POSCO Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2025

Key Takeaways

  • Positive Sentiment: Consolidated Q2 results delivered KRW17.6 trillion in revenue and KRW610 billion operating profit, with a 5.7% margin marking two quarters of growth since 2024’s low.
  • Positive Sentiment: Steel segment saw higher sales volumes and improved mill margins driven by lower iron ore and coking coal prices, AI integration, and ongoing cost-structure enhancements.
  • Positive Sentiment: Negotiations are underway to divest the PCSS stainless steel subsidiary in China, aiming to remove a consistently loss-making unit from consolidated accounts.
  • Neutral Sentiment: Battery materials operations widened Q2 losses due to ramp-up costs and falling lithium prices, but management expects deficits to stabilize and signed a $620 billion LOI for an Argentina lithium project.
  • Positive Sentiment: Non-core asset restructuring is on track to generate KRW1 trillion of additional cash flow in H2, supplementing the KRW350 billion secured in H1.
AI Generated. May Contain Errors.
Earnings Conference Call
POSCO Q2 2025
00:00 / 00:00

Transcript Sections

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Moderator

Hello, everyone. We'd like to begin the Holdings earnings call presentation. Thank you all for coming. Today, we will have a presentation from PASCO Holdings first and then we will have a Q and A session with all those in attendance. So let us now begin the earnings call for twenty twenty five second quarter.

Moderator

Hello everyone. I head up Finance and IR at POS Holdings. My name is Kim Seung Jun. As you have already seen, I would first begin I'd like to first begin by thanking all of you for taking time out of your busy schedule to attend this earnings conference call. As you know, the past second quarter was marked by the intensifying global tariff war that began early this year.

Moderator

It was a time that saw incremental uncertainties more so than ever before. Regardless of the hardship and challenges, Paco Holdings did its best to generate sustained growth. As a result, our consolidated revenue hit KRW17.6 trillion, operating profit was KRW610 billion. By key business area, we observed noticeable improvement in steel. In both local and overseas steel businesses quarter on quarter sales volume grew to a push up revenues with lower prices of iron ore and coking coal mill margin improved helping to grow our OP.

Moderator

Most notable is POSCO's second quarter OP margin rate of 5.7%. Taking the 2024 as the low point, we've been recording growth for two consecutive quarters. Moderate improvements in the domestic market is cited as the reason for mill margin growth, but I believe there's more. We have added efficiency to our facilities to improve cost structure. Also energy and raw materials ratios have been cut.

Moderator

We've introduced AI. So this is the outcome of multiple efforts that have come together. And still despite the equivocations in the global tariff policies, I dare to be cautiously optimistic that we will sustain these profit levels into the third quarter. Improving efficiency is a project that is ongoing offshore as well. We've designated POSCO Changjiegang Stainless Steel or PCSS a stainless steel production subsidiary in China.

Moderator

Detailed negotiations are underway for the sale as we speak. Established in 1997 PZSS has consistently performed. However, to oversupply from Chinese competition and local Chinese government policies to limit stainless steel production volume, we have been registering sizable deficits since 2022. Once the negotiations and legal procedures are completed the PCSS subsidiary which continues to remain in RegLink will be removed from our consolidated account. Rechargeable battery materials operating companies completed two new plants at the end of last year.

Moderator

They are both in ramp up stages. Due to initial operation cost increases and falling lithium prices, the size of the deficit in the second quarter will grow. However, we don't believe the current losses will increase any further. We're on track to take steady steps toward customer certification, commercial production and product sales. So again we're on track.

Moderator

Additionally, in this market this is an opportune time for lithium business. Yesterday at Tosco Argentina, there was an LOI signed with a Canadian company for joint investment and the size is $620,000,000,000 So we will be taking mining rights in a mine that's supposed to our Argentina mine and because of this close proximity should this be successful from an operational perspective, I think we will be able to generate a lot of synergy and there's a lot of upward market incentives that we'll be able to take advantage of. So from now on, I'd like to ask our IR office leader to report the details of our earnings report.

Moderator

I'd like to now go over the earnings for Q2. So the consolidated revenue for KRW17.556 trillion and the OP margin was KRW0.607 trillion. And so after bottoming out, we have been gaining two consecutive quarters of growth. The EBITDA was KRW 1,600,000,000,000.0 and the first half cumulative CapEx recorded KRW 3,100,000,000,000.0. And net debt due to investment and working capital management and cash injection from portfolio management decreased a little bit Q o Q.

Moderator

By segment, steel operating margin recorded 35.6 of increase to RMB610 billion and was just mentioned, the OP margin for POSCO rose from 3.9% to 5.7% and overseas steel also improved. In the Retinal Battery Materials, the lithium battery price fall and the last year's ramp up of the two lithium factories that were newly built last year led to a larger deficit. In the infrastructure, POSCO International showed robust performance, but nonetheless, the POSCO E and C's overseas project incurred additional cost and so there was bit of a marginal decrease. Page five. POSCO has been implementing restructuring of the non core assets and non performing projects and so we will be able to generate KRW1 trillion worth of cash flow.

Moderator

And so in the first half, KRW350 billion of cash was attained and in the second half, we're going to generate additional KRW1 trillion. So let's look into each of the subsidiaries. First of all, POSCO. POSCO's OP margin ratio recovered 5.7%. And so it's and then if you look at the selling price for the quarter, about KRW10000 per ton fell, but then if you look at the reasons, first of all, the domestic price recovered a little bit, but due to the stronger one, the export price fell, which led to the overall selling price downfall.

Moderator

But the raw materials cost also fell, so the mill margin eventually improved and the LNG unit price also fell and so the fuel cost decreased. And so the POSCO's cost cutting efforts are paying off. Overseas steel also increased Q o Q. If you look at Indonesia's PETKP and Vietnam's PY Vina, the sales channels have been diversified and the local purchasing has also increased leading to the cost control measures. However, the PZSS also operated profit loss of KRW33 billion and so the deficit Q o Q has also increased.

Moderator

Next page, POSCO's structural cost innovation projects are continuously ongoing as you know very well. After promoting proactive restructuring, for example, closing down of low efficiency facilities like steel making Line 1 and wire rod Line one, POSCO is seeking optimal material balance to improve efficiency by developing cost cutting technology to decrease the process load. And so we are also collaborating with our suppliers and discovering new low grade materials and minerals to enhance its use ratio to cut cost. Also Pohang and Gwangyang steel factories are adopting AI and robotics and thereby succeeding in accelerating the transition to intelligent factory. And so we've succeeded in fully automating the molten steel pretreatment process.

Moderator

We have been cutting process time and raising yield and also we have applied technology enabling the auto control of optimal target speed. And so we have been able to minimize production delay and achieve increased production of more than 10 tonnes per tonne. And so all of these efforts are leading to overall competitiveness and the profitability going forward and so POSCO remain committed to these initiatives. Next page is about R and D. So we have been developing high value added steel products.

Moderator

As you know, POSCO has been very committed to these initiatives. And in 2013, the high manganese steel for cryonic use was first developed and it went through registration to various organizations. And last year was applied in the Gwangyang LNG Terminal and in April, we exported the technology for the first time and so we are gaining our leadership in the market. Although small, this kind of high value added products going forward are going to grow further. And so we will be meeting the needs of the market and the customers and promote purpose led new product development and diversify our product portfolio.

Moderator

Now on to the HiRX technology. So this is a long term strategy that we are promoting. January, it was designated as a national strategic technology as we had already mentioned and we opened a HiRX development center inside our factory. In June, the POSCO passed the MOTIES pre feasibility study for the Hyrax demonstration project. And so we have been successfully able to lay the ground for commercialization technology development.

Moderator

And so this demonstration project is going to cost around KRW814.6 billion during the duration of the project from 2026 and 2030 and the government is funding KRW308.8 billion. And so with that, we'll be able to have the commercialization and technology face by face. So let's now go on to the RBM.

Moderator

Next is FostcoFuture M, because volume of high nickel can sales dipped against the previous quarter plant utilization rate has fallen. At the same time the Kwonya precursor plant began operation in second quarter incurring initial ramp up costs adversely impacting our profits. In Anode Active Materials or AAM, while volume of natural graphite AAM sales increased against the previous quarter, artificial graphite AAM has recorded inventory impairment loss. Page 10 Page 12, In business activities in the RBM business rechargeable battery materials. First of all from 2016, we have been developing DLE technology and we wish to embark on a demonstration project.

Moderator

As you're aware DLE processing is an important technology to extract and process lithium. So we've already gone through a pilot project where we tested our technology. So in the state of Utah this time we plan to build a demo plant on the site owned by Anson Resources that owns the mining rights to a brine lithium mine. And with whom we have signed an MOU here we will test the possibility of commercializing our DLE technology. Secondly, a 45,000 ton capacity precursor plant completed in June by POSCO Future M.

Moderator

We're internally building out an intermediary plant here. So from raw materials to semi products and all the way to cathode active materials we'll be able to internally build out this process. And three of our RBM business entities raised the paid in capital. So in KRW1.1 trillion for POSCO Future M, PPL is KRW400 billion and KRW328 billion by the parent company of POSCO HY Clean Metals. And in July, we also entered into a major agreement with a key Japanese battery maker for AAM Materials.

Moderator

Next is POSCO International with increased cost recovery ratio at the Myanmar gas field and because we also have to consider seasonal factors that we need to be able to look at the last the same period last year. So there was about a 20% decline and there's strong profits in the materials business, but in power generation because of the lower unit prices we have suffered some losses here. Page 14, TOSCO E and C. The Malaysia power plant and Poland's incinerator these projects comprise some of our overseas projects that have incurred additional costs turning the books into red ink. The government complex development project in Sucho District and the LNG terminal project in Thailand are new projects that we have won that brings our order amount in the first half of the year to KRW10.2 trillion.

Moderator

So this concludes our brief earnings report for POSCO Holdings. And now I'd like to move into the Q and A. Thank you for your attention. We will begin the Q and A session. The first question will be from Hyundai Motors Securities, Park Kyung Ho.

Moderator

Hello, my name is Park Kyung Ho. So thank you for giving me an opportunity to ask question. So I have about three questions. The first question is regarding the steel market. So in the second half, you're going to have less production in China and also there's going to be less export.

Moderator

And there is the anti dumping tariffs being imposed in cold rolled steel. So I think that's going to impact our company. So how does POSCO view the second half market and the strip building and automotive industry? So how are your price negotiations going about with these different industries players? In the overseas, you have the Indian investments in the joint venture and you did mention that you're going to complete the investment by 02/1931.

Moderator

Can you give us an update on the current status? And there's the after the Liberty Steel Weiler acquisition, are you also interested in the Australian business as well? And do you have like a percentage target that you have in mind? Recently the lithium price was from about KRW5000 KRW8000 went up to about KRW10000. And we believe that there is also going to be of a rebound from the price of lithium hydroxide. So how do you see this market developing?

Moderator

Thank you very much for your question. So regarding your first question, I think the Head of the Marketing Office can answer and the second can be responded by the relevant department head and the third by the Energy Head. So first of all, regarding the China's decrease in production, well, it's been in the news for quite a while, but it has not really seen fruition as yet. But in July, we have seen some news reports that in the second half there is going to be some decrease in production in China. And so the Chinese domestic production and domestic demand has increased.

Moderator

And so that's going to reach us in about two months. And we believe that that's going to have a positive impact on POSCO profit in the second half. And so we believe them to be a positive impact.

Moderator

So for the hot rolled sheets that we will go from deficit to a profit and this is an opportunity for us. Since the preliminary rulings were provided, we are looking for final rulings by the end So for this to be accounted for in our books, will take until the end of the year. In automotive and shipbuilding user industry negotiations, you asked a question about that. So in both businesses or industries compared to other industries, they are at an advantage.

Moderator

We were quite concerned about the tariff negotiations, but that negotiation has gone very well as well. So I'm optimistic in the automotive business because of the raw materials cost fluctuations that we do need to enter into negotiations. But there are fluctuations, it's going up and down. So I believe the second half will not be too different from the first half in terms of what we negotiate. In shipbuilding, the impact of AD tariffs have to be considered.

Moderator

So with that consideration, we believe the price needs to be adjusted slightly upward. That's our position. And because the raw materials prices have dropped they are asking that we keep the prices where they are. The change will not be huge.

Moderator

So I'd like to now go on to the second question regarding the investment. So first of all, the Indian JV. So first of all, there is working level discussions taking place currently and we have been looking to the site and the size of the JV. And so we are in the process of fine tuning out the details. So we did target for 2031 and that's still valid.

Moderator

But when it comes to the environmental feasibility study and also the site, there may be some variables going forward. But for now, everything is going as planned. And then regarding the rubber to steel, Waiala steelmaker being acquired by POSCO. Well, regarding this possibility of the Wayala has various different opportunities that we are looking into and so we are internally reviewing the possibility. The steel mill itself is about 1,200,000 tons.

Moderator

And so there might be not that much of a synergy that's possible, but they are mining opportunities, which we find quite positive. It has its own mine and also there is lots of renewable energy possibilities. So in the mid to long term, so low carbon sources like DRI and HBI could be impacted positively. And so we are looking quite positively into the visibility of this kind of acquisition. And you also asked for the midterm production.

Moderator

So about 5,100,000 ton is the target, but 2031 is the completion date for the Indian JV. So Indian so India will be about RMB5 million and Indonesia over the PPDKP will be finalized by that time. And in The U. S, we have the electric furnace. And so if you look at the overall production plan, it would be something like about 10,000,000 tons.

Moderator

So as of 02/1935, it will be around 15,700,000 tons and then there will be a bit of a decrease if we take into account the equity shares. So now the third question. So you asked well, you asked about the question about the lithium, the EV market is growing especially in China and the LFP lead growth is quite noticeable. And the LC is rebounding first, we believe. And also the Chinese government is imposing quite strong sanctions and it's cost the entire value chain.

Moderator

You see the not just the refinery, but also the other parts are also rebounding as well. So we believe that the price is not going to fall below $8 And so usually the Chinese LC will rebound first and then the LH will follow. And so we believe the LH will eventually rebound as well. And so maybe I don't think it's going to go below the $8 mark, but this year we believe that it's going to be the latter part of the $9 mark. Recently with a low price, eight entities announced their lithium prices.

Moderator

So basically if you look at their opinion in 2026, believe that maybe it will be more than $10 And so I don't believe that the rebound is going to be abrupt, but there is going to be a phase and increase in the lithium prices.

Moderator

Next question please. The next question will come from I'm Securities, Mr. Kim Yoon Sung. Please ask your question. Hello, my name is Kim Yoon Sung from I'm Securities.

Moderator

I will ask three questions as well. First of all, our main export destination U. S. And European market projections and sales projections. In The United States because we have 15% tariffs but 50% on steel since then we've been losing a lot of volume and demand.

Moderator

But there is a growing market in The United States. So what are your plans about how to take advantage of the market situation? And in that same vein? About 27,000,000 tons of steel will be replaced and this is going to play against the European market. So what do you think about the European and The U.

Moderator

S. Markets and how they will impact each other? So with these sales strategies in the two regions, In the first half sales volume remained in the early €8,000,000 range. But in the second half we're hoping for a little bit of a recovery. So how do you see those numbers developing in the second half is the other part of that question.

Moderator

And HR anti dumping tariffs and preliminary rulings, I wonder if this is going to impact your policies going forward. And where are your destinations? I'm sure that there are certain industries that you're serving in The U. S. Market for example.

Moderator

But because these using industries are going to suffer a little bit, what are your price policies going to be? That's it. Marketing Strategy Office Chief. This is a very comprehensive series of questions. First, the 50% steel tariff from The United States, will that remain?

Moderator

I think that was the first part of your question. Many believe that this is going to be hard to sustain. But the Trump administration has expressed a strong commitment. So perhaps this year and until the first part of next year, yes, 50% will hold. That's what we're expecting.

Moderator

And U. S. Bound revenue, it's only about 2% of our total volume. So it remains within the 2% of our volume even if we continue to sell to The United States, we will and even paying tariffs, we will be able to make a small profit. But will we have to now consider other regions?

Moderator

I think that volume is going to be very minimal maybe 10,000 to 20,000 tons. And so should the tariffs fall we'll maybe be able to sell a little bit more but the impact is not likely to be huge. But there are customers, local customers who take steel from us to sell to The United States and they are going to be impacted. The most representative among them being the automotive industry, but they've had a pretty favorable tariff imposed. So I think that's a win situation.

Moderator

There are also other secondary steel product manufacturers that are also going to suffer. So once the price increases, yes exports will become difficult. But when other products have difficulty entering our market, we'll be able to take advantage of the local market to raise our prices here too. So rather than partitioning demand through distribution for those who have higher demand, I think we need to be able to come up with a price strategy that is going to be sustainable and competitive. So we don't have a complete plan on that yet.

Moderator

But as the AD rulings continue to finalize, once they become finalized, I think we'll be able to give you a more definitive policy. What we can tell you at the moment is we need to be able to come up with a price policy that keeps our using industries competitive. In the EU market, it's a similar situation. So those that will not be able to go to The U. S.

Moderator

Market, yes, think they will flow into the European market, but the quota will be pretty rigid. So that is why I don't think the volume increase is going to be huge into But of course we have limits to how much we can export to The U. S. And because of these factors price will be suppressed.

Moderator

But we'll be able to keep our prices pretty competitive in other regions such as in Southeast Asia. About 2,000,000 to 2,500,000 tons is subject to is the volume we're selling to other regions. And when CBAM goes into full force, we will be operating our EAF. So I believe we will be able to keep our current levels of production and sales maybe even increase it by a little bit. I hope that answered your question. We'll take the next question now.

Moderator

The next question will be posed by Lee Eun Young from DBS Securities. Please go ahead with your question. So thank you very much for giving me the opportunity. So I would like to ask a question about the PZSS sell off. So first of all, so I heard in the news that you'll be selling it to a Chinese company.

Moderator

So what are some of the conditionalities and also the price of the sale? And also as a result, is there going to be some kind of an operating margin that's going to be recorded as a result of the sell off of this PZSS? And if so, what's going to be the amount that's going to impact the operating profit margin? The second question is, what products are recording a deficit? And so I think that despite the market circumstances, I think the POSCO is doing relatively well.

Moderator

But what are the steel products that are not doing so well and recording a loss? The third question is, there are some news regarding increase of the capacity in Korea. So what are your plans? So the second EAS in Gwangya, so when going to be commercialized? What are the future plans?

Moderator

And what's going to be the period for the ramp up? And also you have the Kwang Yang EAF in 2026. I know that the number eight and CGL is going to be promoted also in Kwang Yang. So can you also give us an update on those projects? Thank you very much.

Moderator

So first of all, let me talk a bit about the PZSS cell. So first of all, currently there some progress and we are now in the process of making the discussion of the final issues regarding the equipping company. So I won't be able to give you the details about the actual numbers. Please look forward to your understanding on that. And the second question was about the divestments that we are making due to the deficit.

Moderator

So there were some dividends coming from the PZSS and there's also some of the cash flow in from the divestment. And so I think we'll be able to cover the loss that's going to be incurred. So I think that's about what I can say at this point in time. And so the PZSS goes smoothly then in the first half, you'll see the final results from the sell off. But we do have that the government approval and we will do have to register the consolidation.

Moderator

So it's going to take a few months like six months for that to actually be finalized. So of course depending on how that plays out, the timeframe can actually be shortened. So regarding the question about the PZSS, yes, we are negotiating with the JV partner and also the negotiating partner. So when things are finalized, I think we'll be able to provide the details to you at that point. I'm from the Head of Marketing Strategy.

Moderator

So what your products are at a deficit was your question. So in the second quarter, I would say nearly none. During the first half, we had the we had some of the products that were losing out. So we had shut down some of the facilities and so a lot of the deficits turned around to the black. And so there are hardly any products, especially in the steel plates that are recording a deficit.

Moderator

So for now there are hardly any steel products that are recording a deficit. Hello, I'm going to be talking about the EAF at Quangyang. And so everything is going as planned. It's about 41% currently and so we will be starting operation in 2026. So we'll be able to meet the demand and create new demand by that time.

Moderator

Electrical sheets plants those have been completed. So we are ramping up. And the Kwangyang number eight CGL plant, we are still surveying this but have made no concrete decisions. So there are various scenarios that we are investigating. We will look at the aging situation.

Moderator

So we have delayed our decisions at this point. We'll take the next question. We're ready for the next question. From

Moderator

Yujin Securities. Yujin. Hello everyone. So lithium certification progress, I'd like to know how that's going on with each customer and the battery volume. If you could share any of the confirmed volumes by each company.

Moderator

And secondly, E and C has had some safety incidents. So how will these damages when will these damages be accounted for? Will that be in the third quarter? And what would be the size of that impact? I'd like to answer the first question.

Moderator

So PPLS in Huangyang has completed certification by three customers and sale has begun. That's plant one. Second plant is going into certification and the first stage of that certification is almost complete. In Argentina, one plant is in ramp up and the other is under construction. The one that's in ramp up stage, we have not gone to full plant operation yet.

Moderator

So once we have significant volume that we can produce that's when we will go into certification stage. So at the Argentina plant we are not at commercial grade. In Hwangyang for three customers we are on a smooth sale with customer certifications by three companies. I'd like to answer that second question. I'm in charge of finance.

Moderator

I believe you are referring to the E and C safety incident that happened at the Shinansan line that happened on April 11. And we are the lead contractor on this construction project that's happened in Construction Zone 2. And this has caused an extension of time on the construction schedule because there is a safety investigative commission that is conducting the investigation. So we will not know the full impact of this incident until all of that investigation is completed. Once they have the investigative report, we'll be able to assess better what that impact is.

Moderator

But as you mentioned, yes, the investigative report will probably complete in the third quarter and that will probably not impact the third quarter. I believe it will impact our fourth quarter. First, we really want to focus on the recovery and restoration as well as to process the complaints and so we will have to wait and see exactly how much the damage is and how much can be covered by our insurance. Thank you.

Moderator

Next question please. Next is from Antu Securities and Chairman Sun. So I'm participating after a long period. So there are many concerns by the investors, but it seems that the steel industry is rebounding. So I'd like to congratulate you on that regard.

Moderator

So right now, there are some projections regarding the cut down in the production in the market. And the Chinese government has set a plan, it's going to be the first year of its implementation. And so and there are some expectations that China is not going to actually decrease the production, but actually to downsize the amount of steel mills it has in the market. So what do you think? And I think maybe my question is going forward a little bit too fast, but POSCO if it's going to earn a profit from lithium also would depend on how much cash cost you to have and how much is going to go down.

Moderator

So what's the kind of price level you have in mind for the POSCO Argentina to be become profitable for you to be able to say that POSCO Argentina is going to be more competitive. So what's that kind of adequate price level that you have in mind? So I'm Head of the Marketing Strategy. So first of all, with your first question. So is it going to be the cut in production?

Moderator

So there's been various news reports since last year. And as I had mentioned before, whether it be restructuring, whether it be cut in production, there are lots of projections and positive expectations. For example, President Xi had overtly talked about the overcapacity in the market and the Chinese Steel Association had actually made a proposal to the government regarding the cutting down of the production. So in whatever way we believe that the production capacity is going to decrease in China. So there are high hopes for that kind of initiative in China.

Moderator

But in China, there are more and more private steel makers. And so before if the government says something, things are going to happen, but that's not really the case anymore. And so there are higher hopes for the downsizing of the production, but when it's going to be and how it's going to play out is not yet known. And so we just have we just continue to monitor the market. Let me now answer the question about the Argentina.

Moderator

Since October Argentina, Postgre Argentina has been ramping up and the sellers are different, Korean sellers are different and even within Argentina, the Muerto Muerto and the other sellers are different as well. And so ramping up usually takes about a whole year according to our estimates. So we believe that we're going to be able to complete the ramp up. And so by September and October, I think the ramping up process will be finalized and by the time we'll be able to come up with exact cash cost. But for now the things are rather uncertain.

Moderator

So I won't be able to give you a definitive number. But if it goes beyond nine dollars then it's going to be more beneficial to produce more.

Moderator

Thank We'll take the next question. Thank you. We'll take the next question. Next question is from NH Investment Securities, Mr. Li.

Moderator

Please ask your question. Hello, I'm from NH Securities. My question will be simple. It's about steel. The volume bound for Canada and Mexico, I wonder if you can share that volume.

Moderator

Secondly, PPLS, The utilization rate comes out to about 40% based on second quarter numbers. And you mentioned that the first plant is fully ramped up. Once the second plant is online this utilization rate will go up. So what do you predict will be the timeline for when both plants will be up and running? If this goes on schedule, are you going to be able to climb out of your deficit?

Moderator

So the second question is pertaining to which plant are you talking about PPLS? Yes, that is regarding PPLS. I'd like to address PPLS. So plant one has been certified. The second plant is scheduled to complete certification by October after it's fully ramped up.

Moderator

But looking at the current prices, full operation of the plant is only going to generate losses. So unless we're able to win more orders, we have no intention to keep the plant at full operation rates. So we will be more flexible in how much of the plant we operate. Marketing Strategy Chief, I can't tell you exact numbers by country and these numbers vary year to year. But we do sell about 2,000,000 tons to North America each year excepting U.

Moderator

S. And Canada that number is very small to Mexico because we have our own subsidiary there and for processing centers that supply to the automotive companies we do sell about 1,000,000 tons to Mexico.

Moderator

Next question please. Next question will be made by KB Securities, Choi Yong Han. Please go ahead with your question. Hello, I'm from KB Securities. Thank you for giving me this opportunity.

Moderator

I have two questions. The first question is regarding the CapEx investment plan. So is your early year plan unchanged? You have talked about the Argentine plants going through the M and A. And so I'm asking because your CapEx investment is projected to grow from our perspective.

Moderator

And so the is there a possibility that the CF FCS may record a loss? And if the current price is sustained in the upstream, is there a possibility of you increasing your capital? So regarding the CapEx investment plan, in the early part of the year, we plan for KRW 8,800,000,000,000.0. And for now, the plan has not changed. For the Argentina M and A and the investment into Hyundai Steel, yes, they are reflected in our plan already.

Moderator

And for now, we don't see this we don't think there's going to be a big change from the plan that we had made in the early year. And the possibility of the MCF deficit, the EBITDA is not going to cover that. So I'm not sure how I should explain this. I should answer the second question. So recently the POSCO feature and PPLS then and paid in capital raise was about KRW 6,000,000,000,000. So by raising this capital, we wanted to make sure that this was the last one. We didn't want to have to go through another paid in capital raising event. As long as the distribution cost and price holds for the next two years additional paid in capital will not be happening. And what was excluded from the recent capital raising event was POSCO Argentina.

Moderator

If Argentina needs funding because Argentina has some borrowing capacity, we will be able to take some loans locally. But because we discussed some potential acquisition of Salt Lake, Once that happens, also Argentina will be the entity acquiring those additional assets. So because they were not part of this part of the capital raising event, they could potentially do so in the future.

Moderator

So regarding the first question, I would just like to say, there well was a question about the possibility of a deficit of this year's FCF. So are you talking about the EBITDA deficit? And if that's the case, the investment is a little bit over the EBITDA, but we are making divestments and so we'll be able to cover the gap. And so we won't be able able to say well, you can't really say that we'll be able to be we'll be increasing the borrowing because of the enlargement gap.

Moderator

Next question is from QM Securities. Mr. Li, please ask your question. Hello everyone, I'm from QM Securities. I have one question.

Moderator

So NFC acquired USS, it took about a year and a half and the cost price tag was about 20,000,000,000,000 won. What is your assessment of this acquisition? Since the acquisition from a long term perspective, how do you assess the impact it may have on POSCO? What are your projections? I know this is a very broad question, but what are your assessments?

Moderator

Steel business management leader here whether it's the Japanese steel company or Costco, we have similar global investment strategies, High growth market or high profit market among advanced countries, U. S. Is the only high growth market. And The United States is trying to bring back the renaissance of manufacturing into the country. So there's a lot that is going to go on in The United States.

Moderator

So the decision of Japan to move into The U. S. Market because there were limitations on how much they would grow locally with local companies. I believe the infusion that Japan brings into this deal is going to help. But the conditions of the deal that includes the Golden Stock and other terms because so much cost has gone into this arrangement, I think we need to wait and see exactly how much profit they'll be able to generate.

Moderator

Because The U. S. Is a high growth market, POSCO has been looking into The U. S. Market for a very long time and from a long term perspective because they will be adding more demand in premium products.

Moderator

Given that our strength is in automotive steel sheets, We are looking into setting up a production plant locally in The United States as well. So as mentioned earlier in India or Indonesia which we see as high growth markets, we will continue to look into additional investments. And I'm sure we're not alone. Other steelmakers are also looking to opportunities in these high growth markets as well.

Moderator

So anybody with further questions, please go ahead. Next question will be made by Yoohun Ta Securities, Yi Hyun Soo. Please go ahead with your question. Hello. My name is Yi Hyun Soo from Yuan Tu Securities.

Moderator

I have about two questions. First of all, regarding steel. So I think the question was made before me, but didn't quite get the answer. So in first quarter and in the second quarter as well, it seems that the sale was about 8,100,000 tons, which was a little bit less than my own projections. But I think the sales volume had gone down somewhat compared to the past.

Moderator

So in the first half, it was RMB8.1 million. So do you think in the second half, you'll see a higher volume? And connected to that question, if I remember correctly, in November, there was a fire in the PYNAX Number 3 that was caught on fire. And so, the news reports have said that it's going to start running from about September, October. So I'm not sure the production capacity before the fire, but I knew that it was something like yearly RMB200 million, which is RMB2 million, excuse me.

Moderator

And so then in the second half, are we going to see a higher volume compared to the first half? The second question is regarding the RBM. We had a valuation day.

Moderator

So usually in July you have value day, but that time has come and passed. And there were some forward guidances that you provided last year. And so there were some numbers attached to revenue as well as EBITDA but those numbers have changed significantly. So I don't know if you'll be able to meet these numbers. So in the second quarter the deficits have increased but you did say that you expect this to go down.

Moderator

So I like those projections but once you start looking at all of these numbers and conditions in the second half, looking at the second half and maybe from an annualized perspective, when do you see this turning a profit?

Moderator

From the marketing strategy, so first of all regarding the our sales volume, you asked about whether in the second half the volume is going to be more than 8,100,000.0. So in the past, we had ramped up our volume, But we have divested from certain production lines and so we won't be able to reach our past maximum, but we do believe that our numbers for the second half is going to be higher than our first half. And in November, yes, there was a fire and the finance number three has stopped operation and now the repairs have been done and so that's going to be finalized about September. And the capacity is not going to reach 2,000,000, it's going to be a little less than that number, but the production is definitely going to increase. And in the second half, especially in Q4, the Finex number three will start producing and then we'll be able to see those numbers being accounted for.

Moderator

Additionally, you have the Finex number three in operation and then you're going to also have the runoff gas and then that's going to also lead to more efficiency in cost cutting in the energy sector as well. I'll talk about let me talk about the RBM. You had the Value Day last July and yes, we did say that the nickel revenue would be about KRW2.2 trillion and EBITDA KRW0.5 trillion. And so I think it's going to be about a 5% of a decrease. The production volume is going to decrease.

Moderator

We're going to maintain the 39,000, but when it comes to nickel, it's going to be about 45,000 and 25,000 is going to was canceled in Guangyang in Pohang, sorry. And so there was bit of that decrease. And the case of nickel next year is going to be in the black. But in the case of lithium, the EBITDA margin is going to be there, but the OP depends on the nickel prices as you know well. So depending on the lithium price, the EBITDA is going to fluctuate.

Moderator

Do you have any more questions? If no more questions, I would like to conclude the earnings call. To all the investors who participated today, I thank you. I'd like to officially close the earnings call for 2025. Thank

Analysts
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