POSCO, Rising Steel Prices Fuel Growing Expectations for Stock Price Increase

[Asia Economy Reporter Song Hwajeong] Expectations for POSCO's stock price increase are growing due to rising steel prices.

According to NH Investment & Securities on the 27th, the price of hot-rolled steel (HR) in the Chinese distribution market rose by 7.1% to 4,904 yuan per ton on the 24th compared to just before the Lunar New Year holiday. After declining from the high of 5,058 yuan per ton on December 22 last year until the holiday, prices have rebounded. During the same period, prices of cold-rolled steel, thick plates, and rebar also increased by 4.6%, 7.1%, and 7.1%, respectively. The price of iron ore reached $171.8 per ton on the 24th, approaching the previous high of $175.2 per ton recorded on December 21 last year.

Supported by the rise in steel prices, POSCO's average selling price (ASP) of carbon steel is expected to increase from 679,000 KRW in Q4 last year to 733,000 KRW in Q1 this year and 770,000 KRW in Q2. Byun Jongman, a researcher at NH Investment & Securities, stated, "Accordingly, POSCO's consolidated operating profit for Q1 is expected to recover to the 1 trillion KRW level for the first time in five quarters, increasing by 53.7% year-on-year to 1.084 trillion KRW," and added, "In Q2, it is expected to rise by 601.1% to 1.1757 trillion KRW."

Major global steel companies have recently shown simultaneous stock price increases. This year, China's Baoshan Steel's stock price rose by 26.7%, Europe's ArcelorMittal by 18.5%, the U.S.'s Nucor by 18.4%, and Japan Steel by 18.4%. POSCO's stock price increased by only 0.7%, but it is expected that stock price gains based on rising steel prices and improved performance will be possible. Researcher Byun said, "Thanks to the rise in steel prices, performance improvement is expected through Q2," and added, "The clear rebound in Chinese steel prices will lead to stock price increases."

Inflation and rising interest rates are signals of real economic recovery, making the business outlook positive. Researcher Byun analyzed, "Recently, the yield on the U.S. 10-year Treasury bond has been rising, and steel markets have performed well during periods of rising interest rates," adding, "The rise in copper prices, an economic indicator, and the strong oil prices are also positive signals for steel company stocks."