POSCO Holdings' Q2 profit drops as raw material costs surge

South Korea's POSCO Holdings posted on Thursday a 4.5 per cent drop in second-quarter operating profit, in line with its estimates, as costs for raw material rose more sharply than prices of its steel products.

The holding company of South Korea's largest steelmaker said its consolidated operating profit fell to 2.1 trillion won ($1.61 billion) in the April-June quarter, from 2.2 trillion won a year earlier. Revenue rose 25.7 per cent to a record 23 trillion won.

Its steelmaking unit POSCO hiked prices of some products through negotiations with customers such as shipbuilders and automakers, but that was outweighed by surging prices of coking coal, an essential material for steel production, analysts said.

Analysts added that POSCO Holdings' third-quarter operating profit is likely to fall from the second quarter as steel prices are expected to drop due to weak demand amid recession fears.