244,500 KRW, up 0.41% (1,000 KRW) from the previous trading day. During the session, POSCO's stock price rose as high as 249,500 KRW, setting a new 52-week high. Hyundai Steel also closed at a record high of 33,500 KRW, continuing its upward trend.

Steel stocks, which began to slowly recover since September, have sharply expanded their gains this month. POSCO's stock price has risen 24.7% from last month to the day before, and Hyundai Steel's has increased by 35.0%, outperforming the KOSPI return of 12.5% during the same period. Other steel stocks such as Korea Steel (38.0%), Dongkuk Steel (29.0%), and SeAH Besteel (13.2%) also saw significant gains.

The recent rise in steel stocks is attributed to expectations of a rebound in steel demand next year. Although uncertainties remain, optimism about the expansion of fiscal policies in various countries starting next year is valid, and China's winter environmental regulations are likely to exceed market expectations, suggesting that the price recovery trend will continue at least through the first quarter of next year.

Jaeseung Baek, a researcher at Samsung Securities, said, "It is difficult to pinpoint the exact timing of a full recovery in steel demand immediately, but fiscal policy strengthening is expected not only in China but also in the US and Europe, and the likelihood of an imminent US interest rate hike is low. Unless COVID-19 spreads significantly again, the upward trend in steel and metal prices driven by demand recovery is expected to continue."

Additionally, expectations for COVID-19 vaccine development are stimulating investor sentiment. Although the global cumulative number of confirmed cases is approaching 60 million, clinical trial results of vaccines with over 90% immunity effectiveness have been announced one after another, improving investment sentiment in cyclical stocks, which is also driving rotation into steel stocks. Previously, the raw materials market also saw rising prices for steel industry raw materials such as iron ore and copper, along with crude oil, as the economic recovery outlook for next year gained traction.

Along with the recovery outlook for the industry, earnings expectations are also expanding. According to financial information provider FnGuide, Hyundai Steel's operating profit for next year is estimated at 517.6 billion KRW, a 372.7% increase from this year. POSCO is also expected to see a 50.3% increase to 3.4599 trillion KRW.