East Asian steel majors post decline in profit margins in H1CY23

The total revenue of three major East Asian steel companies - Baowu Steel Group of China, POSCO Holdings of South Korea, and China Steel Corporation (CSC) of Taiwan declined significantly compared to the previous year. This decline was primarily due to imbalanced supply and demand in China, which has negatively impacted the earnings of these companies.

POSCO Holdings reported consolidated operating profit (provisional) of KRW 2 trillion ($1.56 billion), down by more than 50% y-o-y during January-June 2023 (H1CY'23). The operating profit for April-June'23 surged 85.7% y-o-y to KRW 1.3 trillion ($1.015 billion).

Baowu Steel Group's consolidated profit (equivalent to pre-tax profit) in H1CY'23 period fell short of RMB 2 billion ($0.28 billion). This shows a significant decrease in profit from approximately RMB 32.6 billion ($4.54 billion) y-o-y. During January-March, profits were less than RMB 1 billion ($0.14 billion), but in April-June'23, it seems that it was on par with the previous fiscal year or even lower.

CSC's consolidated operating profit in January-May was approximately TWD 1.57 billion ($0.05 billion). It seems that it will be able to break away from the deficit in January-March, but continuous price cuts in June and July may get worse after June.

Baoshan Steel & CSC raised prices of hot-rolled coils by RMB 100/t ($14/t) & TWD 300/t ($9.58/t) in August with the the aim of improving profits.
The key to ensuring profitability will depend on whether the company can consistently increase prices.

Outlook
Supply chain problems such as semiconductor shortage are gradually improving for the auto industry. Orders for automotive steel sheets are also increasing, indicating a recovery.
This is a positive factor not only for POSCO but also for Baoshan Steel, a core company of the Baowu Group, and can help these companies improve their profitability.

Note: This article has been written in accordance with an article exchange agreement between Japan Metal Daily and SteelMint.