The Korean steel industry's earnings in thefirst quarter of this year may be bleak due to soaring raw material prices,falling steel prices and continued growth in trade protectionism. Industryobservers said that the weakening prospects for the Korean steel industry aremainly due to the soaring prices of iron ore from steel raw materials.

During the January-March period, the averageselling price of iron ore increased by 13.8% from the US$70 in the fourthquarter of last year to US$80. This price surge was due to the supply of Braziland Australia in the two major iron ore producer problem.

Despite the soaring prices of raw materials,due to the oversupply of China's steel industry, the price of South Koreancarbon steel fell by 15,000 won/ton in the first three months of this year.Increasing trade protectionism has also exacerbated operational pressures inthe local steel industry in Korea.