[Click eStock] "SeAH Steel, Profitability Improvement in US Energy Steel Pipes"

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment announced on the 20th that it maintains a buy rating and a target price of 160,000 KRW for SeAH Steel, expecting favorable performance this year due to improved profitability of U.S. energy-use steel pipes and anticipating offshore wind power and LNG orders in the second half of the year.

Park Seong-bong, a researcher at Hana Financial Investment, stated, "As the international oil price continues to rise, West Texas Intermediate (WTI) recently climbed to the mid-80s per barrel, and the number of North American rigs has continued to increase, recently recovering to levels seen in early 2020 at the onset of COVID-19," adding, "With the sustained strength of international oil prices, domestic demand for energy-use steel pipes in the U.S. is expected to continuously expand."

However, Park noted, "SeAH Steel's exports of energy-use steel pipes to the U.S. are limited to an annual quota of about 270,000 tons, so there is no room to expand exports," and added, "At the end of last year, the Trump administration's imposition of a 25% import tariff under Section 232 of the Trade Expansion Act on steel was lifted entirely for EU products, and it is reported that negotiations are underway regarding steel from Japan and the UK. Therefore, the possibility of easing import restrictions on Korean steel cannot be ruled out."

SeAH Steel's sales and operating profit for the fourth quarter of last year are expected to increase by 32.8% and 1690.1%, respectively, compared to the same period last year, reaching 400.5 billion KRW and 38.6 billion KRW. The total steel pipe sales, which had declined in the third quarter due to fewer operating days, recovered in the fourth quarter. In the domestic steel pipe market, demand-side cautious purchasing led to overheated competition among steel pipe companies for orders, resulting in failure to pass on raw material price increases to selling prices and thus a narrowed spread. Conversely, exports saw improved profitability due to the recovery of U.S. domestic steel pipe demand, resulting price increases, and the rise in the KRW-USD exchange rate, offsetting the domestic market downturn.