Better South Korea Steel Demand in 2H, POSCO Research Institute

POSCO Research Institute expects South Korean steel demand growth slows in 2012 than 2011. The managing director Sung-Moon Tak expects South Korean economy improves in second half of the year due to better situation in USA and China.

Mr. Tak said South Korean economy grows at 3.7-3.8% in second half of the year while the growth is 3.1% in first half due to slower consumption and capital expenditure. He expects South Korean steel demand increases by 1% in 2012 from 2011 but the demand decreases by 7% for plate due to first drop for shipbuilding since 1997.

Mr. Tak said South Korean steel export would increase by more than 6% in 2012 from 2011 due to severe competition with offshore makers while the growth was 15-20% in 2010 and 2011. He expects domestic steel output grows by around 3% from 2011 while the output growth was more than 10% before. He expects South Korean steel import is more than 20 million tonnes including semi-finished steel while the import keeps decreasing.

Mr. Tak said most important issue is import from China for South Korean steel industry. He said South Korean government intends to support steel industry in the trade issue when Chinese import increased by 4.2% in January-March from same period of 2011 while total steel import decreased by 12.5%. Chinese import of colored flat steel increased by 130% during the period when the category included some of colored Chinese plate steel.

Mr. Tak said South Korean steel makers try to increase the steel selling price and POSCO tries to improve the profitability, not market share. He expects Chinese economy could improve in second half in the start of term for new political leader and the better economy would reduce steel import from China to South Korea and improve the import price.

Mr. Tak said overcapacity of steel plate could continue for longer term due to overcapacity in China and Japan along with South Korea. He said without adjustment of the overcapacity, South Korean plate market doesn’t improve and the adjustment could take longer term.