By Shinhye Kang
Oct. 14 (Bloomberg) -- Posco, South Korea’s largest steelmaker, raised its full-year profit forecast by 23 percent adding to evidence that the worst for the steel market is over.
Operating profit may reach 3.2 trillion won ($2.7 billion) for the year, up from an earlier forecast of 2.6 trillion ton, the Pohang, South Korea-based company said today in a statement.
The global steel market has bottomed and will grow by 9.2 percent next year as demand rebounds in the U.S., Europe and Japan, the World Steel Association said Oct 12. ArcelorMittal, the largest mill has forecast a third-quarter pretax profit after three periods of losses.
“Prices and demand for steel products are improving after hitting the bottom in the second quarter,” Chris Kim, an analyst at Shinhan Investment Corp., said before the statement. “Posco’s earnings will keep gaining momentum in the fourth quarter and next year.”
Shares of Posco, 5.2 percent owned by Warren Buffett’s Berkshire Hathaway Inc., rose 4.3 percent to close at 515,000 won in Seoul trading. The stock has risen 36 percent this year, compared with a 47 percent gain in the key Kospi index.
The steelmaker also raised its 2009 sales target to 27.1 trillion won from 25.8 trillion won. The company lowered its annual crude steel output estimate to 29.5 million metric tons from 29.8 million tons.
Rising Output
Net income for the third quarter fell to 1.14 trillion won in the three months ended Sept. 30, That beats the 945 billion won median estimate of 11 analysts surveyed by Bloomberg, and is more than double the income in the previous quarter.
Third-quarter operating profit dropped 49 percent to 1.02 trillion won from a year earlier, while sales declined 22.3 percent to 6.85 trillion won, according to the company.
Crude steel production and sales volume increased 10.5 percent and 7.3 percent respectively in the three months ended September from the previous three months as demand from customers improved, Posco said in the statement.
Posco restarted the No. 4 furnace in Gwangyang in July after a maintenance shutdown. The 3.1-million ton furnace was shut in February ahead of schedule for an overhaul.
Steelmakers are restarting output at mills in China, Europe and the U.S. as the economy shows signs of recovery. The pace of restocking in the U.S. has improved, Lakshmi Mittal, chief executive officer of ArcelorMittal, said Oct. 12.
The world’s largest mill said in July it was restarting blast furnaces in Belgium, France, and Spain as customers replace inventories. China’s Baoshan Iron & Steel Co., the third-biggest, is running at full capacity, it said Aug. 31.
A 33 percent plunge in iron ore contract prices and a drop of almost 60 percent in coal costs also boosted Posco’s profit, the Korean mill said today.
Iron ore imports by China, the world’s largest buyer, jumped 30 percent to a record in September, the nation’s customs office said.
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