POSCO Reports Record High Q2 Operating Profit of 2 Trillion Won

1213% Increase Compared to Same Period Last Year
Steel Sector Drives Overall Performance
Global Market Improvement and Strong Sales
Concerns Over Performance Slowdown in Second Half
COVID-19 Spread and Price Resistance Expected

[Asia Economy Reporter Choi Dae-yeol] POSCO posted record-breaking earnings in the second quarter of this year. The steel division, its core business, demonstrated strong performance. This was driven by increased demand from upstream industries using steel products amid expectations of economic recovery. However, the outlook for the second half of the year is mixed. While there remains optimism that tight supply and demand conditions domestically and internationally will continue into the latter half, concerns have emerged that the global economic recovery could slow due to the spread of COVID-19 variants. Additionally, recent consecutive steel price hikes have intensified price resistance among major consumers such as shipbuilding and automotive sectors, adding to the challenges.

According to the Q2 earnings report released by POSCO on the 22nd, operating profit reached 2.201 trillion KRW (consolidated basis), marking a 1,213% increase compared to the same period last year. This is the highest quarterly performance since POSCO began disclosing quarterly results in 2006. On a separate basis, sales amounted to 9.277 trillion KRW and operating profit was 1.608 trillion KRW. Last year’s Q2 saw the company post its first-ever loss since its founding, heightening concerns about the steel industry crisis, but the atmosphere has completely turned around within a year.

The steel division led the overall strong performance, with major subsidiaries also contributing. Summing up profits by business division, the steel segment earned 2.048 trillion KRW, more than 50% higher than in Q1. According to industry sources, raw material costs such as iron ore increased by about 50,000 to 60,000 KRW per ton, but selling prices rose by over 100,000 KRW per ton, significantly improving profitability. In the infrastructure division, POSCO International generated 286 billion KRW in profit, while in the new growth division, POSCO Chemical was the main contributor with 44 billion KRW in earnings.

POSCO explained, "Global steel market conditions improved, and operating profit surged due to price increases and sales volume growth driven by recovery in demand industries. Overseas subsidiaries such as Krakatau POSCO, Zhangjiagang Pohang Stainless Steel, and POSCO Maharashtra also showed significant performance improvements."

Riding on the improved Q2 results, POSCO raised its annual targets. The initial target announced in January was 59.4 trillion KRW (consolidated basis), which was then raised to 63.2 trillion KRW in April after the Q1 results, and now further increased to 66.4 trillion KRW. Crude steel production was also raised by 400,000 tons to 38.2 million tons compared to the initial target, and product sales volume was increased by 300,000 tons to 35.6 million tons. Investment expenditure was raised by 300 billion KRW to 6.4 trillion KRW compared to the beginning of the year.

However, some market analysts predict that the strong performance in the first half may slow somewhat in the second half due to internal and external factors such as the fourth wave of COVID-19, early signs of demand slowdown in China, and resistance to steel price hikes. Moon Kyung-won, a researcher at Meritz Securities, said, "The sharply rising prices since Q4 last year are likely to moderate starting from Q3 this year. Signs of demand slowdown are appearing in China, and the current price level may trigger resistance from steel consumers."

Meanwhile, POSCO plans to expand local operations in high-growth potential markets such as Indonesia, India, and Vietnam through joint ventures covering upstream and downstream processes, while also establishing stable supply systems in existing key markets like China and Mexico. The annual crude steel production capacity, which was about 46 million tons last year, is planned to increase to 60 million tons by 2030, ten years from now. Additionally, POSCO aims to enhance safety management to prevent major accidents, improve blast furnace processes, and develop hydrogen reduction technology to achieve its 2050 carbon neutrality vision.

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