Steelmakers pin hopes on earnings recovery through US expansion

Steel products are piled on a yard at the Port of Pyeongtaek in Gyeonggi Province, April 3. Yonhap

Korea's two largest steelmakers experienced declines in their first-quarter revenues, largely due to the lingering oversupply of low-priced Chinese steel products amid weakening demand in the domestic construction industry.

While Washington has maintained the sweeping 25 percent tariffs on all steel imports, both companies expressed optimism that their planned investments in the United States will lead to earnings recoveries.

POSCO Holdings, which posted 17.4 trillion won ($12.1 billion) in sales and 568 billion won in operating profit, announced Thursday that its steelmaking unit, POSCO, saw a 5.8 percent year-on-year drop in revenue to 8.97 trillion won and a 16.7 percent rise in operating profit to 346 billion won.

The steelmaker attributed the results to a surge in product prices and cost-reduction measures, as well as large-scale factory maintenance.

"We aim to secure footholds in highly profitable markets with high growth potential," a POSCO Holdings official said.

POSCO Holdings highlighted its planned partnership with Hyundai Motor Group as part of the strategy. Recently, POSCO decided to invest in the forthcoming Louisiana plant construction for Hyundai Steel, the automotive group's steelmaking subsidiary.

"We will also push ahead with a joint project with JSW, India's largest steelmaking group, to build an integrated steel mill in the country," the POSCO Holdings official said.

Vehicles enter Hyundai Steel's plant in Incheon, April 1. Yonhap

Hyundai Steel announced the same day that its first-quarter revenue fell 6.5 percent year-on-year to 5.6 trillion won, citing the sluggish market recovery and its seven-month dispute with its union over performance-based bonuses. The labor conflict ended a week earlier after management agreed to pay 27 million won per person on average.

The steelmaker posted another operating loss, though it managed to narrow its quarterly deficit to 19 billion won from the previous quarter's 45.8 billion won. Its net loss reached 54.4 billion won, up 532.5 percent from the previous quarter.

The company also noted the Louisiana project as an opportunity for future growth.

"With the production of high-quality, low-carbon automotive steel plates in the U.S. plant, we will reform our business portfolio to focus more on highly profitable and highly value-added products while improving our profits," Hyundai Steel said in a press release.

During a conference call on the first-quarter performance, Hyundai Steel denied speculation that its investment in the U.S. plant could be burdensome. The company is currently seeking external investors to fund nearly half of the $5.8 billion project.

While noting the possibility of forming a partnership with POSCO in the domestic market, Hyundai Steel remained cautious about disclosing details of their cooperation.