Posco, Asia's biggest steelmaker by market value, expects third-quarter earnings to beat ``market expectations'' and full-year operating profit to exceed its forecast on increasing sales and cost savings.

    ``Third-quarter earnings will be better than expected,'' Chief Financial Officer Lee Dong Hee said in an interview in Seoul with overseas news wires, without giving profit forecasts. ``Sales are good and we'll also be able to meet our cost-saving target this year.''

    Price increases and spending on technology to use cheaper coal will support earnings at Pohang, South Korea-based Posco as steelmakers globally struggle with a surge in raw materials costs, Lee said. Asian mills are paying three times more for coking coal and almost two times more for iron ore this year.

    ``They have the technology to cut down on expensive materials and instead increase cheap ones, which will help them cut costs,'' said Chung Ji Yun, an analyst with HI Investment & Securities Co. in Seoul. ``They have a very good mixture of raw materials.''

    Posco, Asia's third-biggest steel producer, in July projected 2008 operating profit of 5.7 trillion won ($5.1 billion), up 33 percent from 4.3 trillion won in 2007.

    Posco gained 15,000 won, or 3.3 percent, at 469,500 won at 11:39 a.m. in Seoul trading, outperforming a 0.1 percent advance in the benchmark stock index.

    The Korean steelmaker has fallen 18 percent this year, while Nippon Steel Corp., the world's second-largest and Japan's biggest, lost 34 percent and Baoshan Iron & Steel Co., China's No. 1 producer, plunged 62 percent.

    Production CutsArcelorMittal, the world's biggest steelmaker, said last week it could cut output by 15 percent in Europe and the U.S. to support prices as global growth slows.

    ``Many other steel companies are saying it will be very difficult to go through the third quarter,'' Lee said. ``I can say we are doing well as we are continuously switching into cheaper coal, thanks to our technology.''

    Chinese steelmakers have cut production because of weak demand and higher raw material costs, Nanjing Iron & Steel United Co. said last month. Prices of hot-rolled coil, a benchmark product, are down 15 percent from a June record in China.

    ``Steel prices appear to be weakening a bit at the moment, but we are not much concerned and remain positive,'', Lee said. ``Current prices of our products are already lower than market prices, so we are the least-affected in that regard.''

    Posco will report 1.99 trillion won in net income in the third quarter ended Sept. 30, according to 16 analysts' mean estimate compiled by Bloomberg.

    Price IncreasesThe steelmaker raised prices for benchmark hot-rolled coil by about 63 percent this year through three rounds of increases to cover higher costs. It may adjust prices by product, Lee said, declining to say which products will be affected and when.

    Posco cut stainless-steel prices as much as 10 percent in August, the first reduction this year on weakening demand. It extended a 20 percent output cut for stainless steel products in September from July and August on weak demand.

    The company doesn't plan to cut output of other products, helped by strong demand, Lee said.

    ``Carbon steel demand is good now, so we don't need to even consider cutting output,'' Lee said, adding that the stainless steel business will post a ``reasonable'' profit this year.

    Baosteel Group Corp., China's largest steelmaker, said Sept. 18 orders were falling, signaling a slowdown in the world's fastest-growing major economy.