SEOUL -- POSCO, the world's fifth-largest steel maker, is raising prices in South Korea for the fourth time in 14 months, the latest move in the industry to pass on to customers a sharp increase in iron ore bills.
The 6 percent to 10 percent increase would add around 1 trillion won ($1 billion) to the Korean company's annual operating profit, said GJ Kim, an analyst at Samsung Securities.
That will offset about half of the higher costs POSCO faces this year after agreeing last month to pay 71.5 percent more for iron ore bought from Brazilian miner Companhia Vale do Rio Doce.
"Despite a rise in raw material prices, a strong won currency and previous price hikes are expected to boost this year's operating profit by 20 percent," Kim said in a research note.
Four recent price increases mean POSCO's benchmark hot-rolled coil costs 68 percent more than in February 2004. Its customer include carmaker Hyundai Motor Co. Ltd.
Other steel companies also plan price rises after agreeing similar iron ore deals.
China's giant Baosteel raised prices by 10 percent, while Europe's Arcelor and Japan's JFE Holdings also said they planned to charge more.
Tata Iron & Steel Co., India's second biggest steel maker, said it would increase prices for its long-term customers from April.
POSCO, which sells 75 percent of its output at home, has enjoyed a strong performance since last year, helped by robust global demand and strong international steel prices despite concerns rising raw material costs could squeeze profits.
ANOTHER RECORD YEAR
"POSCO will see its profit hit a record high again in 2005 after peaking in 2004 due to this price hike," said Lee Eun-young, an analyst at Mirae Asset Securities.
"But I don't think it has more room to raise domestic prices any more this year given the stronger won and stabilization in global steel prices."
Analysts had been expecting the company to boost net profits by about 3.9 percent this year to 3.95 trillion won, according to Reuters Estimates. The steel maker in January forecast sales would rise 16 percent in 2005 to 23.0 trillion won.
POSCO's price hike is in line with global steel makers' move to pass on rising raw material costs to customers.
POSCO said in a statement it would increase hot-rolled coil prices to 595,000 won a ton from 540,000 won starting with April shipments. Hot-rolled steel accounts for about 35 percent of POSCO's output.
Prices per ton will rise 8.6 percent to 695,000 won for cold-rolled steel, 9.7 percent to 680,000 won for plates and 6 percent to 795,000 won for galvanized sheets.
POSCO ranks fifth after Arcelor, Japan's Nippon Steel and JFE Holdings, and Mittal Steel, which will become the world's largest steel maker when it completes its purchase of International Steel Group this month.