Steel Stocks That Were Running Suddenly Hit the 'Brake'

Stable Sheet Metal Prices Due to Declining Transactions
First Quarter Performance Improvement Not Yet Visible
Weakness in POSCO, Hyundai Steel, and Others

[Asia Economy Reporter Oh Ju-yeon] The upward momentum of domestic steel companies' stock prices, which was created at the end of last year due to expectations of improved earnings and dividend issues, has come to a halt. This is interpreted as being due to stable sheet metal prices amid decreased trading at the beginning of this year and the lack of visible improvement in corporate earnings in the first quarter.

According to the Korea Exchange on the 7th, POSCO's stock price, which was 248,000 KRW at the closing price on the 18th of last month, fell 6.85% to 231,000 KRW the day before. Despite disappointing earnings and stock prices lingering near the bottom, the appeal of high dividends led to a 14.29% rise until mid-December, but since the ex-dividend date, there has been no new upward momentum, resulting in continuous weakness.

The stock price, which had risen on earnings expectations, has shifted focus to immediate results. Hana Financial Investment analyzed that POSCO's operating profit this year will increase by 8.59% from last year to 4.4117 trillion KRW. However, the market is focusing on the fourth-quarter earnings of last year, which are expected to fall short of consensus. POSCO's fourth-quarter operating profit is forecasted to be 412.2 billion KRW, down 53.0% year-on-year. The iron ore price, which surged in the third quarter, was reflected with a time lag into the fourth quarter, causing raw material input costs to rise by 20,000 KRW per ton compared to the previous quarter, but export and domestic product prices declined, resulting in the average selling price (ASP) of carbon steel dropping by 20,000 KRW per ton. Accordingly, operating profit is likely to fall below the market consensus of 568.7 billion KRW.

Hyundai Steel's fourth-quarter operating profit is also expected to fall short of market consensus. Although steel sheets used in automobiles have had high profit margins, margins are expected to shrink due to decreased sales volume. While there is a view that sheet metal prices will rise despite lower sales volume, prices remain stable for now. Hyundai Steel's stock price fell 8.63% from 32,450 KRW at the closing price on the 17th of the previous month to 29,650 KRW the day before.

Hi Investment & Securities forecasted that Hyundai Steel's earnings will improve moderately due to cost reductions in the blast furnace segment and product price increases, but the extent of improvement is uncertain due to sluggish downstream industries. Kim Yoon-sang, a researcher at Hi Investment & Securities, explained, "It is expected to show a consolidated operating loss of 7 billion KRW in the fourth quarter," adding, "There is no disagreement about quarterly earnings improvement, but achieving operating profits at the level before 2018 will not be easy."

This content was produced with the assistance of AI translation services.