POSCO chairman nominee to prop up ailing steel business

The chairman nominee of POSCO Holdings Inc., the parent of the world’s No. 7 steelmaker POSCO, is expected to concentrate on improving its core steel business dented by its Chinese and Japanese rivals while strengthening the profitability of its battery materials business, a new growth engine.

The group’s steel business logged an operating profit of 2.56 trillion won ($1.92 billion) in 2023, down 21% from the previous year, according to the holding company on Monday. The latest profit was less than a third of 8.44 trillion won in 2021.

The business, which makes up some 60% of POSCO Holdings’ total operating profit, has been reeling from heavy inflows of steel products from China and Japan amid weakening demand on sluggish economic growth and property markets.

The group chairman nominee Chang In-hwa, a former POSCO president, is predicted to actively invest in boosting steel outputs, industry sources said.

POSCO, South Korea’s top steelmaker, unveiled a goal to ramp up steel output to 52 million tons a year by 2030 from the current 43 million tons in July last year. The company also aims to use hydrogen instead of fossil fuels for steel production, which usually requires investments of tens of billions of dollars, for carbon neutrality sought by the global steel industry.

Chang is well aware that the group needs to focus on those goals.

“Steelmaking is not an industry that works well on its own although it is left alone,” the 69-year-old nominee, currently a POSCO advisor, told The Korea Economic Daily in a recent interview. “We need to invest in new technology on steelmaking not for short-term earnings but for long-term growth.”

NO STEEL OUTPUT INCREASE IN A DECADE

POSCO, which has not raised steel output since 2013, slipped to the global No. 7 steelmaker from the sixth-largest player in 2022 when a typhoon forced the company to shut down all of its three furnaces in Pohang, about 350 kilometers (217 miles) southeast of Seoul, for the first time in 49 years, slashing its output by 10.1% to 38.6 million tons.

That fell short of the 131.8 million tons produced by the world’s top China Baowu Steel Group Corp. in 2022, according to the World Steel Association.

Japan’s Nippon Steel Corp. the world’s No. 4 steelmaker, decided to acquire United States Steel Corp. in a $15 billion deal, ramping up output.

Chang’s plans are divergent from those of the incumbent Chairman Choi Jeong-woo, who has been concentrating on new growth sectors, especially electric vehicle battery materials.

SLOWER INVESTMENTS IN BATTERY MATERIALS BUSINESS

Chang may slow investments in the group’s battery materials sector to boost the profitability of the business mired by the sluggish growth in the global EV demand, industry sources said.

“Battery materials makers are not superior to battery producers anymore,” said one of the sources. “Chang may have to decide if the group keeps expanding the business through aggressive spending despite such a tough environment or fosters internal stability through adjusting the speed of investments.”

POSCO Future M Co., the group’s cathodes producer, reported an operating profit of 36 billion won in 2023, down 78% from the year prior with supply outpacing demand.

The tumble came as global battery makers suffered rising inventories amid slower EV sales worldwide.

Chang is expected to restructure the group’s decision-making process amid controversy over the fairness of its CEO selection.

POSCO Holdings has come under fire for its opaqueness in choosing a new leader as the state-run National Pension Service (NPS), its largest shareholder, suspected that the current selection process was skewed in favor of the outgoing Chairman Choi.

“Chang, a kindhearted leader respected by many employees, is predicted to quickly manage the recent disturbance,” said another industry source.

Write to Hyung-Kyu Kim at khk@hankyung.com
 
Jongwoo Cheon edited this article.