Korea-based Posco’s third quarter earnings were weaker than forecast and it lowered its full year profit and revenue estimates. The world’s third largest steelmaker is able to pass along only part of the increase in raw materials costs.
While demand in the first half of 2010 was strong, demand started falling this summer.
Production lags the changes in demand and is projected to remain weak in the second half of the year.
Despite slowing demand, Posco expanded operations into Indonesia and India while continuing to integrate Daewoo International which it acquired in August.
The report focuses on accomplishments of the quarter and does not say if the expansions will continue in the fourth quarter. It does, however, mention they that are still focused on cost cutting and responding to climate change.
The takeaway is that the feared double dip looks a bit more likely.
Even China’s growth is slowing. Through its massive stimulus programs, China has managed to maintain growth in steel demand over last few years. Its size and growth nearly completely compensated for the massive falls in demand in the US and EU in 2009. Demand in the US and EU is not projected to match the levels of 2008 this year or next.
Posco industry outlook forecasts lower auto, home appliance, and ship sales in 2011.