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By Nam Hyun-woo
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| POSCO Q3 operating profit |
The optimistic outlook comes after the company swung to an operating profit in the third quarter of the year, after it logged a quarterly operating loss for the first time in the previous three months.
Along with the outlook for recovery, POSCO dropped hints at investing in high purity nickel production to meet growing demand from electric vehicle (EV) battery manufacturers, as well as heralding a change in its sales mix.
"Though the pandemic is still affecting the world with additional waves, it is difficult to say they will be as severe as the earlier spread in the previous three quarters of the year," the company said during a conference call announcing its third quarter performance.
"Given the fatality rate, the global economy will be relatively stabilized, and countries such as India and China are showing a sharp growth in automobile sales which we expect will continue into the fourth quarter … As automobile sales get back on track, we assume the steel market has already hit bottom and heading to a normal level, though it may not be as solid as it used to be in the past."
Sales to carmakers make up a significant portion of the steelmaker's overall revenue. As carmakers shut down plants in the pandemic, POSCO's profitability was also hurt, leading to the company's 108.5 billion won operating loss in the second quarter.
As countries resume economic activities and institute aggressive consumption boosting policies, automobile sales are showing signs of a recovery in the second half of this year and POSCO's sales to carmakers increased to 750,000 tons in the third quarter, up from 464,000 tons in the second.
"We expect sales in the fourth quarter will be better than that of the third quarter," the company said. "Since we finished maintenance work for plants in the second quarter, there is no halt scheduled for the fourth quarter and the global market situation is also favorable."
POSCO said sales of thick plates for shipbuilding are showing a slow recovery, but it is refurbishing its portfolio to supply the plates for wind farms, LNG storage tanks and other renewable energy industry needs.
"We plan to expand the sales of products that can be supplied to renewable energy and eco-friendly mobility industries, and we expect there will be a major change in our sales mix within the next two to three years," the company said, adding it will come up with strategies for reducing carbon emissions by the end of the year.
During the conference, the company said investing in high purity nickel production was being considered as there is growing demand from the manufacturers of EV batteries. Nickel is a key component in the batteries, and POSCO is running POSCO SNNC, a joint venture between it and SMSP, a nickel mining firm based in New Caledonia.
For the latest quarter, POSCO reported an operating profit of 261.9 billion won on 6.58 trillion won in sales. The operating profit was down 60.5 percent year-on-year, but improved from a 108.5 billion won operating loss in the second quarter. Its outlook on production and sales volume remained flat at a respective 35.3 million tons and 33.8 million tons it projected a quarter earlier.
