South Korea's Hyundai Steel said it expects iron ore prices to stabilise after sliding below $80/t this month, because supply disruptions in major producing countries have been resolved and a slowdown in Chinese economic growth is curbing demand.
Australian 62pc fine ore prices on a fob basis are settling down, having surged above $100/t earlier this year following a dam collapse that curtailed output in Brazil and other supply disruptions, Hyundai Steel said. Meanwhile, prices for Australian high-grade hard coking coal have bottomed out and will rebound from current levels of around $149/t as Chinese companies begin to utilise their 2020 import quotas, the company said.
Hyundai Steel's outlook is similar to that of rival steelmaker Posco, which said last week that it foresees iron ore prices averaging $90-95/t and coking coal selling for $160-170/t in the October-December quarter. An easing of cost increases for raw materials comes at a time when steelmakers are facing declines in product prices. China is scaling back seasonal cuts to steel production this winter, which will put downward pressure on hot rolled coil prices as demand slumps, Hyundai Steel said. The company sees rebar prices dropping on high inventories and a weak scrap market.
Government efforts to stimulate economic growth will help push global steel demand 3.9pc higher this year to 1.78bn t and 1.7pc higher in 2020, but increasing production in China will worsen a supply glut, Hyundai Steel said. Government spending on infrastructure will help drive a partial recovery in South Korean steel demand, the company said, and activity in the shipbuilding segment will continue to rise as orders for new vessels accelerate.
Hyundai Steel's third-quarter sales by volume dropped by 4.6pc from a year earlier to 5.14mn t because of unstable global markets. Production in July-September fell by 1.6pc to 5.15mn t as rebar output was cut amid slowing construction activity. An impasse in wage negotiations with the company's labour union, which led to a 48-hour strike last week at three of the company's plants, will weigh on output in the current quarter.
Third-quarter revenue fell by 3.6pc on the year to less than 5.05bn South Korean won ($4.32bn), while net income tumbled by 73pc to W51bn. Operating profit slid by 38pc and was equivalent to 4.2pc of revenue, down from 6.9pc a year earlier.
One bright spot is that Hyundai Steel is gaining market share in the auto industry. The company's sales of automotive steel sheeting totalled 523,000 t in this year's first nine months, up by 13pc on the year.
