After years of depressed demand from overcapacity and slowdown in China, the outlook on Posco has turned favorable as the Korean leading steelmaker’s bolder-than-expected restructuring paid off this year amid signs of recovery in steel prices.

According to industry sources, Posco raised the price of its cold-rolled steel products by 50,000 won ($44) to 840,000 won per ton last month. It upped the price of hot-rolled steel by 30,000 won per ton. Similar adjustments would be made on prices of thick steel plates for vessels and automotive steel sheets.

Posco has refrained from raising its product prices, given the troubles in domestic shipbuilding and other industries. But it no longer could delay the hike as prices of raw coals have more than doubled from a couple months ago, a company official.

The price of cold-rolled steel products is expected to go over 800,000 won per ton in the fourth quarter, having passed 790,000 won in the third quarter from 780,000 won early this year. The price of hot-rolled steel will be over 600,000 won per ton for the first time in three years.

Cold-rolled steel, used to make the exterior of motor vehicles and electronics appliances is the main source of profit for Posco, generating more than a third of the company’s steel revenue. The company stock therefore often traces the trend in spot prices of the mainstay product.

Streamlining in China’s steel mills that have long been blamed for the global-wide glut and slump also helped the local steelmaker. Early this year, the Chinese government vowed to reduce domestic steel production by 100 million tons within the next three years. It approved the merger of Baoshan Iron and Steel and Wuhan Iron and Steel last month. Chinese steelmakers were able to stop dumping and began raising prices after easing in domestic oversupply.

Posco meanwhile carried on with its own restructuring wave, ridding of 46 out of 95 units.

Analysts believe the stock has more reason to go upward then downward. Its dividend propensity also adds to appeal.

“The steel category unaffected by volatile market factors like a rate hike in the United States poses as a safe investment bet in the year-end market, said Kim Yong-gu, an analyst at Hana Financial Investment.

The consensus on the company’s third quarter operating profit to be released on Wednesday is 876.5 billion won, up more than 30 percent from a year ago and highest in three years.

As of 2:10 p.m. Tuesday, the stock gained 1.2 percent to 49,500 won.

By Moon Il-ho

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]