* Q1 op profit rises 23 pct to 581 bln won vs 578 bln
* Weaker yen, economy weigh on demand from S.Korean
* POSCO shares close up 0.9 pct prior to earnings
SEOUL, April 25 South Korean steelmaker POSCO
, backed by billionaire investor Warren Buffett,
posted only a small profit recovery from January to March,
capped by the weak global economy and demand that depressed
prices, especially for automotive steel.
Asia's steel sector is in a prolonged downturn as China's
economy is losing momentum because of the euro zone's recession
and a fragile U.S. economy, squeezing demand and prices for the
alloy used in the automobile, shipbuilding, construction and
home appliance sectors.
The outlook remains dim this year as a planned capacity
addition by POSCO and smaller rival Hyundai Steel in
South Korea may exacerbate oversupply even as demand from South
Korean automakers is under pressure from the weaker yen that
could give an advantage to Japanese rivals.
"We expect the global steel demand to recover slightly from
the second quarter," the steelmaker said in a statement.
POSCO said on Thursday that its operating profit rose 23
percent to 581 billion won ($519.8 million) on a parent basis in
the first quarter from a year earlier, in line with a consensus
forecast of 578 billion won from Thomson Reuters I/B/E/S.
Its sales fell 19 percent to 7.7 trillion won from a year
earlier. Its average selling price for carbon steel slumped 16
percent to 782,000 won per tonne in the first quarter from a
POSCO, which supplies steel to the likes of Hyundai Motor
and the South Korean unit of General Motors,
cut domestic prices of automotive steel by 50,000 Korean won per
tonne in the first quarter because of a weak auto market, Nomura
said in a recent report.
Prior to the earnings announcement, shares in POSCO, in
which Buffett's Berkshire Hathaway owns around 5
percent, ended up 0.9 percent in line with the market's 0.8
POSCO, which has outperformed its Japanese rivals for
several quarters, is now set to lag them as Japanese rivals
benefit from a weaker yen.
Japanese steel producer JFE Holdings Inc returned
to a recurring profit from a loss in the January to March
quarter, and analysts polled by Thomson Reuters I/B/E/S gave an
average projection of 191.2 billion yen ($1.92 billion) in
recurring profit this year.
China's Baoshan Iron & Steel, the country's
biggest listed steelmaker, posted a 33-percent rise in its
first-quarter net profit, but it believes steelmakers' profits
are unlikely to gain largely in the second quarter as tepid
Chinese economic recovery weighs on demand.
Shanghai rebar futures dropped to the lowest in more than
seven months on Tuesday after data showed China's manufacturing
sector growth slowed in April, suggesting the world's No.2
economy still faces headwinds after its gross domestic product
grew by a less than forecast 7.7 percent in January-March.
Despite lackluster demand, POSCO plans to reportedly expand
one of its blast furnaces in the southwestern city of Gwangyang
after initial delay due to weak demand, and Hyundai Steel, an
affiliate of Hyundai Motor, will also start a new blast furnace
later this year.