POSCO Q1 Profit Up 20%, Low Iron Ore Costs Outweigh Weaker Steel Prices

South Korean steelmaker POSCO said on Tuesday its quarterly operating profit rose 20 per cent, beating estimates, as lower iron ore input costs more than offset the impact of weaker steel prices. POSCO, the world's sixth-biggest steelmaker, said operating profit in the January to March quarter was 622 billion won ($574 million) on a parent-only basis, above a consensus forecast of 602 billion won compiled by Thomson Reuters I/B/E/S. The closely watched parent-only measure refers to earnings from steel business, and excludes profit from affiliates. That compared with 518 billion won in operating profit in the same period a year earlier, and 632 billion won in the October-December quarter. In a regulatory filing, POSCO said revenue fell 8 per cent in the quarter to 6.79 trillion won. Prices of iron ore, a key ingredient in steelmaking, slid in the first quarter amid a supply glut and soft Chinese demand. Benchmark prices have dropped nearly 30 per cent this year, hitting their lowest levels since at least October 2008, and POSCO said on Tuesday it expects iron ore prices to remain weak in the second quarter. That has softened the blow of lower demand from steel from China, as the economy of world's top steel consumer grew at its slowest annual pace in six years at the start of 2015. The global steel business has also been hit by chronic overcapacity, capping price rises of the alloy sold for the automobile, shipbuilding, construction and home appliance sectors. POSCO said on Tuesday it expects China steel price falls to decrease going forward. Shares in POSCO ended up 0.8 per cent in Seoul, before the earnings were disclosed, versus the flat broader market. After declining for a fifth consecutive year in 2014, POSCO shares have extended losses this year, dropping 8 percent versus the market's 12 per cent rise. ($1 = 1,082.9200 won)