Companhia Siderúrgica do Pecém Steel Mill in Brazil, also known as CSP, suffered more than 2 trillion won in losses after its dedication in 2016, quickly becoming a major headache for Dongkuk Steel.
But as prices of steel slab, CSP’s mainstay product, surged, CSP logged about 700 billion won in operating profit last year.
The Brazilian unit is forecast to surpass 2021’s business performance this year. Dongkuk Steel, the parent company of CSP, is poised to post its best-ever business performance since its establishment in 1954 on the back of booming color steel plates and rebars.
Dongkuk Steel, a plate powerhouse, which was in a danger of insolvency in 2015, is evaluated to have had a successful comeback.
Securities companies said Dongkuk Steel would post about 160 billion won on a consolidated basis in 2022 Q1 operating profit consensus, a 46 percent year-on-year jump over 109.4 billion won in the same period of the previous year.
An analyst with Hi Investment & Securities said CSP is predicted to achieve a better business performance for the second quarter of the year than expected.
Dongkuk Steel’s shares, which plunged to 13,400 won apiece at the end of January, closed at 16,400 won on April 11, a 22.4 percent jump during the period.
Dongkuk Steel chalked up 803 billion won in operating profit last year, equivalent to 856.2 billion in operating profit in 2008, the best since its founding, on the back of the so-called Steel Super Cycle.
The steelmaker’s good business results for last year was owed to a rise in reinforced bar prices, caused by raw material price hikes, and the booming sales of color plates.
An encouraging sign is that a rise in net profit has dramatically improved the company’s financial stability.
Dongkuk Steel posted 558.5 billion won in net profit last year, an eight-fold jump over 69.4 billion won in the previous year. The steelmaker saw its debt ratio decline to 127.7 percent, an improvement from 179.6 percent in 2019.
Dongkuk Steel suffered 386.1 billion won in net losses during the period between 2018 and 2019. The net losses were primarily caused by CSP, which posted 2,225.1 billion won in cumulative losses the Brazilian steel mill sustained since its dedication in 2016.
A view of CSP in Brazil. (Photos: Dongkuk Steel)
Dongkuk Steel Chairman Chang Se-joo was the architect of CSP, located in the Pecém industrial complex in the state of Ceará, located in the northeastern region of Brazil. CSP is a joint-venture by Brazilian mining company Vale, Dongkuk Steel and POSCO.
CSP was dedicated in 2016 after a combined $5.4 billion, including $2.4 billion in paid-in capital, was invested. Vale, Dongkuk Steel and POSCO own a 50 percent, a 30 percent and a 20 percent stake in CSP, respectively. Dongkuk Steel led all investments and collateral guarantees of the steel mill.
CSP was dubbed as a future growth engine for Dongkuk Steel when its furnace was fired. Dongkuk Steel Vice Chairman Chang Se-wook, who took office on the heels of Chairman Chang, has poured his energy into CSP.
CSP posted 90.5 billion won in net profit in the first year of operation, but the steel mill suffered a setback with cumulative losses snowing to 2,225.1 billion won during the period between 2017 and 2020.
CSP’s operating profit was also sluggish due to currency losses, caused by the devaluation of the Brazilian real, the official currency of Brazil.
Things began to change starting last year. CSP produces steel slaves, a semi-finished steel product. Slave export FOB prices soared from $334 per ton in April 2020 to $867 in April 2021.
It was the reason CSP chalked up 698.6 billion in operating profit last year.
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