[Click eStock] "POSCO Holdings Faces Temporary Earnings Pressure Amid Steel Industry 'Sireum'"

Production Cuts and Demand Decline in China's Steel Industry
Spread May Remain or Worsen
Secondary Battery Sector to Contribute Significantly from 2025

Yuanta Securities analyzed on the 20th that the steel industry is facing difficulties and that POSCO Holdings is likely to experience performance pressure for the time being. The investment opinion 'Buy' and the target price of 540,000 KRW were maintained.

According to Yuanta Securities, the Chinese steel industry has implemented production cuts to cope with the challenging market conditions. September and October are traditionally considered the peak season known as 'Geumgu Eunsip (金九銀十),' but expectations have diminished after the harsh period from June to August. In particular, the sluggish real estate market is weighing on demand, and the Chinese government's policy of replacing old facilities with new ones has been halted, meaning it will take time for supply-side effects to materialize.

Researcher Hyunsoo Lee of Yuanta Securities stated, "During July and August, China's crude steel production decreased for two consecutive months, down 9-10% year-on-year, while product prices showed a declining trend. Although blast furnace operators' utilization rates in early September remain lower than in 2022-2023, the decrease in crude steel production has led to a drop in raw material prices, negatively impacting product prices." However, since August, the decline in raw material prices has been greater than that of product prices, causing spreads to rebound in some products.

POSCO Holdings is expected to record product sales in the mid-8 million ton range in the third quarter, which is anticipated to translate into volume effects. However, although raw material input costs are falling, the simultaneous decline in sales prices to end-users and distribution channels may cause spreads to remain flat or worsen compared to the previous quarter. Product sales volume in the fourth quarter is expected to increase slightly, but if product price declines continue, the effect of lower raw material input costs will likely be limited.

In the secondary battery sector, the completion of some projects has resulted in low initial operating rates, leading to an expected increase in operating losses in the third quarter compared to the previous quarter. Researcher Lee said, "The secondary battery sector's full-scale contribution to performance is expected to begin with sales in 2025 and profitability in 2026. Operating profit in the fourth quarter is expected to hit a bottom, and restructuring of low-profit businesses will have a positive impact."