South Korea’s petrochemical and steel making companies saw their earnings significantly improve in the first quarter thanks to increasing demand amid low oil prices and ongoing restructuring in the Chinese steel industry.

The nation’s leading steelmaker Posco announced on Thursday that it recorded 352.5 billion won ($395 million) in net profit in the first quarter ended March, 2016, up 5.2 percent from the same period last year. The company reported its first ever loss last year after fierce competition from cheap Chinese steel products slashed global steel prices.

But Posco said its sales declined 17.5 percent to 12.46 trillion won over the cited period because of still low steel prices, and its operating profit dropped 9.8 percent to 659.8 billion won. But on quarter, its operating income surged 93.7 percent, and operating profit margin improved 2.9 percentage points to 5.3 percent, it said.

The Korean steel maker saw its bottom line improve significantly from the previous quarter, mainly driven by gains in its overseas units. Zhangjiagang Pohang Stainless Steel Co., its Chinese stainless steel unit, which posted losses last year, swung to profit in the first three months of this year, and its Indonesian steel mill narrowed losses. It also seems that massive restructuring efforts by the Chinese government to reduce steel supply have led global steel prices to hit the bottom.

The Korean steelmaker itself has also implemented a series of restructuring in the first quarter by selling its power generating subsidiary Genesis and liquidating Posco Russia. An unnamed official at Posco said the company expects to improve its financial health worth nearly 4 trillion won through restructuring of subsidiaries this year.

LG Chem Inc. and S-Oil Corp., the country’s major chemical and refinery companies, also announced their first-quarter earnings that beat the market expectations.

LG Chem said on Thursday its operating profit in the first quarter ended March surged 26.5 percent to 457.7 billion won from a year ago, while its sales fell 0.8 percent to 4.87 trillion won. S-Oil also announced its operating profit in January-March period more than doubled to 491.3 billion won from a year ago, but its sales decreased 21.6 percent to 3.42 trillion won.

The country’s oil refining and petrochemical businesses have seen significant improvement in their profits since last year thanks to increasing demand amid prolonged low oil prices. Their rivals are also expected to report better than expected earnings for the first quarter.

However, industry observers remained cautious about the outlook of the steelmaking, and chemical and refining businesses, citing the fall in their sales.

By Chung Wook, Park Yong-beom

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