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UPDATE 1-POSCO says Q1 profit doubled, but braces for coking coal cost hit from Cyclone Debbie
April 18, 2017 / 6:17 AM / 8 months ago

UPDATE 1-POSCO says Q1 profit doubled, but braces for coking coal cost hit from Cyclone Debbie

* Q1 operating profit 1.37 trln won vs 1.2 trln won estimate

* Sees Q2 coking coal contract benchmarks at over $200/tonne

* Saw Q2 benchmark at $150-170/tonne pre-cyclone impact

* Higher costs in view; FY revenue outlook unchanged (Adds outlook on coking coal prices, earnings details)

By Hyunjoo Jin

SEOUL, April 18 (Reuters) - South Korean steelmaker POSCO said first-quarter profit more than doubled, beating its estimate on solid demand from China, but warned coking coal may now cost up to a third more than forecast because of price surges post-Cyclone Debbie.

The world’s fourth-largest steelmaker said on Tuesday it has suspended negotiations on contract benchmark prices for coking coal - a vital raw ingredient in steelmaking - due to a hike in spot prices since the end-March cyclone lashed Queensland, the world’s largest coking coal export region.

POSCO said in a statement that first-quarter operating profit was 1.37 trillion won ($1.20 billion), surpassing a preliminary estimate of 1.2 trillion won, as well as 659.8 billion won a year ago.

But the firm said it now expects contract benchmark prices for coking coal to reach more than $200 a tonne in the second quarter. Before Cyclone Debbie hit, POSCO had forecast contract benchmark prices would be about $150-170 a tonne for April-June.

The price hikes raises the prospects of higher steelmaking costs than previously anticipated. POSCO, which doesn’t typically issue full-year operating profit guidance, left its 12-month revenue forecast unchanged at 54.8 trillion won.

Cyclone Debbie led to the temporary closure of four of Australian coal railway line operator Aurizon Holdings Ltd’s haulage routes in Queensland. Three of the lines have reopened already.

Meanwhile POSCO reiterated a previous forecast that China steel demand is expected to rise slightly this year, thanks to the Beijing’s infrastructure investment and other policies.

China, the world’s second-largest economy, grew at 6.9 percent in the first quarter, slightly faster than expectations, supported by a government infrastructure spending spree and a frenzied housing market that boosted steel prices.

However, a record steel output and expectations that demand would slow as Beijing tries to cool its red-hot property market has hammered prices, snuffing out a months-long rally.

As of 0602 GMT, about 90 minutes after the earnings disclosure, POSCO shares were up 1.9 percent, while the broader Seoul market was 0.2 percent higher.

$1 = 1,140.2000 won Reporting by Hyunjoo Jin; Editing by Kenneth Maxwell

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