South Korean steelmaker POSCO said on Tuesday that its first-quarter Q1 operating profit more than doubled from the same period a year earlier, beating its own earlier estimate, as solid demand in China boosted steel prices; Posco also warned coking coal may now cost up to a third more than forecast because of price surges post-Cyclone Debbie.

The world’s fourth-largest steelmaker said consolidated operating profit for January-March was 1.37 trillion won ($1.20 billion), compared with a preliminary estimate it issued in late March of 1.2 trillion won, and 659.8 billion won reported a year ago.

POSCO Q1 operating profit 1.37 trln won vs 1.2 trln won estimate

• Sees Q2 coking coal contract benchmarks at over $200/tonne
• Saw Q2 benchmark at $150-170/tonne pre-cyclone impact
• Higher costs in view; FY revenue outlook unchanged (Adds outlook on coking coal prices, earnings details)

The world’s fourth-largest steelmaker said on Tuesday it has suspended negotiations on contract benchmark prices for coking coal – a vital raw ingredient in steelmaking – due to a hike in spot prices since the end-March cyclone lashed Queensland, the world’s largest coking coal export region.

The price hikes raises the prospects of higher steelmaking costs than previously anticipated. POSCO, which doesn’t typically issue full-year operating profit guidance, left its 12-month revenue forecast unchanged at 54.8 trillion won.

Cyclone Debbie led to the temporary closure of four of Australian coal railway line operator Aurizon Holdings Ltd’s haulage routes in Queensland. Three of the lines have reopened already.

Meanwhile POSCO reiterated a previous forecast that China steel demand is expected to rise slightly this year, thanks to the Beijing’s infrastructure investment and other policies.

China, the world’s second-largest economy, grew at 6.9 percent in the first quarter, slightly faster than expectations, supported by a government infrastructure spending spree and a frenzied housing market that boosted steel prices.

However, a record steel output and expectations that demand would slow as Beijing tries to cool its red-hot property market has hammered prices, snuffing out a months-long rally.

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