POSCO tightens belts, seeks M&A within 3 years: new chairman

Chang In-hwa, chairman and chief executive of POSCO Holdings Inc., the parent of South Korea’s top steelmaker POSCO, has vowed to take drastic cost-cutting measures to counter difficulties caused by global steel oversupply and the intensifying US-China trade war.

The new chairman also promised to seek mergers and acquisitions in promising sectors beyond the steel and battery materials within his three-year term to secure new growth engines.

While unveiling seven key missions to pursue during his term on Monday, he said the company’s top priority is to strengthen its steel business.

POSCO's steelmaking unit accounts for 60% of the group’s entire annual profits.

The company posted 2.56 trillion won ($1.86 billion) in operating profit from its steel business in 2023.

POSCO, Korea’s fifth-largest business conglomerate, faces growing competition with its rivals in China and Japan, which are also advancing into the Korean market.

The chairman said he aims to slash more than 1 trillion won in production costs annually by streamlining facilities.

Some 60% of POSCO’s steel-related costs come from raw materials such as iron ore and coking coal.

The steelmaker’s efforts to cut costs will be challenging as global iron ore prices and sea freight rates are on a rising trend and it is difficult to immediately lower the purchase price of raw materials given long-term contracts.

The chairman said POSCO will employ artificial intelligence and robot technology to transform existing facilities into smart factories and adjust its steel product portfolio to increase the portion of high-end products.

M&A EFFORTS

Regarding POSCO’s battery materials business, the conglomerate plans to make aggressive investments in salt lakes and mines containing lithium, taking advantage of the recent slowdown in the global electric vehicle uptake.

“The electric vehicle market is currently facing difficulties from a temporary slowdown, but we plan to take this as an opportunity to increase our lithium production,” said a company official.

POSCO’s battery materials affiliate, POSCO Future M Co., is struggling with a deepening economic doldrums, particularly in the battery and electric vehicle businesses.

Posco Pilbara Lithium Solution Co., a lithium hydroxide-producing joint venture between POSCO Holdings and Pilbara Minerals, recently began commercial operations.

Chang said he will look for M&A targets in promising sectors beyond the steel and battery materials over the next three years.

STRENGTHENING CORPORATE GOVERNANCE

The chairman said he aims to improve the company’s corporate governance by setting up a new committee responsible for the transparent selection of subsidiary CEOs and outside board directors.

Last month, POSCO’s shareholders approved Chang as the company’s new CEO, replacing Choi Jeong-woo whose second term as POSCO Group chairman ended in March.

The 69-year-old chairman has been with the steelmaker for 36 years, joining the company in 1988 as a researcher at the Research Institute of Industrial Science & Technology (RIST) under the company-sponsored advanced research college, Pohang University of Science and Technology (POSTECH).

After graduating from the prestigious Kyunggi High School and majoring in shipbuilding engineering at Seoul National University, Chang received a doctorate from the Massachusetts Institute of Technology (MIT).

At POSCO Group, he mainly worked in the research and development divisions, including his role as the head of the POSCO E&C research team, senior RIST researcher, POSCO technology investment chief and the president of POSCO.

Chang’s appointment as CEO comes as the steelmaker is engulfed in a controversy over the fairness of its CEO selection process.

POSCO Holdings has come under fire for its opaqueness in choosing a new leader as its largest shareholder, the National Pension Service (NPS), questioned fairness in POSCO’s selection process.

Write to Hyung-Kyu Kim and Sang Hoon Sung at khk@hankyung.com

In-Soo Nam edited this article.