POSCO posts highest profit in five quarters on low iron ore costs

South Korean steelmaker POSCO posted its highest operating profit in five quarters on Thursday, as lower raw materials costs helped support margins during a period of weak steel prices. The world's sixth-biggest steelmaker by output also said it expected steel demand to rise "slightly" in the current quarter from the previous quarter, citing an improving automobile industry and seasonal demand.

Post date: 25-10-2014

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The world's sixth-biggest steelmaker by output also said it expected steel demand to rise "slightly" in the current quarter from the previous quarter, citing an improving automobile industry and seasonal demand.

The industry has been struggling with over-capacity and sluggish demand in China, the world's biggest producer and consumer of steel, as economic growth there slows. Chinese growth is at its slowest since the 2008/9 global financial crisis, exacerbating concern about China's impact on global growth.

China's woes have also led to iron ore prices falling to five-year lows this year as supplies of the primary steel-making material build up.

POSCO said operating profit in the July to September quarter totalled 635 billion won ($601.66 million) from 443 billion won in the same period a year earlier. The result compared with a 601 billion won mean estimate of 22 analysts polled by Reuters.

Sales fell 2 percent to 7.29 trillion won, the steelmaker said in a statement.

POSCO has been trying to shed non-core assets to reduce debt and boost its balance sheet since Chairman and Chief Executive Kwon Oh-joon took office in March, although no major deal has been done.

"POSCO will be able to achieve a meaningful earnings recovery only if steel prices rise," analyst Jeon Seung-hun at KDB Daewoo Securities said ahead of the earnings release. "But there will be a question mark over global economic recovery unless China launches economic stimulus measures."

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