POSCO <005490.KS>, the world's No. 3 steelmaker, reported a 36 percent fall in quarterly operating profit, missing forecasts, hit by high raw materials costs and low demand.

The global steel sector, seen as a barometer of the broader economy's health, is facing a margin squeeze as China continues to churn out record steel despite rising interest rates, while raw material costs remain high partly due to persistent rains in Australia delaying production recovery.

The devastating earthquake in Japan is also dimming overall demand prospects from key consumers such as carmakers, shipbuilders and consumer electronics goods makers as they struggle to normalize production amid rolling power blackouts.

Japan's JFE Holdings <5411.T>, the world's No. 5 steelmaker, reported a 67 percent fall in quarterly profit on Thursday after the March 11 earthquake curtailed shipments, and provided no guidance for the current financial year.

South Korea's POSCO, which trails ArcelorMittal and Baosteel <600019.SS>, said its January-March operating profit was 921 billion won ($852 million), below the consensus forecast of 1.1 trillion won by Thomson Reuters I/B/E/S.

The profit compares with 1.44 trillion won a year ago and 519 billion won in the previous quarter, POSCO said.

POSCO raised domestic steel prices by 16-18 percent this week in its first increase since July last year because of the surge in costs of raw materials such as iron ore and coking coal. Prices of spot iron ore have surged more than 30 percent since July.

Shares in POSCO, which counts billionaire investor Warren Buffett's investment vehicle Berkshire Hathaway Inc as its major shareholder, have little changed so far this year, underperforming the broader market, <.KS11>, which renewed lifetime highs this week, and lagging its home rival Hyundai Steel's <004020.KS> 18 percent jump.

Prior to the result, POSCO shares closed up 0.5 percent in a flat market.

(Reporting by Hyunjoo Jin; Editing by Vinu Pilakkott and Jonathan Hopfner)