[Click eStock] "China-Origin Price Adjustment Not Long... Posco, Expectation of Price Increase Effect"

"Price Uncertainty Rather Decreases... Performance Improvement Valid Amid Continued Selling Price Increase Trend"

[Asia Economy Reporter Minwoo Lee] An analysis has emerged suggesting that the price adjustment of steel products originating from China will not be prolonged. Although POSCO will face increased burdens due to rising raw material prices such as iron ore, the effect of sales price increases is expected to be greater given the steady demand for steel.

On the 11th, Yuanta Securities raised POSCO's target stock price by 12.8% to 530,000 KRW and maintained a 'Buy' investment rating based on this assessment. The closing price the previous day was 334,000 KRW.

Yuanta Securities judged that the policy stance of the Chinese government, which the steel industry is closely monitoring, has not changed. Earlier, on the 12th of last month, Chinese Premier Li Keqiang chaired a State Council meeting and stated, "By implementing market regulation policies, we must respond to prevent rapid increases in raw material prices from affecting other areas." This came after domestic steel product prices in China surged sharply following the Labor Day holiday last month, prompting efforts to curb unreasonable raw material price hikes. Following this statement, steel products underwent strong price adjustments and plummeted.

Regarding this, Hyunsoo Lee, a researcher at Yuanta Securities, analyzed, "This means caution against speculative capital and does not indicate a change in the Chinese government's policy direction of steel industry production cuts to reduce carbon emissions that has been ongoing since the beginning of the year." He added, "Rather, this statement is judged to have reduced the inflow of speculative capital, thereby decreasing the risk of increased volatility in steel product prices."

Yuanta Securities forecasted that POSCO's manufacturing cost burden will significantly increase in Q2 and Q3 due to rising iron ore prices, but the effect of sales price increases will be greater. Researcher Lee stated, "Although price adjustments in China's domestic steel products occurred since mid-last month, prices still remain at a high level similar to the end of April, so POSCO's sales price increase trend will be maintained." He further noted, "Steel product prices in the US and Europe, excluding China, continued to rise last month, and considering local prices, profitability from export sales could exceed expectations."

Accordingly, POSCO's standalone operating profit for Q2 is estimated at 1.442 trillion KRW, and consolidated operating profit at 1.894 trillion KRW. This represents a turnaround to profit compared to the same period last year on a standalone basis and a 34.4% increase compared to the previous quarter. Researcher Lee explained, "Since product sales prices and profitability lag behind the Chinese market conditions by a certain period, Q2 results are expected to improve compared to the previous quarter," adding, "The magnitude of improvement could be greater than market participants anticipate."

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