By Lee Kyung-min

The third-quarter earnings outlook of POSCO Holdings will not be as rosy as the second quarter's, as indicated by the falling prices of steel products over the past few weeks, according to market watchers, Thursday. This is compounded by a moderate increase in supply and concerns over an economic recession fanning an industrywide slowdown.

Leading the bleak outlook is decreased demand due to prolonged COVID-19 lockdowns in Shanghai and seasonal weather factors including floods. Also at play is an increasing number of Chinese steelmakers resuming factory operations after the Beijing Winter Olympics ended.

The downside risks failed to offset a raw materials sector boom brought on and sustained by the Russian invasion of Ukraine, leading to revisions of earlier upbeat market outlooks by many market watchers.

POSCO Holdings said Thursday that its sales in the April-June period on a consolidated basis stood at 23 trillion won ($17.5 billion), up 25.7 percent from a year earlier. Operating profit came in at 2.1 trillion won, down 4.5 percent. Net income was 1.8 trillion won, same as last year's second quarter.

The operating profit was driven up by an increase in steel prices and the firm's robust business in the green infrastructure and future materials sectors.

Its trading subsidiary, POSCO International, registered a higher profit in the areas of steel, gas fields and food materials. Its construction unit won orders for city planning, urbanization and maintenance projects. Its chemical subsidiary logged a higher profit in the cathode materials business.

"We were able to report profit, a feat highlighted by strong performance of all of our subsidiaries despite rising inflation and precarious global economic and financial conditions," a POSCO official said.

Data from Korea Mineral Resource Information Service (KOMIS) showed the price of iron ore stood at $112.48 per ton July 8, down 22.1 percent from a month earlier. This is almost a 30 percent decline compared to the around $160 level seen between March and April.

The price of black coal is also on a downward trajectory, dipping 2 percent to $189.2 per ton, July 8, from $194.85, month-on-month.

Market watchers say sinking global steel prices will shrink the roll margins of steelmakers and lead to lower prices of steel plates and shipbuilding plates.

Yuanta Securities researcher Lee Hyun-soo said steel demand will remain stagnant for weeks to come.

"Sluggish steel demand is explained in large part by heavy downpours and earlier and more intense heat waves in China in June, as well as prolonged lockdowns in the country," Lee said in a report. "This will continue through August."