Will Steel and Copper Prices Rise? What About Q4 Earnings?

Since the second half of last year, the global steel market has shown deepening regional decoupling. In the U.S., imports declined due to tariffs imposed on the whole world, while infrastructure and data center demand remained strong, pushing steel prices up. Thanks to this, the stock returns of major U.S. steel companies reached 50–60%.

The Asian market showed some rebound in the second quarter, but the returns of major countries excluding China were only around 10%. In particular, China's steel prices stagnated due to weak global demand and strengthened export regulations, and corporate returns fell sharply, ranging from -2% to -40%.

According to Mysteel data, the share of Chinese steelmakers recording profits is only around 10%, and most steelmakers cannot avoid losses at current prices.

This is because they have been unable to pass on rising raw material and energy costs to selling prices, causing losses to accumulate. Recently, as production cuts spread and steel prices in other Asian countries rebounded, Chinese steelmakers have laid the groundwork for price hikes in the fourth quarter.

The currently expected price rebound is likely to be limited to passing on raw material price increases to selling prices.

Therefore, the overall recovery of the Chinese steel market is expected to be slow, and it is analyzed that a large-scale price increase will be difficult to expect.

As the seasonal off-season ends and the fall peak season begins, the possibility of a recovery in steel demand is raised. However, a variable is that the structure of China's steel downstream industries is overwhelmingly concentrated in construction and real estate, followed by infrastructure and machinery.

In particular, the sluggish fixed asset investment in China acts as a structural limitation and may offset the effects of the seasonal peak season.

Due to seasonal factors, a temporary recovery is expected in the third quarter, but supply-demand improvement is expected toward the year-end.

However, analyses suggest that this improvement is difficult to view as a structural recovery.

Despite the construction downturn, domestic rebar prices rebounded meaningfully from the second quarter.

This is analyzed to be mainly due to an increase in export volumes to the U.S. An ironic situation is occurring in which the deepening steel shortage in the U.S. leads to increased exports of Korean steel products.

Based on this estimate, about 1.6–1.7 million tons of steel will be needed for data center construction by 2030.

In addition, about 100,000 tons of steel are needed per semiconductor fab, and assuming a total of five fabs are built, an additional 500,000 tons will be required. Taken together, it is estimated that about 700,000–800,000 tons of steel demand will arise annually.

Currently, they are fluctuating in the low $20,000 range. In the long term, lithium demand is expected to exceed supply, sustaining a demand-driven market.

In the copper market, prices began rising in the second half of last year as mine supply disruptions deepened. Treatment charges (TC), the revenue from processing copper concentrate, fell enormously last year and this year.

In addition, the Chinese government's tightening of copper scrap regulations is acting as an additional pressure factor on copper supply. These factors combined raise the possibility of lower smelter utilization rates and are driving copper prices higher.

Among copper-related stocks, Poongsan is drawing attention. Poongsan is a company that buys and processes electrolytic copper to produce defense products and coins, and as copper prices rise, inventory valuation gains or metal gains increase significantly.

Poongsan's operating profit forecast for this year is 470 billion won, expected to record an all-time high. Expectations for earnings improvement due to rising copper prices are high.

Poongsan possesses globally recognized defense technology and has a stable profit base. It also holds a unique position in the non-ferrous metal processing field, including coins.

These strengths, combined with positive changes in the copper market, are expected to be major factors raising Poongsan's corporate value.