'Impact of COVID-19 from Q2'... Steel Industry Q1 Earnings 'Plummet'

Holding Up Well Despite Steel Demand Contraction and Raw Material Cost Increase

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] The decline in steel industry performance in the first quarter of this year was smaller than market expectations. The impact of the novel coronavirus disease (COVID-19) is expected to cause a larger drop in performance in the second quarter.

POSCO reported a consolidated operating profit of 705.3 billion KRW in the first quarter, down 41.4% compared to the same period last year. Sales during the same period decreased by 9.2% to 14.5458 trillion KRW. The operating profit margin fell from 7.5% in the first quarter of last year to 4.8% in the first quarter of this year.

Hyundai Steel posted an operating loss of 29.7 billion KRW in the first quarter, marking a second consecutive quarter of losses following the fourth quarter of last year (-147.9 billion KRW). Sales amounted to 4.668 trillion KRW, down 8.0% year-on-year.

POSCO's operating profit declined due to reduced sales volume caused by the refurbishment of the third blast furnace at the Gwangyang Steelworks, as well as contraction in key industries such as the automotive sector. Although Hyundai Steel remains in the red, the scale of losses has significantly decreased compared to the fourth quarter of last year, when one-time expenses were incurred.

A POSCO official stated, "The impact of COVID-19 will become more pronounced from the second quarter," adding, "Signs of the COVID-19 situation began to appear in frontline operations from late March to April."

Earlier, as the COVID-19 outbreak spread, POSCO formed a task force (TF) centered on the marketing team within its strategy headquarters, and the POSCO Research Institute internally analyzed the potential impact of COVID-19.

This year, domestic steel demand may fall below 50 million tons for the first time in 11 years since the 2009 global financial crisis, depending on the situation in key industries such as the automotive sector, and exports are also feared to fall below the 30 million ton level.

POSCO and Hyundai Steel plan to prepare scenarios considering the spread of COVID-19 and the global economy and to enter emergency management. The steel industry expects that if the spread of COVID-19 in the US and Europe slows by May at the latest, performance could rebound from the second half of the year.

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