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15 Things SteelMint Learned from POSCO CY19 Results

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BigMint Bureau

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31 Jan 2020, 16:20 IST

15 Things SteelMint Learned from POSCO CY19 Results

South Korea's steel major - POSCO announced its CY '19 results today. The major findings from the annual report are as follows:

1. Company's crude steel production inched up in CY19- POSCO's crude steel production inched up by 1% at 38,007 thousand tons in CY '19 in comparison to 37,738 thousand tons in CY' 18. The company increased production of crude steel ahead of the revamping of BF#3 at Gwanyang works from Feb'20, estimated to last for about 3 months.

2. Company's product sales volumes went up in CY19- Company's sales volumes increased slightly by 1% to 35,990 thousand tons in CY '19 as against 35,588 thousand tons in the previous year. Product sales went up on plate sales growth for shipbuilding and construction sectors.

3. Company's export sales up by 6% in CY'19- Export sales stood at 16,081 thousand tons in CY'19 increased by 6% in comparison with 15,131 thousand tons in CY18.

4. Domestic sales move down by 3% in CY '19- Company's domestic sales move down by 3% at 19,909 thousand tons in CY19 as against 20,457 thousand tons in CY' 18.

5. Product inventory fell by 26% in CY'19- Company's product inventory slashed by 26% in CY'19 to 1,107 thousand tonnes against 1,500 thousand tons in the previous year.

6. Sales volume from POSCO Maharashtra fall- The sluggish sales of the automobile sector and slow economic growth in India led to a decline in the sales volume. Sales volume fell to 1,567 thousand tons in CY'19 against 1,778 MT in CY'18.

7. PT Krakatau sales mark highest in CY19- Production/sales marked the highest, but operating profit shrank due to raw material price hike and weaker sales of high-margin products.

8. Carbon steel sales prices down by 2% in CY '19- Company's carbon steel prices inched down by 2% in full-year CY'19 to 722 thousand KRW from 733 thousand KRW in CY '18.

9. Global steel demand likely to remain slow- The global steel demand may remain weak amid low economic growth rate and USA China trade spat. Chinese steel demand in CY'20 is estimated to grow by 1% Y-o-Y maintaining the 900 MnT crude steel output. Meanwhile, the EU and the USA's growth rate will be at 0.6% owing to low economic development. However, govt-led stimulus and increased spending on infrastructure in emerging markets like India, ASEAN, and Russia may keep demand supported.

10. Chinese steel market continues to remain strong- In China, the construction sector performed well amid an influx of investments in properties development. Also, in the Oct-Dec steel prices remained supported amid robust restocking demand and winter production curbs. Also, the distributor's inventory slipped for 10 consecutive weeks from Oct to Dec from 9.9 MnT to 7.7 MnT.

11. Automobile production anticipated to remain weak in CY '20- In 2019, Korea's automobile sector remained depressed amid the end of subsidies and increased liabilities. Thus, this delay in normal recovery of the sector shall weigh on 2020 production, which may fall under 4 million units and yet show a marginal recovery on a yearly premise. Korea Automobile manufacturers association mentioned the production of cars in CY19 to 3,951 which is expected to be 3,983 in CY20.

12. Construction investment may decrease- Construction investment in Korea will decrease on a yearly premise but the rate will be narrower as public investment is expected to expand.

13. Shipbuilding volumes to increase in CY'20- The demand in Korea's shipbuilding sector is likely to increase in CY'20 on the back of increased demand for environment-friendly ships. Also, the IMO environment regulation shall lead to an increase in the replacement demand of ships.

14. Global iron ore prices to inch up in Q1 CY'20- The global iron ore prices are expected to touch USD 90-95/MT in Q1 CY'20 depending on steel demand and Chinese port inventory. Also sustained steel production in China and increased restocking demand in Australia ahead of the rainy season shall keep the iron ore prices supported. However, in Q4 demand strengthened as the Chinese steel market improved and winter environment control was loosened, which pushed up the price to record U$89/ton average

15. Coking coal prices to rebound in Q1 CY'20- Coking coal prices are expected to touch USD 150-160/MT in the first quarter and will be higher than Q4CY19. Amid the gap between Chinese domestic coal and imported coal prices, it is anticipated that competitive imported coal demand shall rise with the renewal of annual import quotas. Along with this, the recovering Indian steel sector shall also lead to an increase in demand for coal, pushing the prices up. However, in Q4 coking coal stood at USD 140/MT lowest in 3 years owing to weak demand in China and credit crunch in India.