POSCO, the world's No.4 steel maker, is expected to report strong profit growth for the April-June quarter, lifted by solid demand and higher steel prices.

Chinese steel firms including Baosteel are also seen boosting earnings this year but their bigger rivals in Japan are likely to show another drop in earnings after warning they are struggling to pass through rising costs.
Despite firm demand from China and the Middle East, Asian steel mills, which depend heavily on imports of raw materials, face a tougher year as they were forced to agree to pay up to 96.5 percent more for Australian iron ore and 71 percent for Brazilian minerals.

"Producers will benefit from continuing stable manufacturing industry demand for high quality steel in the auto, shipbuilding, machinery and energy-related fields, but cost pass-through will be difficult and may take multiple quarters to achieve," Fitch Ratings analysts said in a recent report.

POSCO, which kicks off the sector's reporting season on Friday, is likely to show a 13 percent rise in net profit to 1.26 trillion won ($1.2 billion), its highest in three years, with sales seen jumping by 26 percent to an all-time high of 7.3 trillion won.

The South Korean company, which raised prices twice in February and April, put up prices again in July, taking total annual increases to 63 percent, as it seeks to shore up profit margins dented by soaring prices of iron ore and coking coal.

China's Baoshan Iron and Steel Corp is on course to report a 34 percent rise in full-year net profit after reporting a 16 percent gain in the first quarter. Analyst forecasts for the June quarter were not yet available.
But Japanese firms including world No. 2 Nippon Steel and No. 3 JFE are likely to post double-digit percentage drops in earnings as they struggle to hike product prices fast enough to cover cost rises.

While costs are increasingly sharply, steel prices are also rising, raising the prospect that profit margins will improve later this year after hitting the bottom in the first quarter (April-June)," said Atsushi Yamaguchi, a UBS analyst.

In April, Nippon warned annual profits would fall 34 percent in the year to March 2009 on raw material costs, while JFE spooked investors by delaying the release of its annual forecast to July due to prolonged talks over price hikes with clients including major automakers.

Nippon has said rises in iron ore, coal, freight and other charges will cost it 1 trillion yen more this business year, equating to a price hike of 30,000 yen per tonne or 38 percent.