Modern ironmaking, although turned losses into profits in the first quarter, still fell short of market expectations... increased cost burden

Although Hyundai Iron & Steel (현대제철) turned profitable in the first quarter of 2026, its performance did not meet market expectations, with both cost burdens and financial burdens becoming increasingly prominent.

On the 24th, Hyundai Iron & Steel said in an announcement that, based on consolidated financial statements, its operating profit for the first quarter this year is preliminarily estimated at 15.7 billion won. Compared with the same period last year, it turned from loss to profit, with sales of 573.7 trillion won, up 3.2%. Net loss was 39.3 billion won; although the company is still loss-making, the scale of losses declined. However, this operating profit was 66.2% lower than the market expectation of 46.5 billion won cited by Unions Infomax. Compared with the previous quarter, sales rose 4.6%, but operating profit fell 63.7%, making it still difficult to conclude that profitability has clearly recovered.

The company attributes the background of profitability being weaker than expected to the rise in exchange rates and the increase in raw material prices. The steel industry is directly affected by changes in raw material prices such as iron ore, coal, and scrap steel, as well as fluctuations in exchange rates. Because increases in costs cannot be immediately reflected in product prices, performance is easily affected. Hyundai Iron & Steel predicts that after the second quarter, as the inflow of low-priced imported steel into the domestic market decreases and the effects of price increases for major products begin to show, operating profit will improve gradually. This is interpreted to mean that pressure from domestic market oversupply will ease to some extent, and the company’s ability to negotiate prices may partially recover.

From the short-term perspective, financial burdens are further intensifying. As of the first quarter, borrowings increased by about 1 trillion won compared with the end of last year, reaching 102.701 trillion won, and liabilities also rose to 151.95 trillion won, an increase of 592.8 billion won. Although the unit for borrowings in the original text appears to contain a typo, based on the overall context it is more natural to interpret it in units of 100 million won. In response, Hyundai Iron & Steel explained that this is due to temporary increases in borrowing resulting from investment execution aimed at future growth, such as providing capital for U.S. steel mills. In fact, the company previously announced that, together with POSCO, it will build an electric arc furnace steel plant with an annual capacity of 2.7 million tons in Louisiana, USA, to supply steel to local demand-side customers including Hyundai Motor Group’s Metaplant America (HMGMA). The target timeline for commercial production is 2029.

Hyundai Iron & Steel plans to focus this year’s operations on improving profitability and securing new demand. In particular, the data center construction steel market, which is growing rapidly as investments in artificial intelligence expand, is viewed as a new opportunity. Data centers are facilities that house large servers, cooling equipment, and electrical power equipment, and demand for high-quality structural steel remains steady. Hyundai Iron & Steel plans to develop standardized models by scale and client-customized models, and expand its marketing reach through bundled supply of sheet and long products to enter global markets. In addition, it has decided to strengthen its response to steel for energy storage systems, where demand is growing as renewable energy expands and the power grid stabilization process advances, as well as to the markets for steel for power transmission towers and for thick plates. In the North American market, the company has supplied the first batch of low-temperature impact steel, and it is pushing related certifications domestically while expanding orders.

Ultimately, Hyundai Iron & Steel’s first-quarter results, while showing signs of performance improvement, also indicate that the burden of costs and the pressures from large-scale investment remain substantial. Going forward, whether the effect of product price increases can truly translate into profits, and how quickly U.S. investments and new demands such as power infrastructure and data centers can be converted into sales, will be key variables. This trend is very likely to align with a future reorientation of the steel industry—from a simple recovery driven by the economy toward a shift centered on high value-added demand and regional supply strategies.