On May 8, Korea Ratings analyzed that it is crucial for POSCO Group to secure sustainable competitive advantages, as each of its business divisions is exposed to various risks.
Korea Ratings presented this outlook during a Credit Issue webcast reviewing POSCO, Lotte, SK, and Hanwha Group. POSCO Group’s steel division continues to drive the group's performance. In addition, the group has diversified into trade, energy, construction, and future materials. In particular, POSCO Group is actively fostering its secondary battery materials business as a new growth engine. As a result, the share of the future materials division within the group is gradually expanding.
However, Korea Ratings noted that the group’s overall performance remains weak due to declining profits in both the steel and non-steel divisions. Jung Iksoo, Senior Analyst at Korea Ratings, stated, “POSCO Group is facing an exceptionally challenging business environment due to the combination of China’s overproduction and U.S. trade pressure. Despite these difficulties, the group must bear a heavy investment burden under its growth strategy of decarbonization and moving beyond steel.” He added, “Given the continued unfavorable business conditions across all divisions, the group’s performance improvement this year is expected to be limited.”
In particular, the ongoing expansion of investments due to business restructuring has resulted in continued net cash outflows, leading to an increase in net debt. According to Korea Ratings, POSCO Holdings’ net debt rose from 4.5 trillion won in 2021 to 12.5 trillion won last year. Analyst Jung Iksoo explained, “Since 2022, the group’s net cash outflow trend has continued. With expanding investments despite constrained performance, the burden on cash flow is expected to persist. It is necessary to monitor the scale of investments and the level of financial burden control.”
Korea Ratings also identified several key monitoring points for POSCO Group: the impact of U.S. tariffs, this year’s steel supply-demand and group performance, weakening profit generation amid investment burdens, and investment strategies by business division.
First, the tariff policy of U.S. President Donald Trump is expected to affect the business. He said, “Focusing on the steel division, the direct tariff burden is not expected to be significant. However, since POSCO’s major customers, such as automobile and home appliance manufacturers, consider the U.S. a key market, the tariff risks they face could be indirectly transferred to POSCO.”
He also pointed out that retaliatory and remedial measures by U.S. trading partners could further strengthen protectionism, posing an additional burden. “Recently, the European Union implemented safeguard measures to reduce steel import quotas by up to 15%, and India has begun imposing provisional tariffs on certain low-priced steel imports. If the U.S. sanctions against China delay the recovery of the Chinese steel market, there is a risk that supply-demand pressures within Asia could be prolonged,” he said. He added, “The secondary battery materials division is also exposed to negative impacts.”
He also projected that there is little likelihood of significant performance improvement this year, mainly because the recovery potential of the core steel sector remains limited. He explained, “In the construction sector, which accounts for a large portion of domestic steel demand, the current difficult phase, including a sharp drop in orders, is expected to continue, making a meaningful recovery unlikely this year. The manufacturing sectors such as automobiles and machinery have also remained sluggish since 2023, and additional U.S. tariff measures are acting as further downside risks.”
Regarding POSCO Future M, a group affiliate, he noted that the financial burden from continued investments is increasing. “Despite capital increases, POSCO Future M’s consolidated net debt has surged from 440 billion won at the end of 2019 to 3 trillion won at the end of last year due to expenditures for expanding production capacity. The company is now exposed to downward pressure on its credit rating,” he said.
He emphasized, “Given that the company is exposed to considerable investments of around 1.5 trillion won and performance uncertainties this year, it is necessary to confirm whether the company can continue to control the increase in financial burden through additional capital increases and by minimizing performance volatility.”
Korea Ratings explained that, as POSCO Group is exposed to simultaneous risks, it is important to control financial burdens while securing sustainable competitive advantages. He stated, “Ultimately, POSCO Group’s strategy clearly aligns with the structural direction of the industry, such as convergence toward eco-friendly technologies.”
He continued, “However, given the heightened performance uncertainties and the need to bear significant investment burdens, the pace at which financial capacity is depleted could accelerate. From a long-term perspective, it is necessary to control financial burdens through efficient investments and to ensure that timely investment outcomes lead to improved profits and reinvestment resources, creating a virtuous cycle.”
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