Average Increase of 40% Since March... Continued Outlook for Business Improvement and Growth
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[Asia Economy Reporter Park Jihwan] "Steel stocks have been rising for almost two months, is it still a good time to buy now?"
As steel industry stocks continue to show strong performance day after day, investors considering buying are facing growing concerns. The securities industry forecasts that the upward trend in stock prices will continue, based on tight supply and demand and product price increases indicating an improvement in the business environment.
According to the Korea Exchange on the 9th, the stock prices of major domestic steel companies have risen by an average of 40.6% from March until the previous day. POSCO (17.8%), Hyundai Steel (26.4%), KG Dongbu Steel (35.3%), Dongkuk Steel (88.0%), and SeAH Besteel (35.7%) all showed strong gains. Dongkuk Steel's rise was particularly notable due to expectations of improved earnings from its Brazilian subsidiary CSP, which had a net loss of 1 trillion won last year but is expected to generate up to 200 billion won in operating profit this year.
Recently, the rise in steel companies' stock prices has been largely influenced by expectations of improved earnings due to strong product prices. POSCO's hot-rolled steel sheet prices increased by 280,000 won per ton from January to April this year. Hyundai Steel raised rebar prices by 88,000 won per ton in the second quarter compared to the first quarter. Globally, steel demand is increasing, but supply continues to lag behind demand, raising the possibility of earnings improvement through product price hikes.
According to financial information provider FnGuide, POSCO's consolidated operating profit consensus for this year is estimated at 5.2494 trillion won, a 118.45% increase compared to last year's 2.403 trillion won. Operating profits for Hyundai Steel and Dongkuk Steel are also expected to rise by 1179.59% and 21.34% to 934.1 billion won and 357.6 billion won, respectively.
Recent discussions in the U.S. Congress to amend Section 232 of the Trade Expansion Act, which had blocked Korean steel exports to the U.S., have also positively influenced stock prices. The Biden administration, emphasizing cooperation with allied countries, is analyzed to be likely to withdraw the import tariffs on steel products imposed by the Trump administration.
Steel companies' strong earnings are expected to continue into the second quarter due to improved business conditions. With the Chinese government, which accounts for more than half of global steel production, implementing production cuts under strengthened environmental regulations, supply and demand are expected to remain tight for the time being. Additionally, the government's housing supply expansion policy is expected to increase rebar demand by 5-10% this year compared to last year, which is also positive.
Kim Misong, a researcher at Cape Investment & Securities, emphasized, "Since the beginning of the year, steel companies' stock returns in China, Japan, and the U.S. have reached 30-50%. In contrast, POSCO is at 17%, Hyundai Steel at 19%, indicating that domestic steel companies have high investment attractiveness."
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