POSCO Holdings, Inc. Q3 FY2026 earnings call

• Triple Core Strategy Progress:
  • Industrial Resources: Broke ground on CGL No. 8 plant (450,000 tons/year automotive hot-dip galvanized steel sheet).
  • Strategic Resources: Transitioned part of POSCO Future M’s NMC facility to LFP production; aiming for 50k tons of LFP cathodes by year-end for long-term supply agreements.
  • Energy Resources: Acquired 100% shares in Shell gas assets in Marcellus Basin, Pennsylvania.
• Financial Health:
  • OP increased for three consecutive quarters (Q1: 707B, Q2: 819B, Q3: 945B).
  • Net debt declined by 4.3 trillion won QoQ; equity ratio fell to 18.4%.
  • Raised 2.5 trillion won from partial stake sales in POSCO International and POSCO DX, plus ~700 billion won from Woori Financial Group sale.
• Operational Updates:
  • Steel: Offset raw material cost increases (up 4.4% QoQ) by raising carbon steel prices by ~20,000 won/ton. Logistics costs normalized post-geopolitical spikes.
  • Lithium: Argentina Plant 2 completed; ramp-up ongoing. Pocara Lithium Solution faces deficits due to high hard-rock feedstock costs vs. low selling prices.

Revenue reached 19.1 trillion won, with Operating Profit (OP) at 945 billion won (margin 4.9%).

• Steel Business: OP improved to approximately 455 billion won, driven by higher selling prices and cost-cutting efforts. Domestic sales share rose to 55.6%.
• Rechargeable Battery Materials: Recorded an operating loss due to falling lithium prices, inventory valuation losses of 29 billion won, and operational disruptions in Argentina and Pocara Lithium Solution.
• Infrastructure: POSCO International saw a 24% year-on-year OP growth supported by Senex Energy and Indonesian Palm Operations. POSCO EMC maintained solid earnings. However, the RBM segment swung to a slight operating loss of 17 billion won.

• Steel Production: Crude steel output and sales volume expected to decline temporarily in Q4 2026 through Q1 2027 due to scheduled blast furnace maintenance (Gwangyang BF No. 2 relining). Full normalization expected after Q1 2027.
• Lithium Revenue Targets:
  • Argentina Plant 2: Targeting 14,000 tons production next year (after 5,500 tons in Q4 2026). Expected to generate operating profit from Q3 next year.
  • Pocara Lithium Solution: Intends to generate profit sometime next year as mill margin spreads are expected to widen to $6/ton.
• Pricing: Will continue to adjust selling prices based on market conditions, client circumstances, and supply volumes to ensure stable profitability.

• Geopolitical and Supply Chain Volatility: Middle East tensions and U.S. Treasury yields >5% impact energy costs and financial markets.
• Raw Material Costs: Rising cooking coal prices due to mine safety inspections in China and Mongolian supply disruptions; high hard-rock lithium costs not yet reflected in selling prices.
• Lithium Market Volatility: Prices dropped below $13,000/ton; mismatch between feedstock costs and selling prices causing losses in lithium subsidiaries.
• Regulatory Risks: Potential U.S. tariffs or additional regulations on Korean steel imports; strict U.S. export controls on black mass affecting raw material costs for HY Clean Metals.
• Carbon Compliance: Free emissions allocation ending in 2027 will introduce carbon trading costs; need to manage CBAM certification expenses starting 2027.

Q: Hyundai Motors asked about steel price outlook, use of proceeds from divestments, and lithium price forecasts. / A: Steel demand may recover moderately in 2027 with strength in auto and shipbuilding; prices will be adjusted flexibly. Divestment proceeds (~1.5T won) will fund new growth businesses rather than immediate buybacks. Lithium prices have dropped excessively but institutions forecast recovery above $15,000/ton, though EV growth has lagged expectations.

Q: IM Securities asked if lithium concentrate margins will improve in Q4, if price drops are step-wise, and turnaround timing given US tariffs. / A: Spodumene prices dropped drastically, but mills margins are tight; target is $6/ton spread next year for EBITDA-level profits. Current prices may be near bottom; ESS growth in Americas is exponential. US tariff risks are being monitored closely with government collaboration; import regulations will likely persist.

Q: KB Securities asked about CBAM impacts, Cleveland Cliffs JV progress, and US-China lithium price disparities. / A: CBAM costs will be provisioned from 2027; Korea's lower baseline emissions reduce relative cost. No consensus reached with Cleveland Cliffs; US entry via Louisiana JV remains independent option. US premium for non-China lithium exists only at product level currently, but may emerge for lithium ingredients post-2027 as supply chains diversify.

Q: P&K Investment asked about carbon emission costs, EAF utilization, and India investment carbon impact. / A: Carbon trading costs will enter financials from 2027 as free allocations end; advanced tech and CCUS will mitigate costs. Gwangyang EAF utilization is ~10%; low-carbon market is immature. India JV with JSW aims for NDC 2050 using PV and CCUS technologies to offset consolidated emissions.

Q: Hana Investment Security asked for breakdown of Q3 cost savings and continuity into Q4. / A: Savings were primarily from energy and labor cuts, not logistics. Management expects continued reduction in energy and maintenance costs in Q4 to help cover processing costs, confirming the trend of operational efficiency improvements.