The Strength of Steel and Metal... The Peak Season Arrives

[Asia Economy Reporter Junho Hwang] Since the beginning of this month, the KOSPI Steel and Metal Index has shown a higher rate of increase compared to other indices. This is analyzed to be due to the decline in steel raw material prices and heightened expectations for the seasonal peak starting this month.

According to the Korea Exchange on the 9th, the KOSPI Steel and Metal Index rose 5.49% over five trading days until the 8th. It is the highest increase among various indices based on the KOSPI. Despite fluctuations in the KOSPI, this index showed a continuous upward trend from the 30th of last month to the 8th. The KOSPI 200 Steel/Materials Index also rose 4.19% during the same period, showing the second highest increase after the Steel and Metal Index.

By individual stocks, POSCO, the leading stock within the Steel and Metal Index, recorded a closing price of 361,500 KRW on the 8th, rising about 7.27% compared to the end of last month. Investor interest also increased in Dongkuk Steel (9.60%) and Hyundai Steel (5.68%).

While China, which greatly influences the domestic steel market, is suppressing exports of Chinese products by canceling the value-added tax refund equivalent to export VAT on steel products, raw material prices have fallen, raising expectations for securing performance.

Hyunsoo Lee, a researcher at Yuanta Securities, said, "Typically, a decline in raw material prices acts as a negative factor causing product price drops, but currently it is being perceived as a positive signal." He added, "China’s government measures to curb speculation on iron ore for price stabilization are affecting prices, and with the seasonal peak (demand expansion) approaching, it is a time to pay attention again."

On the other hand, Byun Dongman, a researcher at NH Investment & Securities, advised, "Although there are factors supporting a short-term rebound in steel product prices, it should be noted that the lowered iron ore prices and the slowdown in China’s economic momentum could act as downward pressure on steel product prices toward the end of the year."