[Great Transformation POSCO]① Up to 27 Trillion Won Invested Over 3 Years... Investment Spirit 'Overflowing'

"Annual Investment of 8~9 Trillion Won to Continue for the Next 3 Years"
'Hylex' Carbon Neutrality Strategy Implementation Detailed
Overseas Steel Subsidiaries Transferred to POSCO... Governance Restructuring

Editor's NoteThe global steel company POSCO Group is facing a major turning point. In line with the carbon-neutral era, it stands at an inflection point to shift towards new growth engines of 'green steel' and 'eco-friendly future materials.' After several years of a brief steel market boom, recent downturns are expected to accelerate these movements. Despite sluggish earnings, the group is actively investing, especially in the secondary battery materials sector, maintaining the momentum of innovation. Reviewing the current status of continuous investments, business expansions, and mergers and acquisitions (M&A) offers a glimpse into the blueprint of POSCO Group's envisioned major transformation.

[Image source=Yonhap News]

[Asia Economy Reporters Hyungil Oh, Seoyoon Choi] POSCO Group's investments in transitioning to 'green steel' and fostering 'eco-friendly future materials' will be decided within the next three years. Despite the global economic recession, sluggish steel market conditions, and setbacks in earnings due to flooding in North Cheon, aggressive investments are expected to continue.

POSCO Holdings announced on the 24th during a conference call that it will sustain annual investments of approximately 8 to 9 trillion KRW over the next three years to expand businesses in steel, secondary battery materials, and infrastructure sectors.

Jeon Joong-seon, Head of POSCO Holdings' Management Strategy Team (President), stated, "With the global economic downturn beginning, we are reviewing investments cautiously," but added, "We will proceed with investments in secondary battery materials and steel sectors without delaying the existing roadmap."

Until last year, POSCO Holdings invested about 8 trillion KRW in research and development and capital expenditures (CAPEX), and it is now planning even more aggressive investment strategies.

The steel division's investments will be managed by POSCO, the steel subsidiary, which plans to invest in low-carbon green steel using its own EBITDA. The carbon-neutral related investment scale is expected to be around 1.2 trillion KRW in 2023 and about 1 trillion KRW in 2024.

POSCO has begun concretizing its carbon-neutral strategy implementation. At the Pohang Steelworks, Blast Furnace No. 2 is being specialized to develop technology capable of producing low-carbon products. At the Gwangyang Steelworks, an electric arc furnace is scheduled to be completed by 2025 to produce low-carbon automotive steel sheets.

By 2030, POSCO plans to verify the commercialization potential of its hydrogen reduction steelmaking technology, 'HyREX.' Hydrogen reduction steelmaking is a technology that replaces the traditional coal-based reducing agent with hydrogen to remove oxygen from iron ore, producing steel products without carbon emissions.

Park Jung-bin, POSCO Holdings' Head of Investment, said, "The fundamental principle is to proceed with investments within the range of EBITDA, and from next year onwards, we plan to secure funds through asset efficiency improvements," adding, "About half of the investment costs will be spent in the steel sector, with the remainder allocated to battery materials and infrastructure."

Additionally, POSCO Holdings plans to enhance the efficiency of its steel business by restructuring its governance to transfer overseas steel subsidiaries, which have been recording poor performance, under POSCO.

Overseas steel subsidiaries saw sharp declines in earnings in the third quarter due to falling steel prices and reduced sales volumes. Sales of the Indonesian subsidiary (PT. Krakatau) and the Chinese subsidiary (Zhangjiagang STS) decreased by 22% and 11% year-on-year, respectively. Notably, the Chinese subsidiary recorded an operating loss of 32 million USD (approximately 46.1 billion KRW), worsening its performance as in the previous quarter.

The Indian subsidiary (POSCO Maharashtra) and the Vietnamese subsidiary (PY VINA) also experienced sales declines of 6% and 25%, respectively, due to local price and volume decreases.

A POSCO Holdings official explained, "From the perspective of ownership and governance unification, transferring steel-related subsidiaries under POSCO will aid efficient management," adding, "Once the review is complete, the matter will be submitted to the board for unification."

[Image source=Yonhap News]