POSCO Opens 3rd CSPC Unit in China
Korean steel maker, POSCO (PKX) has moved a step forward to leverage benefits from the growing automotive market in China. The company's third automotive steel processing facility with annual processing capacity of 50,000 tons, started operating recently in the Chinese city of Kunshan, Jiangsu Province.
POSCO's presence in the Chinese automotive sector dates back to 2004 with the opening of its first automotive steel processing unit, POSCO-CSPC. The company since then has been making remarkable progress and strengthening its foothold in the Chinese market, operating around 20 processing centers currently.
POSCO-CSPC from its inception has supplied over 300,000 tons of automotive steel to automakers, including Shanghai GM and Volkswagen, among others. Steel demand in China is expected to grow by 4.0% year over year both in 2012 and 2013, according to the World Steel Association. To meet the end, the company will soon be launching a new processing center focused on galvanized steel sheets and steel alloy sheets in Foshan, Guangdong Province.
Thus, POSCO remains optimistic about steel consumption in the Korean market, with demand ever rising from the automotive, construction and shipbuilding sectors. Exports are expected to play a major growth driving catalyst.
For 2012, the company anticipates a 2.5% increase in revenue to KRW 70.6 trillion. Crude steel production is projected to rise 3.0% while investments by 10.0%.
The Zacks Consensus Estimate for 2012 and 2013 are at $7.83 and $8.91, respectively. These represent a year-over-year decline of 27.09% in 2012 and growth of 13.79% in 2013.
We currently maintain an Underperform recommendation on POSCO. The steel giant has a Zacks #3 Rank, translating into a short-term (1-3 months) Hold rating.
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