[Special Stock] Dongyang Estech Faces Inflation Fears Amid Soaring Raw Material Prices Like Iron Ore... Hedge Demand Surges?

[Asia Economy Reporter Yoo Hyun-seok] The stock price of Dongyang Estec has surged for two consecutive days. The recent news that iron ore prices have been hitting record highs day after day appears to have influenced the stock price. Dongyang Estec operates as a processing center for POSCO, processing and selling hot-rolled steel plates and thick plates produced by POSCO.

As of 9:14 AM on the 11th, Dongyang Estec was trading at 5,260 KRW, up 22.47% (965 KRW) compared to the previous trading day.

On the 7th, the price at Qingdao Port in China (CFR) reached an all-time high of $212.25 per ton (t). After surpassing $200 per ton for the first time the previous day, it exceeded $210 again within a day.

The price surge is driven by increased demand due to economic stimulus measures worldwide and production cuts resulting from China’s strengthened environmental policies. The tense relationship between China, the world’s largest steel producer, and Australia, the world’s largest iron ore producer, is also pushing steel prices higher. China depends on Australia for 60% of its iron ore imports.

The sharp decline in the U.S. Nasdaq stock market amid growing inflation concerns also seems to have had an impact. The Wall Street Journal (WSJ) analyzed that this is due to worries that the future earnings value of growth companies will decrease.

Research Alom analyzed Dongyang Estec as a "hidden gem" in the steel industry.

Choi Seong-hwan, Chief Researcher at Research Alom, explained, "Recently, the distribution prices of hot-rolled steel plates and thick plates have surged, leading to a revaluation across POSCO’s processing centers. According to the Korea Iron & Steel Association, the domestic distribution price of hot-rolled steel is 1.1 million KRW per ton, a 66.7% increase compared to the previous year." He added, "With China announcing the abolition of the steel export VAT refund starting May 1, the upward trend in steel prices is expected to continue through the second half of this year."

He emphasized, "Dongyang Estec’s market capitalization is significantly discounted compared to other POSCO hot-rolled processing companies, and it is time for revaluation. Considering the scale of operating profit, its market capitalization is smaller than Daedong Steel, Moonbae Steel, Buguk Steel, and Samhyun Steel." He continued, "Dongyang Estec not only operates in the steel business but also has potential for joint growth with its subsidiaries in eco-friendly construction waste intermediate processing, which could warrant additional premium."