Korean steel stocks are trading at the lowest price-to-book ratio (PBR) among major sectors. Still, expectations are emerging that the industry may be passing through its trough, as declining low-cost Chinese supply, rising product prices, growing artificial intelligence (AI) infrastructure demand, and stabilizing raw material costs come together.
According to the Korea Exchange on the 14th, the KRX Steel Index carried a PBR of 0.39 as of the previous day, the lowest among the 17 KRX sector indices. Bellwether POSCO Holdings (005490.KS) stood at 0.42, Hyundai Steel (004020.KS) at 0.18, and SeAH Besteel Holdings (001430.KS) at 0.56. These figures fall far below the global steelmaker average of 0.9 and the market average of 1.8 compiled by Daishin Securities. Given the nature of capital-intensive process industries that hold large tangible assets, steel stocks are considered representative "low-PBR stocks."
This is analyzed as the combined result of China's overproduction and low-cost exports, a domestic construction slump, and low return on equity (ROE). This month as well, POSCO Holdings (-4.3%), Hyundai Steel (-6.6%), and SeAH Besteel Holdings (-12.8%) have been in weak territory. Even so, they held up relatively well during the KOSPI's sharp decline. Foreign investors also net-bought POSCO Holdings and SeAH Besteel Holdings by 42.589 billion won and 3.343 billion won, respectively, this month, showing signs of picking up some names.
In the securities industry, expectations are that "selling price (P)" will be supported by declining low-cost Chinese supply and anti-dumping measures, that AI infrastructure-related exports will supplement "sales volume (Q)," and that "raw material costs (C)" will fall in the second half. Domestic hot-rolled distribution prices reached 980,000 won per ton in the second week of July, up 1.0% from the previous week, while rebar exports to the United States in the first half rose to 484,000 tons, about 33 times higher than a year earlier. Daishin Securities projected that iron ore prices, which rose to $111 in May, will decline to $90-100 per ton in the second half, and that Australian coking coal, which was $220-240 in the first half, will fall to $180-210.
"The steel industry is at the beginning of a turnaround phase," said Kang Min-a, an analyst at Daishin Securities. "P and Q are showing clear signs of improvement, and C is expected to stabilize in the second half after a temporary rise in the first half." Semiconductor plants and power grid investments in the Honam region are also cited as new demand sources. "As AI data center construction, semiconductor production facility expansion, and the power infrastructure buildout supporting them are all being pursued simultaneously, they are expected to act as factors expanding steel demand," said Park Sung-bong, an analyst at Hana Securities.
