[Ferro-Alloys.com] South Korean steelmaker Posco is partially restoring its rate of production on expectations that resumption of industrial activity in China and elsewhere around the world will drive a recovery in steel demand in this year's second half from a slump brought on by the Covid-19 pandemic.

 

Posco now expects to produce 35.3mn t of crude steel and sell 33.8mn t of steel products this year. These targets remain 3.8pc and 3.4pc lower, respectively, than the company's original forecasts for 2020, prior to the virus outbreak, but they are 3.5pc and 4.3pc higher than Posco's projections in April.

 

Increasing domestic sales and rising exports to China will help drive product prices higher, Posco said. Prices in several export markets have already risen by 20-30pc from the lowest levels of the Covid-19 crisis, and the company sees greater chances for additional price gains as government policy support boosts steel demand in China and global demand shows signs of recovery.

 

Posco also is seeing signs of life in the automotive industry, one of the segments hit hardest by the pandemic. Carmakers are restoring some idled production in the current quarter, and the company said demand for automotive steel plates will be about 10pc higher in this year's second half than in the April-June quarter.

 

Posco said it also expects to benefit as iron ore prices trend downward in the July-September quarter, hovering around $85-90/t.

 

Longer term, the company is looking to increase its cost competitiveness by retiring its oldest blast furnaces. Posco said its Pohang No. 1 furnace will be shut down next year and it may close or revamp its Pohang No. 2 furnace as early as 2025.

 

The company is looking to boost its competitiveness amid growing trade protectionism and glutted steel markets. The latest quarter was one of Posco's toughest on record, as it posted a 109bn won ($91.3mn) operating loss in its core steel business compared with a W724bn profit in 2019's second quarter. Posco was in the black on a consolidated basis, helped by stronger results in its construction, trading and energy units. Its net income fell by 85pc on the year to W105bn.

 

Source: Argusmedia