Dongkuk Steel Maintains Strong Performance Amid Rising Demand for Billet and Cold-Rolled Steel

Q1 Operating Profit Consensus Up 31.4% YoY
Demand for Bonghyeonggang Also Rises with Construction Market Growth

[Asia Economy Reporter Hwang Yoon-joo] Dongkuk Steel is expected to continue strong performance this year, supported by increased demand for rebar and long products as well as expanded production of color steel sheets.

According to FnGuide on the 9th, Dongkuk Steel's consensus operating profit for the first quarter is estimated at 73.9 billion KRW, a 31.4% increase compared to the same period last year. Sales are expected to rise 11.1% year-on-year to 1.3651 trillion KRW. Notably, the net profit, which was -120.8 billion KRW in the first quarter of last year, is expected to turn positive.

This reflects expectations of improved profitability in long products (29% of sales) and cold-rolled products (34%), which account for the largest portions of sales. Housing starts reached 70,000 units through February this year, a 76% increase from the previous year. Growth in the construction market is expected to boost sales of rebar and H-beams. In fact, Dongkuk Steel's long product production volume is known to be around 900,000 tons in Q1 2019, 785,000 tons in Q1 2020, and approximately 850,000 tons in Q1 this year.

For cold-rolled products, sales of high-margin color steel sheets are expected to increase. This is based on the judgment that the demand for home appliance replacement, driven by COVID-19, will continue this year, as LG Electronics' appliance shipments to the U.S. have reached the highest level since 2020. Dongkuk Steel holds the number one domestic market share (35%) in color steel sheets and supplies them to global home appliance companies such as Samsung Electronics, LG Electronics, and Whirlpool. The company plans to further widen the production and operating margin gap this year. Once the color steel sheet line expanded last year is completed in the second quarter, it will be able to produce 850,000 tons annually, the world's largest scale, starting in the second half of the year.

An industry insider said, "With the growth of the construction market, steelmakers focusing on long products are bound to have good performance, and sales from the color steel sheet expansion could be reflected in results as early as the fourth quarter of this year."