Steel Business: Awaiting China's Economic Stimulus or Production Cuts

The steel industry is currently in need of either a Chinese economic stimulus package or significant production cuts to stabilize prices. The HR price in China has dropped by 12% year-to-date to $510/ton due to weak domestic demand. In the first half of 2024, China's new construction starts decreased by 24% year-over-year, leading to a 22% increase in steel exports, which has further depressed regional steel prices. We anticipate a decline in China's steel exports in the second half of 2024, following the implementation of economic stimulus measures or aggressive production cuts.

Lithium Business: Dependent on Global BEV Sales Growth

The lithium business is closely tied to the growth of global battery electric vehicle (BEV) sales. The price of lithium carbonate in China has fallen by 12% since early 2024 to $12/kg. Global BEV sales reached 4.8 million by the end of June, an increase of 12% year-over-year, but this growth rate has significantly slowed compared to last year's 30% increase. POSCO Holdings' lithium facilities are expected to begin full-scale operations only from the first quarter of 2025.

Second Quarter 2024 Review: Profitability Rises Despite Declining Sales Volume

POSCO Holdings' operating profit (OP) for the second quarter of 2024 surged 29% quarter-over-quarter to W752 billion, surpassing consensus by 10%, primarily due to improved earnings at POSCO International. POSCO's OP expanded by 41.7% quarter-over-quarter (+W123.0 billion) to W418.0 billion. Despite a decline in sales volume due to maintenance and repair work, improving steel mill margins significantly boosted overall OP.