SEOUL, July 21 (Reuters) - South Korea's POSCO Holdings posted on Thursday a 4.5% drop in second-quarter operating profit, in line with its estimates, as costs for raw material rose more sharply than prices of its steel products.

The holding company of South Korea's largest steelmaker said its consolidated operating profit fell to 2.1 trillion won ($1.61 billion) in the April-June quarter, from 2.2 trillion won a year earlier. Revenue rose 25.7% to a record 23 trillion won.

Its steelmaking unit POSCO hiked prices of some products through negotiations with customers such as shipbuilders and automakers, but that was outweighed by surging prices of coking coal, an essential material for steel production, analysts said.

Analysts added that POSCO Holdings' third-quarter operating profit is likely to fall from the second quarter as steel prices are expected to drop due to weak demand amid recession fears.

Sluggish demand in China, the world's top producer and consumer of steel, is dragging on prices of the commodity, said Park Seong-bong, an analyst at Hana Financial Investment.

"Demand in China, though lockdowns were lifted, didn't recover at all in June, which was unexpected," he added.

Indicating weaker Chinese demand, the price of iron ore imported to the Chinese port of Qingdao plunged 35% to $104 per metric tonne in mid-July from $159 in April, industry data shows. Iron ore is used to make steel.

"Steel prices are projected to continue their downward spiral due to recession concerns and delays in China's infrastructure investments," said Byung Jong-man, an analyst at NH Investment & Securities.

Yi Hyun-soo, analyst at Yuanta Securities, said heavy rains and a heatwave in China were also discouraging steel demand.

However, market conditions should improve as steel-consuming companies stock up ahead of September-October, Yi added.

Chinese steel demand picks up in September and October after the summer lull as construction activity increases. ($1 = 1,307.3500 won) (Reporting by Byungwook Kim and Heekyong Yang; Editing by Muralikumar Anantharaman and Himani Sarkar)