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South Korea’s Posco sees firmer steel demand from auto, shipbuilding sectors in Q2

South Korea’s Posco expects domestic steel demand from the automobile and shipbuilding industries to pick up in the second-quarter following a slump in the first, the steelmaker said.

Citing data from the Korea Automobile Manufacturers Association, Q2 production is expected to reach 1.03 million cars, up from about 955,000 cars in Q1, Posco said.

“Despite weak domestic demand, government measures to boost consumption will slow decreasing trend of auto production in 2019,” it said.

Demand from the shipbuilding industry is due to rise too as new orders are expected to total 7.0 million gross tons, more than double the 3.1 million gross tons in Q1, based on data from Posco Research Institute and shipbuilding market tracker Clarksons Research.

“In Q1 2019, new order volume was down due to a hike in ship price, but is expected to recover from Q2,” Posco said.

However demand from the construction industry is expected to fall as “construction investment will decrease in 2019 mainly due to weak private housing sector, while SOC (social overhead capital) budget expands,” Posco said, foreseeing a 4.5% fall in construction investment in Q2 versus a 5.2% decline in Q1.

Amid the mostly positive outlooks, the leading South Korean steelmaker said it produced about 9.41 million mt of crude steel over January-March 2019, about 2.0% higher against 9.23 million mt a year ago.

Examining the South Korean steel supply and demand situation for Q2, Posco said nominal consumption will rise to 13.6 million mt in Q2, from 13.2 million mt in Q1.

Steel exports will be stable at 7.7 million mt in Q2 versus Q1, with production at 19.0 million mt from 18.1 million mt in Q1, and imports will fall to 2.4 million mt in Q2 from 2.7 million mt in Q1.

Despite the positive outlook for Q2, Posco reiterated that crude steel production will dip 0.5% year on year to 37.5 million mt in 2019 due to weakness in the local automobile and construction industries.
Source: Platts

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