POSCO Holdings, 1Q Consolidated Operating Profit 2.3 Trillion KRW, Up 43.9% YoY... "Raw Coal Price Stabilizing Downward" (Comprehensive)

"Argentina Lithium Salt Lake Phase 2 Project Aims for Approval Within the Year"

Choi Jung-woo, Chairman of POSCO Group, waving a flag at the POSCO Holdings inauguration ceremony held on the 2nd of last month. (Photo by POSCO Holdings)

[Asia Economy Reporter Moon Chaeseok] POSCO Holdings announced on the 25th that its consolidated operating profit for the first quarter was 2.3 trillion KRW, a 43.9% increase compared to the previous year. The price volatility of coking coal, a raw material for steelmaking, which had been significant due to Russia's invasion of Ukraine, is expected to stabilize downward in the future as Australian supplies arrive. To strengthen the securing of lithium, a key raw material for electric vehicle batteries, POSCO Holdings revealed that it is currently conducting additional salt lake market research as well as aiming to obtain approval for the second phase of the Argentine salt lake project within this year.

POSCO Holdings disclosed that its consolidated operating profit for the first quarter reached 2.3 trillion KRW, up 43.9% from the first quarter of last year, sales increased by 32.8% to 21.3 trillion KRW, and net profit rose by 67.5% to 1.9 trillion KRW. By segment, steel operating profit was 1.647 trillion KRW, an increase of over 300 billion KRW compared to the same period last year (1.334 trillion KRW). However, it decreased by about 400 billion KRW compared to the previous quarter (2.068 trillion KRW). This decline in quarterly operating profit was attributed to overlapping factors such as reduced production and sales due to equipment repairs at facilities including the cold rolling, hot rolling, and wire rod plants, along with rising costs. The maintenance work on Gwangyang Blast Furnace No. 4 has been ongoing since February. Overseas operations maintained profitability through strengthened local sales activities.

In the eco-friendly infrastructure sector, operating profit increased by 169 billion KRW compared to the same period last year, reaching 516 billion KRW, driven by strong sales of POSCO International's steel products, expanded new orders for POSCO Engineering & Construction, and improved power rates and LNG terminal business performance at POSCO Energy. Operating profit in the eco-friendly future materials sector was 27 billion KRW, a decrease from 33 billion KRW in the first quarter of the previous year.

Through a conference call with investors, POSCO Holdings provided detailed explanations on raw material price forecasts, plans for adjusting prices of automotive steel and heavy plates, and the status of lithium infrastructure in Argentina. Regarding coking coal supply and demand, it was explained that Russian coal accounts for about 30 million tons (14% share) of the global market, and steelmakers in Europe and South America, excluding China and Turkey, are importing coal from Australia, the U.S., and Canada instead of Russian coal, thus being affected by the 'Ukraine war.' Seo Ji-won, Head of POSCO Raw Materials Division 1, stated, "The European Union announced a ban on new imports of Russian coal this month and a trade ban on existing Russian coal from August, but the market has already absorbed these impacts this month. We expect that with new supplies from Australia arriving next month, supply will increase and prices will stabilize downward to some extent."

Regarding automotive steel prices, the surge in prices of coal and nickel was not fully reflected in the first quarter results, so the increase in performance was not significant. Um Ki-chun, Head of POSCO Marketing Strategy Office, said during the conference call, "It takes 2 to 3 months to reflect the surge in coal and nickel prices in automotive steel prices, so it was not reflected in the first quarter. In the second quarter, we have completed price negotiations with the automotive industry at the increased prices." He added, "Negotiations on heavy plate prices with the three major shipbuilders will be completed at a reasonable level within this week. We are compensating for any shortfalls through cost reduction measures."

The plan to secure lithium overseas is also expected to proceed without issues. Regarding the Argentine Hombre Muerto salt lake lithium commercialization plant, in which a total of 830 million USD (about 950 billion KRW) has been invested, the plan is to complete a plant with an annual capacity of 25,000 tons in the first half of 2024 and expand to 100,000 tons by 2028, which is expected to be realized barring any unforeseen circumstances. The 100,000 tons of lithium corresponds to the amount used in batteries for 2.4 million electric vehicles. Lee Kyung-seok, Executive Director and Chair of POSCO Holdings' Secondary Battery Materials Business Promotion Committee, said, "We have already started construction of the 25,000-ton plant and are conducting engineering work for the second phase of the salt lake project. We plan to obtain project approval within this year. The goal to secure a total of 100,000 tons, including an additional 20,000 tons in 2027 and 50,000 tons in 2028, is expected to proceed smoothly once local government environmental permits are obtained." He added, "Additionally, since salt lake lithium is more profitable than ore lithium, we are conducting local market research to find more salt lakes."

POSCO Holdings set targets for this year of consolidated sales of 77.2 trillion KRW and investment costs of 8.9 trillion KRW. By 2030, through facility expansion, the company plans to increase anode and cathode production capacity to 930,000 tons and expand investments in lithium, nickel, and recycling businesses to produce up to 520,000 tons of lithium and nickel. Along with plans to produce 500,000 tons of hydrogen domestically and abroad, the company aims to increase power generation capacity from wind and solar to 2.4 GW (gigawatts) by 2030 and expand food business handling volume from the current 6.55 million tons to 25 million tons. Furthermore, POSCO Holdings aims to reduce domestic carbon emissions by about 10%, from the current approximately 78 million tons to 71 million tons by 2030. The company plans to achieve orders worth about 10.4 trillion KRW through expanding eco-friendly construction and remodeling businesses.