POSCO Sponsored ADR Aktie

Hello. I Head up the Finance and IR Division at POSCO Holdings. My name is Kim Seung-Jun.

First, I'd like to thank everyone participating in the 2026 first quarter earnings call. Thank you to the investors and analysts.

In the first quarter, the U.S.-Iran war disrupted the energy supply chain, which triggered greater fluctuations in the financial market that led to unstable exchange rates. So we witnessed aggravated challenges. Despite these headwinds, POSCO Holdings recorded consolidated revenue of KRW 17.9 trillion and KRW 710 billion in operating profits. Improvements are observed in both revenue and profit against the previous quarter.

Looking at each business sector. In rechargeable battery materials, lithium prices rose, helping lithium production subsidiaries to perform, significantly reducing losses. Particularly, in POSCO Argentina, plant operation has ramped up, while elevated lithium price continues to hold. As a result, in March, it recorded the first-ever monthly profit. We believe the strong performance will continue in the second quarter. And in the second quarter, we also anticipate POSCO Argentina's first ever quarterly profit.

In steel, despite volume growth in sales, rise in FX causes us to pay more for raw materials, squeezing profit. Nevertheless, improved performance in overseas subsidiaries helped register an overall rise in profit. Once geopolitical risk in the Middle East subsides and input costs pushed up by FX and oil price hike come down, taking into consideration time delay for cost impact accounting, we anticipate gradual profit gain starting in the second half.

In the infrastructure business, POSCO International saw its steel exports climb as well as demand recover in gas and energy sectors. Additionally, POSCO E&C has recovered its losses resulting from last year's accidents transitioning to black through sizable profit gains. What is notable this year is the strategic shift in our steel business that is coming to fruition. We finalized divestment of PZSS, the underperforming China subsidiary and to reduce the load of high-cost aging facilities to FINEX has been retired.

Beginning in June, with the goal to expand our low-carbon production system, the world's largest new 2.5 million ton capacity electrical furnace will go into operation. To validate POSCO's proprietary HyREX technology, a 300,000 ton capacity demo plant has broken ground. We've also acquired government permit for the Pohang HyREX plant site. These developments help us to set up the groundwork to build our sustainable business structure.

The integrated steelworks project in Odisha India is progressing. In October '24, we signed an MOU with JSW and an HOA in July '25. Most recently, a JV agreement has been signed. More detail regarding the recent agreement will be delivered in a few minutes by the Head of our Strategic Investment Division.

Finally, allow me to speak about the third interim shareholder return policy to go into effect this year. In our effort to offer a proactive shareholder return policy, we've been paying quarterly dividends since 2016. The first installment of our interim shareholder return policy was announced in 2020. This year, we delivered its third installment.

To enhance the ability of our shareholders to have better visibility into dividends, we wish to shift an earnings-based and performance-linked return policy. Based on net income attributable to controlling interest, we aim to deliver 35% to 40% shareholder return ratio. We will deliver a blended mix of cash dividends and share buyback and cancellations to boost shareholder value.

Looking forward, we'll continue to drive strategic investment for future growth and harmonize that with earnings and performance-linked shareholder returns. This is how POSCO Holdings will build a virtuous cycle that generates robust business growth that will feed into boosting shareholder value.

Now I would like to invite the Head of our Strategy and Investment division to discuss the JVA signing with JSW in India. Then Ms. Han Young-Ah, our IR Office Head, will offer more detail regarding our first quarter 2026 earnings.

Hello, everyone. I'm with the Strategic Investment division at POSCO. My name is Gwang-mu. On April 20, JSW and POSCO signed an agreement for a joint venture on an integrated steel mill. Let me deliver some more detail.

Looking at governance first, this is, first of all, a 50-50 joint venture. Each company will represent 3 directors on the Board, and the CEO will have a 5-year term, and each will alternate to appoint the CEO. POSCO's technology capability as well as JSW's operational capability and the cost competitiveness is what we are going on, on this joint venture project.

From a marketing perspective, JSW has a strong sales network and POSCO Maharashtra has a strong automotive steel sheet capacity. So we want to be able to mitigate some of the entry barriers and to be able to generate stable profits in a high-growth market.

For operational capability, this is not a market we enter alone. This is a joint venture. It is with the #1 steelmaker in India, JSW, and we'll be able to take advantage of their business capability. So local entry often triggers foreign risk, and we're able to eliminate that here.

Product capability, of course, POSCO has a lot of product prowess, and so we'll be taking advantage of that as well. And low-cost iron ore material use is one of our advantages.

Construction-wise, we will be completing this project by 2031.

Looking at the plant site and the infrastructure surrounding the site. First of all, the site is in the state of Odisha, which is an area that promises convenient supply of raw materials. Rail, shipping, power and water use offer some advantages as well. So there are some geographical advantages that we can accrue. The biggest advantage is because we've tried to do this before and had difficulties in procuring site as well as permits and licenses, this time around, because we've already acquired the site, a lot of the risk involved in this business has already been eliminated.

Business overview. This will be blast furnace-based 600 -- 6 million ton capacity for high premium steel products. High profit automotive steel products need customer certification. So first of all, we will be responding to construction steel demand in the beginning stages to be able to generate some profit before we move into automotive steel sheets. Initially, we will be taking some of the materials from Korea, exporting it to India to be processed there for final product. But this project is different because we want to be able to localize all sourcing. Previously, and facility-wise, this will be an integrated mill that is not too different from what we have here in Korea. But we've added a pellet plant. That is the big difference.

Investment overview. 30% of our own assets and 70% liability is what the funding is composed of. And so this is to ensure that we have the highest profitability. From a competitiveness perspective, CapEx competitiveness, first of all, we'll be able to cut costs on construction with cheap labor in India. And so there will be a lot more competitiveness that we can add to this investment project. And as mentioned earlier, we'll be able to use inexpensive iron ore available in India and of course, low-cost labor as well. And our high-tech capability will promise the production of premium steel products that will promise profitability. So cost-wise, profit-wise, from both perspectives, we can accrue advantages on this project. This is not a onetime investment project. I think we all know that India is a high-growth market. So we will be taking advantage of all growth opportunities in the market going forward. Thank you.

Questions regarding this project, please hold on to them until a little bit later. And next, we will talk about...

In Q1, consolidated revenue came in at KRW 7.9 trillion, up by around KRW 1 trillion Q-o-Q. OP was KRW 707 billion, improvement from the previous year. EBITDA of KRW 1.8 trillion, up KRW 721 billion Q-o-Q.

Now if you look at the steel business, profit increased by KRW 91 billion. At POSCO, higher FX rates, logistics costs and raw material prices have led to margins under pressure. That said, supported by the base effect from the Zhangjiagang operation, which had posted large loss in Q4 of last year and due to restructuring ahead of the sale as well as earnings recovery in India and Vietnam, the overall profit, including overseas steel, increased slightly.

In the rechargeable battery materials, losses narrowed significantly, recovering about KRW 150 billion Q-o-Q, and improvement was driven by higher operating rate at Argentina lithium plant. And at POSCO Pilbara Lithium Solution, the rebound in lithium prices and reversal of inventory valuation losses were also accounted for.

Now the profits in the infrastructure also increased by around KRW 415 billion Q-o-Q. POSCO International delivered solid profit growth and supported by favorable market conditions and POSCO E&C, which recorded large loss in previous quarter, also turned to profit posting KRW 53 billion in OP.

So in summary, profit levels, which had been weighed down in the previous quarter by several one-off factors, normalized overall. In particular, what is meaningful, structurally, is that from the recent rise in lithium prices and the start of full-scale commercial production at the Argentina operation, all of these factors combined have led this upside.

Now moving on to Page 6. Let me talk about advancing the structural transformation of steel business. POSCO is shifting business structure by reducing high-cost aging facilities, expanding its EAF-based low-carbon production system.

First of all, POSCO is moving forward with the closure of #2 FINEX at Pohang, which is about 1.5 million tons. So this is actually very crucial, which has been very much a plus for our operations, but it's a very old facility, and it is better for us to close it for its low operational efficiency. And we are currently planning to build a demo plant preparing to transition to a HyREX. And there was also approval from MOLED for the changes to the Pohang Industrial Complex plan. So POSCO is now able to utilize 1.35 million square meters of public water in Pohang steel works to create the site that can be used for a HyREX transition. And then there is Gwangyang EAF, which broke ground in January, February 2024 to begin operation in June with an annual capacity of 2.5 million tons and will be a key facility in POSCO's transition.

Now let me delve deeper into our lithium subsidiaries. First of all, POSCO Argentina is currently entering the commercial production phase of its Phase 1 plant. As of March, the operating rate had risen to around 70%. Now the utilization rate has gone up. And as for the January and February, there have been a depletion of the low-price contracts. And so with the signing, there was about KRW 50 billion of losses per quarter, but we were able to narrow that gap widely this time, and we'll be able to turn to profit in the near future. And in the third quarter and the fourth quarter, we expect to see earnings improved as well. And in the first quarter, there was a signing of a long-term supply agreement with SK On, about 25,000 tons. So the customer base is also expanding steadily, and we'll be able to secure more volumes.

Now with the increase in utilization rates, the costs are going down. But other than that, there is also a mid- to long-term efforts being made in order to reduce production cost. To give you an example, in April this year, when it comes to the downstream strategy or downstream contract, it was changed into a fixed format -- fixed form. And there is also additional PV efforts being made for the upstream contracts as well. So when it comes to the Phase 2 construction, it is progressing towards completion in October this year, and we are also securing additional brine resources, and there's also just commissioning that is underway. So we'll be able to bring in more profits for this plant. And as for this plant, it will create in a conventional way and also produce technical-grade lithium. So compared to Phase 1, it will be much easier for production. So we completed the Argentinian brine plant resources with the LIS 100%, and we believe that we'll be able to secure more additional brine resources in the future.

Now let me talk about POSCO Pilbara Lithium Solution. So there was about KRW 50 billion losses, but it was actually reduced to KRW 3 billion this time. So mostly, it was driven by increased sales and production, but it was also partially driven by the reversal of the inventory losses. And the biggest factor also was the higher lithium prices as well as the spodumene prices. So spodumene prices has gone up to 11% compared to lithium prices in terms of its percentage. And as for this Pilbara Lithium Solution, if the raw material costs go up, the spreads will squeeze and it could pose as a burden for the company in the short term. So going forward, it will be very much impacted by the spread that I talked about rather than lithium prices. So there are some uncertainties over there.

As for the Australia's Mineral Resources, once we complete the definitive agreement, there are merger control procedures that need to be done. So because of this merger control reviews, so we don't know when the exact timing of the joint venture establishment will be, but both companies are working towards establish a joint venture around the fourth quarter of this year. And since the time of investment, spodumene prices have risen sharply, so we expect this to significantly boost the new JV's ability to generate cash flow. And POSCO HY Clean Metal recorded its first ever quarterly profit since its commissioning. So as a non-Chinese recycling company, we can say that it has entered a phase of stable operations.

Now moving on to Page 8. From 2023 to 2025, we have implemented our second interim shareholder return policy. Over the past 3 years, we paid out KRW 2.3 trillion cash dividends and KRW 1.2 trillion in canceled treasury shares, all in all, KRW 3.5 trillion of shareholder return. Despite challenging business environment, we were -- we did our best to fulfill our promise to our shareholders. With regards to treasury stock cancellation, the policy that was announced in 2024, so it was -- it accumulated to KRW 1.2 trillion, and we completed about KRW 635.1 billion of cancellation that remained. So all in all, the future -- the treasury share cancellation plan was about KRW 1.8 trillion for the past 3 years, and we have completely succeeded it.

Now let me talk about the next 3 years. Now when it comes to our existing shareholder return policy, it was to make sure that the surplus cash flow can be used to pay out dividends as well. But as the strategic investments are rising on the rise, the dividend payout based on free cash flow in terms of growth could pose limitations. There were some voices about that. So we want to reinforce our high dividend market position and payout visibility. That is why we plan to shift toward a performance-linked shareholder return policy based on earnings. So we have set a target shareholder return ratio of 35% to 40% of adjusted net profit attributable to controlling interest. Now the -- when it comes to net profit, by using this adjusted net profit, excluding nonrecurring gains and losses as a baseline, we aim to -- for example, the restructuring and so forth will be excluded. So by doing so, we aim to secure both the payout visibility and stability. So we want to address the uncertainties of the dividend payout ratio payout policy based on free cash flow. So going forward, we will continue to maintain a balance between growth investments and shareholder returns by -- thereby enhancing our mid- to long-term corporate value.

Now let me brief you on the earnings by company in more detail. First, POSCO. POSCO's Q1 OP declined Q-o-Q to KRW 213 billion. Sales volume recovered from the previous quarter. Production and utilization rate normalized. Selling prices also remained broadly stable Q-o-Q. But due to higher raw material prices and because of their war in Iran, the FX rates and freight costs went up. So the cost burden for key raw materials increased. For example, when we source raw materials, because of the Iranian war, the logistics costs have gone up. So all of that is serving as a cost burden. So we will continue to make -- despite our efforts, this cost push pressure will remain as burden in the second quarter as well.

Now moving on to Page 11, overseas steel. Indonesia, India, Vietnam operations are showing improving results, and the Zhangjiagang operation has been divested.

And let's go to Page 12, POSCO Future M. POSCO Future M recorded both higher revenue and operating profit. So when it comes to cathode material, it continues to secure new customers and expand sales. As for anode, the impact of inventory adjustment is still going, but earnings improved due to base effect from the large loss recorded in the previous quarter.

Moving on to Page 13, POSCO International. POSCO International delivered solid results in both energy and trading businesses. In Energy, profit increased on higher power plant utilization rates and S&P rise. In trading as well, profits improved, thanks to higher sales of steel and materials as well as favorable market conditions. And the capacity expansion effect from Senex gas fields and the rise in the global commodity prices also had a positive impact for trading.

Now moving on to Page 14. POSCO E&C posted a sharp improvement in OP. Turning to profit. There were some one-off factors, but the projects are becoming normalized. And we want to also strengthen our cost control. So we will -- we expect to maintain such profitability level.

Now this concludes brief presentation on first quarter earnings of 2026. We will move on to the Q&A session. Thank you very much.

We'd like to begin the Q&A. [Operator Instructions] The first question is from Hyundai Motor Securities.

My name is Park Hyun-Wook. I have about 4 questions. The first is regarding the JV agreement in India. So you mentioned that this is part of your localization strategy. Once the JV goes into effect, in the past, you exported items to POSCO Maharashtra to be processed in India. What will happen to PMH after the JV agreement goes into effect?

Second question is about the steel market outlook. Hot-rolled products have been rising in price. What is the rationale behind that price hike? And how does this impact your business? From a distribution price perspective, hot-rolled price has increased, but relatively speaking, cold rolled has stayed stagnant. So what do you project for cold-rolled products going forward?

Third question regarding the Iran situation and the Strait of Hormuz. And because this is likely to become a prolonged event, in terms of your exports as well as your FX and other business decisions, how does this situation impact your business?

And the fourth question is regarding your lithium business. Lithium prices are rising. And I think it's very positive that performance has improved in the first quarter. But is this the result of rising lithium prices? Or is it a result of something else? And for each factor, what is the proportion you would apply as the influencing factors? POSCO Future M has turned a profit. So what do you project to be its operating profit this year? That is all of my questions.

My name is Kim Young-Joong, POSCO Marketing Strategy Office.

My name is Kim Gwang-mu, Strategy Investment division. I actually spoke to you about the JVA in India.

In terms of the export volume, we need to consider the volume going to POSCO Maharashtra and the other, the volume that goes from POSCO to India per se. So I think we have to separate this into 2 parts. Up until the JV goes into effect, I think the hot-rolled products will continue to export in the same volume that we've seen in the past. So once the JV goes into effect, because we will not be able to produce automotive steel sheets immediately, it will be something that we will gradually move on to. Initially, we'll be supplying non-automotive steel products. And I think our exports will not be impacted.

Second question, I would like to address the second question. Again, my name is [indiscernible], Marketing Strategy Office Head. So demand has been lackluster. And because of the price drops as well as hikes in oil price and other input prices, this has caused -- triggered a lot of pressure. But because demand is increasing, hot-rolled product prices have been increasing as well. So this price is likely to hold for some time. Even into the future, I believe because of the hot-rolled price, the cold-rolled product price will be impacted as well. And the antidumping cases that are being evaluated, this is going to impact future pricing as well. So there's still pressures on our cost. But given the situation in the Middle East as well as our own domestic market situation, we will continue to look at our price in consideration of these situations. We've had many factors that pushed the price in the past. But because our input cost is also increasing, our margin is being squeezed.

In the future, Southeast Asia and India will become new regions where we will have to identify different sources to -- for selling.

So Hormuz Strait closure as well as oil price hikes, this is something that POSCO is most impacted by. So I'd like to ask someone from POSCO to answer this question.

My is Ha [indiscernible], Finance Office Head. Because of the Iran war, I think the business that is most highly impacted among POSCO Group of companies is POSCO, first because of FX, the other because of oil price hikes and next price hikes in LNG. FX impact is probably self-explanatory because we spend more dollars than to buy dollars. That's where the impact is. And we do use a lot of oil. And so this causes a lot of pressure in our input costs.

LNG price is the same. Our response for the FX situation is we want to be able to bring in more dollars. So our settlement currency is being shifted, and we're seeing some impact there already.

For LNG, we are diversifying our supply routes to other countries such as Indonesia. And so we're seeing impact here as well.

And third, by increasing efficiency of energy use, we are identifying various ways to cut energy use costs. And so we are making efforts to offset some of these price hikes but it's very difficult to offset all cost increases. Therefore, we will have to pass some of this on to the final price of our products. But we are an infrastructure business. We have our social responsibility to keep our prices rationalized. And so we will be very prudent in pushing up prices.

In relation to this issue, we talked about oil FX and even LNG and energy prices. In terms of FX impact, of course, there is negative impact on POSCO, but we also have POSCO International, which is an exporting company. And at POSCO Future M, they are positively impacted by FX fluctuations. So I think the positive impact is able to cover about 50% of the losses experienced at POSCO.

My name is [indiscernible], Energy Materials Business Management Office. So we have had continuous deficits, especially in brine lithium as well as in HY Clean Metal. However, we've seen profits registered this quarter. And so with these profit gains, we're able to offset some of the losses we've experienced in the past. Exactly what proportion has offset which parts of the losses, I can't tell you for sure. But what I can tell you is because our leading customer, GM, had canceled all of its contracts, we were unable to deliver what we had produced. So now we are transitioning some of our supplies to energy industries. And so our plant is at 70% utilization rate. And so I think all of these positive factors are mixed to say the least.

Infrastructure business, [indiscernible].

POSCO E&C's profit size projection was the question, I believe. Operating profit is projected to be KRW 120 billion, but there are some additional input cost risks, but some of the project value adjustments as well as other cost-cutting efforts will help us to push up our profit. And so our business plan is to achieve KRW 120 billion. I believe we will achieve that.

Next question is from Hana Securities, Park Song Bong.

I'm Park Song Bong from Hana Securities. I would like to ask 2 questions. First of all, regarding the direct employment of the subcontractors, we've heard about it on the news. So I believe there are about 7,000 of them. So if that is realized, SG&A cost could go up. So I would like to know how much of a hike in the SG&A cost that we can expect?

And the second question is, you mentioned about turning to profit in the second quarter, and probably in the latter half of the year, the utilization will go up. So I think that overall, we can look at profitability. When it comes to lithium prices or lithium business profits, what are your expectations for this year?

I am Head of Finance at POSCO. Regarding the direct employment of the subcontractors, employees and the cost increase, so, of course, partial increase in the cost or expenses will be inevitable because the benefit-related policy and measures need to be included. So when it comes to labor costs as well as employee benefits costs, that could be -- that could result in increased expenses. But we're going to complement the relevant policies as well as improve work efficiencies. So we want to complement the increase in costs with other measures. Of course, we cannot confirm the actual impact for the time being.

Now when it comes to the brine as well as the iron ore lithium businesses, we have to consider them separately. And as for the lithium brine, the Argentinian project, as our CFO mentioned, we believe that it is going to continue to see profits. But last year, there are some low-price contracts that will come to completion by the end of April. So that could have an impact on April. But from May, we will turn to profit.

When it comes to the overall volume, we have to -- it is subject to market conditions in the second half. When it comes to lithium concentrate, since it is a concentrate, it needs sodium as a raw material. So the average sodium price in March and if you compare it to now, the selling price has increased about 5%, but the sodium price has risen 20%. So if you make the calculation, the raw material prices, we expected it to be 70%, but it has gone up to 85% overall. So it continues to remain very high, but we have to see whether it continues to remain very high. And according to our estimation, at this raw material price level, even China without subsidy, they cannot turn to profit. So we believe that there is going to be a narrowing of the gap going forward. So in the second half, the brine lithium will be able to turn to profit, and the lithium concentrate, 80% of the selling price is sodium. So we have to really closely watch the prices of the sodium.

Now let me add some comments about the recruitment or employment of the subcontractor employees. So when it comes to POSCO subcontractor employees, we -- there are some costs that have incurred over the years. And once they are directly employed, so they will be translated into the labor cost as well as employee benefit cost. So the direct employment will not have a huge impact. However, when it comes to the level of -- if we are to include like additional employee benefits, including the communications costs as well as the in-house meal costs and so forth, that could lead to a slight increase in the labor cost as well as the employee benefit costs. But after the direct employment, we will see more streamlined control and supervision structure. So that will lead to enhanced work efficiency and productivity. So overall, it will contribute to enhancing competitiveness of the company. And in the long term, it is not going to have a huge impact in terms of costs.

Next question is DB Securities.

I have 2 questions. First, besides India, some of your overseas investments included Cleveland-Cliffs and the Whyalla Steelworks in Australia. So do you have any budgets set aside or time line set aside?

And in terms of HyREX investment, you once estimated KRW 40 trillion. In which areas would you continue to invest this? And can you divide this up into the different areas of investment that HyREX will need?

My name is Kim, Strategy Investment Division. Let me answer your first question. In 2025, in order to enter the U.S. market, we signed an MOU with Cleveland-Cliffs. For cooperation and business synergy, we wanted to be able to cooperate. So there's been a lot of negotiation ongoing, especially about corporate valuation. But there are a lot of differences in opinions that is making it difficult for us to reach an agreement. So at this point in time, I'm afraid I don't have any more update, and we do not have a scheduled date for completion of this agreement.

On the Whyalla Steelworks, it has gone into bankruptcy management, and this is under Australian government supervision. For POSCO, we are cooperating with BlueScope, Japan's NSC and India's JSW. We have submitted an [ N Bio ] to the government. By the second quarter of this year, they will be selecting priority candidates to take over this facility. Profitability schedule as well as investments will be determined at that point, and FS will continue into the third quarter. But at this point in time, the first step we have to pass is to be selected among those viable candidates.

I will answer your second question. My name is Kim Sun Jun. You mentioned KRW 40 trillion. This is inclusive of all costs relevant to HyREX transition. So looking at the different items, there is the cost for the transition of facilities, and there's also the cost related to hydrogen. So this includes all of the ancillary projects related to hydrogen development and production. And because the cost is increasing every time, I think I really couldn't give you specific numbers at this point. So this is all I can deliver at the moment.

Next question is Kim Securities, [indiscernible]. ;

I'm [indiscernible] from Securities. I have a question about lithium. Now in the slides, POSCO Argentina earnings have -- in terms of revenue increased by KRW 9 billion, but the OP by KRW 37 billion. So how were you able to achieve such a dramatic earnings improvement, especially the profit improvement? Can you elaborate more on that?

And the Phase 2 will be completed by October. So Phase 2, when will that have impact on the earnings? Since when? From when? And if that is accounted for? When will the overall lithium business turn to profit? I would like to ask about the timing of turning to profit.

I'm from Energy Materials Office. Yes, the OPs have improved drastically compared to revenue. That is thanks to utilization rate hike. And what is also more important is that the lithium prices last year, when they were very, very low, we had contracts that were very competitive that were signed. And we completed a ramp-up, and we will go for commercial production, but the certification is underway. So that is why we have gotten the prices at the index level from our customers. So our selling prices are very much close to the index level as well. So that has translated into improved profitability.

And when it comes to the Phase 2 and that's impacting our profitability, our depreciation cost will be reflected from October. So the depreciation level or the base line for reference for Latin America is about 25 years, but we consider that it will be about 10 years. So we believe that sales will be quite challenging for us because we don't have a lot of customers. So we want to consider the depreciation as a fixed cost. And as with the Phase 2, we will have about KRW 15 billion of losses. But Phase 1 and 2 combined, we believe that we will definitely turn to profits this year.

Now a similar question was made from JDB Partners and [indiscernible]. So I hope that this answer answers your questions as well.

Next question is from iM Securities, Kim Yoon Sang.

My name is Kim Yoon Sang. I have several questions. First, regarding lithium, let me add another question. So there are some plants that have closed and businesses that have gone out of business. So I think lithium supply is short. And so I'd like to know what your projections are about the lithium demand by the end of this year.

And I think you are at the turnaround point as projected because lithium business continues to experience difficulties. There are some businesses that are hard hit, and Albemarle is projecting this as well. So when will the deficits turn to profit in the market?

And third, CATL's sodium ion battery, how will this impact the lithium battery sector?

And fourth, about India. Through the JV agreement, I think what you are looking to capitalize on is low cost and the availability of input materials. And given the demand and supply projections, do you have enough to allocate to the JV in India?

Energy Materials Business Management Office. Lithium is in shortage, especially in the hard rock lithium. Because of the ESS demand, brine lithium is very difficult to add volumes. So we will have to replace this demand with -- or respond to this demand with hard rock. And because there are limitations to what we can take from China, we have to turn to Australia, and that's why spodumene prices have really soared.

And there are many announcements that we heard in February, which put the price at $20 to $26. UBS and JPMorgan have assessed this to be above $26. So what we believe is that we can achieve our operating profit at prices even lower than that. Our projection is between $24 to $25. So $25 is, I think, the standard being used by the industry. So compared to about 2 months ago, prices have gone up by about $2 to $3.

The second question. As I mentioned earlier, Pilbara Lithium Solution is very much dependent on the price of spodumene. So if we can add A&P and get to a positive territory, that would be great, but this is very difficult at the moment. So even with the spodumene prices at where they are, we want to be able to cut cost, and we are looking into other alternative mines as well. So there's a lot of effort we're making.

CATL's sodium-ion batteries, how does it impact our lithium battery business? Currently, the impact is small. But how much can this pervade the market is the question that we're trying to answer. According to experts, some will be looking at about 3% penetration in the ESS market. Others put it at about 3% to 4%. So there is a lot of advantages here because of price, because of stability, because of charging speed. So I think this will continue to pervade or make inroads into the market.

But how does it impact our lithium battery market? It will replace LFP, but it will not impact NCM market. We are also looking at the LH market. And so I think a calibration with the LH market is a little bit difficult at the moment.

My name is Kim, Strategy and Investment Division. Let me answer your question about the acquisition of iron ore. So iron ore price in India compared to the global iron ore price is quite different. The iron ore index price in the global market and the iron ore price used in India, if you compare the 2, it's -- the Indian price is about 50% to 60% lower. And the government actually applies 30% tariffs to impair to dissuade people from exporting this inexpensive iron ore outside India. So I think cost-wise, we have a definite advantage.

And stable supply of iron ore, looking at it from that perspective, most of the iron ore in India is in the Eastern region of India. Odisha is on the east side of India. So we are closer to these mines. And JSW has 45% self-sufficiency or so they claim. But because other steelmakers have lots of mines and they own them in the vicinity of our new plant, I don't think we will experience any difficulty in acquiring the needed iron ore.

Our plan is to set up by 2031 and then to put it into operation by 2032. Our iron ore acquisition selections have already been made. Once new schedule ends, some of the mines have sold rights that expire in 2032. So come 2032, I think we will have more mines that we can acquire. So we're looking forward to doing that.

Next question is from Samsung Securities, Baek Jae Seung.

I have 2 brief questions. First is about investment in India. Now it is seeing increased structural demand. So it is attractive market, but there is also a domestic capacity expansion in India and also the global players have entered the Indian market to increase production. So the competition is going to become increasingly fierce in that market. So in that sense, we can consider ourselves as a latecomer in the market. So what kind of competitive edge do we have to be able to fare well in the market?

And the second is about electrical arc furnace, which will go operational from Q2. And when it comes to EAF, I would like to know about additional costs that could incur because of the operation of EAF. If that is the case, how much would that be?

I'm Kim Gwang-mu, Head of Strategic Investment Division. You mentioned about the mismatch between supply and demand in the Indian market. So as of 2024, India's steel demand is about 150 million tons and supply is about 140 million tons. So 10 million ton of shortage of supply. So what will be the demand in the Indian market for steel? So by 2035 to 2040, India is going to see an increased economic growth about 6% to 6.5%, and the steel demand is also going to see an increased 5% to 6%. So by 2035, we believe that about 250 million tons, 250 million and 260 million tons of demand for steel will be there.

But in terms of supply, the major -- 4 major players, according to their disclosure, will lack -- we're short of 20 million tons of steel. And even though the plan if the plan is -- actually goes ahead as planned. But if it doesn't, then we will have more shortage. So when it comes to capacity expansion in India, it's a little bit different from China because the major 4 represents 80% of the market share. So their influence is very big. And in that case, the capacity expansion will not be a problem. So we have to -- we believe that our competitive edge in the high end or premium steel will be our key differentiator -- differentiating point.

I am, Kim, Steel Business Management Office Head. You mentioned about the increasing cost due to EAS. Compared to the time of our investment decision, demand hasn't gone up very well much, but the EAF has been expanded, and we believe that the cost will go up than had expected. But even when we decided to invest, we didn't expect it to go fully operational. We were expecting about 10% to 20% of utilization. So we had a step-by-step plan for EAF in terms of going operational. So on an annual basis, if the utilization rate is about 10%, the cost will go up by about KRW 70 billion to KRW 80 billion. But of course, if the costs go up, then the prices -- selling prices can go up and there will be some premium that is formed. So I think that's going to have less of a negative impact.

Now is there any additional questions from the participants? There are no further questions. Thank you very much. We've received a lot of questions online as well for today's conference call. I think that they were pretty much covered during the conference call. And for additional questions, we'll get back to you through the IR team. Thank you for joining.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Greetings. I head up the Finance and IR Division at POSCO Holdings. My name is Kim Seung-Jun. This is POSCO Holdings 2025 Full Year Earnings Release. I'd like to welcome the participants, investors and analysts. Thank you.

In 2025, we experienced global trade policy shifts and economic slowdown. It was a challenging environment. We put our effort into protecting our short-term profits. At the same time, as a business group, we built the foundation for future growth. 2025 consolidated revenues declined 5% year-on-year, recording KRW 69.1 trillion. Operating profit declined 16% to KRW 1.8 trillion.

While POSCO's OP grew from 3.9% to 5%, we failed to meet our goals due to the accidents at POSCO E&C that led to construction halt as well as the ramp-up costs that entered the books for the new lithium and precursor plants that were commissioned at the end of 2024. The fourth quarter profits were especially weak.

The reason was communicated in last quarter's release. Pohang HR plant and other facilities have gone into major repair schedules, triggering production volume cuts. Also, large volume imports that flooded our market prior to the preliminary AD tariffs on HR products were still being consumed, causing a temporary drop in sales volume.

There's more, the divestment of PZSS plant in China caused employee compensation to enter our books, too. This is in addition to the loss incurred by construction stop issued at POSCO E&C. So sizable onetime costs were accounted for all at once.

In 2026, we will likely serve out some significant inflection points for POSCO Holdings. First, we have, for some time, studied various ways to go overseas in steel. This year, we'll see some specific actions. Last year, we identified strategic partners, signed MOUs with the U.S. and Indian JV partners to begin negotiations. With these partners, we're in final stages of discussing the terms of our action plan. So this year, we'll be able to witness some action on our long sought entry strategies into overseas markets.

In parallel, we intend to strengthen our core by focusing on high-margin products in the domestic market.

Secondly, asset-based lithium operations will begin to generate profit. Our Argentina Lithium Plant 1 will ramp up and begin commercial operation this year. Last year, we signed deals with Australia's Wodgina and Mt Marion mine. The acquisition procedures will complete in the second half of the year, making immediate contributions to group level profits.

In the past several years, we completed Phase 1 of our investments evolving the purchase of lithium resources and plant building and ramp-up. With commercial production around the corner, lithium prices have recovered just in time. We're excited to enter the next phase of our business when we will begin to generate real profits.

By business model, an examination of the sequence of benefits accrued to parties impacted by the lithium price hikes illustrate that lithium ores, a.k.a. spodumene, so Australian hard rock lithium producers will be the first to enjoy the benefits. Next will be the brine-based lithium business in Argentina. Then the lithium processors, namely PPLS, who process the imported raw materials will be the last to enjoy the impact.

Third, value chain expansion of the infrastructure business will drive up margins. Therefore, we believe 2026 will be -- see the impact of portfolio management. And as long as we can keep the price at our current levels, we'll be able to see more profit. As a result of the infrastructure business expansion, again, we'll see the impact of our portfolio management reflected in our financial statements this year.

Australia's Senex Energy built out its expansion facilities for gas production in October. And in November, we acquired new palm oil production farms in Indonesia. The return on these investments will be fully reflected in our '26 annual performance. Also last year, PZSS plant in China that registered KRW 200 billion in red ink recently was approved by the Chinese government for divestment. Once the procedure runs through, it will be removed from our consolidated books.

Please understand that we're also aware that regardless of the rosy picture, we also have other challenges to confront: Stagnant domestic steel demand, formation of global blocks, tariff wars that restrict trade and the weakening won currency that has the effect of driving up cost and the risk of lithium price fluctuation to name a few. This year, by taking advantage of the various positive factors on our doorstep, we hope to turn the tide that held us back in the past few years. So we hope this year will prove to be the inflection point.

Thank you. Now I'll invite the Head of IR to deliver our 2025 performance results and '26 business plan.

Page 3. 2025 consolidated OP decreased KRW 347 billion year-on-year, recording KRW 1.8 trillion with consolidated EBITDA of KRW 5.9 trillion. POSCO's OP grew -- from quarter 1 to quarter 3, quarterly OP was on the rise with a slight decline in quarter 4 to KRW 12.7 billion.

First, POSCO E&C had construction stoppage and bad debt expenses recording KRW 190 billion of quarterly deficit. Second, PZSS divestment is ongoing and employee compensation and other temporary costs were administered, deficit totaling KRW 131.9 billion. In end of December, Chinese merger approval was completed and the sale will be completed within Q1.

Third, POSCO's OP recorded KRW 337 billion, decreasing from Q3. Off-season is one factor, but another factor is stockpiling of cheap imports prior to the hot-rolled AD measures. And we decreased our sales volume by 6% quarter-on-quarter. Also, Pohang hot rolling line is under major maintenance, so production was adjusted by 4%. With these efforts, market inventory of low-priced imports are balancing out. And from quarter 1, we expect production and sales volume to return to previous levels.

In 2026, as our CFO mentioned, restructuring of businesses in the red will show the impact and Argentina Lithium Phase 1 will begin commercial production, and we can expect RBM profits to improve. Last year, we acquired a palm farm, expanded capacity of Australia Senex gas fields and these new investments will also contribute to profits.

Page 4. This year, group-wide serious injury cases increased to 9. POSCO Group is enhancing safety systems, increasing employee participation and boosting operability on the ground as priority goals, focusing our best efforts to foster a safe workplace. Last year, we established the group Safety Innovation TF team as CEO direct report and launched POSCO safety solution to strengthen safety expertise.

Furthermore, we applied world-class safety consulting techniques to supplier companies. Also, we have outside specialized organizations regularly perform unscheduled inspections. We will continue to share our safe workplace metrics, improvements and actions with you transparently each quarter.

Page 5. In 2026, I will describe the key business activities in steel. In 2026, for domestic steel, we will develop decarbonization technologies and promote high-margin products to strengthen our business. In overseas steel, we will establish JVs to drive our end-to-end localization growth strategy.

First, to address the carbon-reduced steel market, we will begin construction of the HyREX demo plant in Pohang. Also Gwangyang EAF will continue operation in June. To enhance our profit structure in the domestic market, we will pursue growth in premium steel and specialized products.

We will advance specialized capacity at each steelworks. Pohang Works will lead hydrogen, LNG and power grid innovation as leading mill of energy and Gwangyang Works will be specialized for future mobility markets. We will continue to manage these aspects to increase our mix. We will continue to leverage technology to structurally cut costs under Cost Innovation 2030.

Finally, 2026 will be the year we act on overseas expansion. In the U.S., we have the Hyundai Motor Group EAF integrated mill project for which we confirmed share participation. Cooperation with Cleveland-Cliffs and the India integrated steel mill project with JSW are also ongoing.

Page 6. First, POSCO Argentina's ramp-up is near its completion stage. Generally, South American brine-based plants take 2 to 3 years to ramp up, but we have worked with the goal of completing it within a year. Major parts that needed to be replaced had some supply issues, delaying normal operation for 2 to 3 months. But by March end, we will boost utilization rate to more than 60%. And from July to August, we will be in full operation, meaning it will be our first year of commercial production.

Recently, lithium prices increased substantially. Argentina plant owns brine assets, so we have a lot of operating leverage in face of lithium price hikes. In Q1, we still have volumes remaining for low-priced orders and the utilization rate is rather low, but it will rapidly increase thereafter and profit improvements are in sight.

Furthermore, in the first few years of commercial production, production efficiency improves gradually, boosting cost competitiveness. So we believe this can be the beginning of a positive cycle.

As for POSCO Argentina Phase 2, considering the brine charge and evaporation schedule, construction is planned to be completed by Q4. Once completed, technical-grade lithium carbonate production capacity will be at 25,000 tonnes per annum. Recently, we acquired LIS brine asset at a competitive price, which will serve as a valuable asset for future expansion.

Next, POSCO Lithium -- POSCO Pilbara Lithium Solution. PPLS' major clients include POSCO Future M and other domestic and North American customers in its sales structure. However, demand from these customer base has been slowing down, requiring the company to diversify its customers. European and global top-tier OEM companies are among the new customers that we are working to secure. And there are some positive developments.

Regarding the recent lithium price hike, PPLS imports spodumene from Australia to produce lithium. Recently, spodumene price increase has been higher than lithium price increase with the spodumene to lithium hydroxide price ratio reaching 11%. Therefore, the higher lithium price has not been an immediate positive factor, and there are some temporary difficulties with margin spread. But in the long term, we expect positive impacts.

Third, the JV investment with Australia's mineral resources. Currently, foreign investment approval and merger filing is currently underway. Once they are complete, the final contract will take place near March and the payment will take place within Q2. Therefore, profits from this mine will be included from the second half through gains on equity method valuation. Once investment is approved for the next 4 years, the spodumene concentrate price we estimated was around $1,000 per tonne, but currently, the price rose to more than $2,000. Considering the market situation, we expect the mine to immediately begin contributing to gain on equity method valuation. And next year, the impact of the price hike will be bigger. For production volume, cash costs and other basic details, please refer to MinRes website.

Meanwhile, to verify lithium DLE direct lithium extraction technology, we are investing in the technology. POSCO HY Clean Metal was the first to begin normal operation. And since October 2025, it has sustained EBITDA surplus. Black mass price is on the rise and the supply and demand is tight, but it has confidence in its stable production technology and is discussing opportunities to expand business with global companies.

Now for solid-state battery, we are also active on the scene with robust technology development. POSCO Future M is working with the U.S. solid-state battery maker, Factorial, making strategic investment. And POSCO JK SS recently developed commercialization technology for sulfide solid-state electrolyte mass synthesis method, which gained recognition.

Page 7, portfolio management update. 2025 was the second year of restructuring. Including the divestment of all NSC shares, 28 projects were completed, generating cash of KRW 1.1 trillion. Thus, since 2024, we have generated cash cumulative of KRW 1.8 trillion. We aim to continue restructuring 55 additional projects by 2028. This will generate KRW 1 trillion of cash.

Page 8, CapEx administration and plan for this year. Last year, RBM Phase 1 investment was nearly completed. Thus, the total consolidated CapEx administered fell to KRW 7 trillion from KRW 9 trillion in 2024. This year, in addition to the lithium investment, we have also reflected the budget for upstream investment overseas, which will temporarily increase the CapEx size.

Next, performance by operating companies. First, POSCO. POSCO's operating profit improved from the previous year, with an operating margin ratio of 5.1%. So we believe that our profitability enhancement has taken place. Q4 price increased from Q3, but coal unit price rose, leading to high raw material prices. So the mill margin fell moderately on quarter. The low-price import market inventory adjustment efforts led to sales volume falling to 7.7 million tonnes, putting pressure on profits. But this year's Q1 will see sales volume return to previous level years, and we plan to raise the selling price of some products. The effect of price increase will show from Q2.

In 2026, we expect EU and other countries to strengthen protectionist policies and challenges will continue. But by expanding sales of high-margin strategic products, and accelerating global expansion strategies, we will do our best to continue to turn profits.

Page 9, overseas steel. As for overseas steel profits, despite a weak global market, we optimized our marketing strategy and cut costs, improving our profitability. PTKP in Indonesia expanded export to high-margin European markets, which improved profit structure. And POSCO Maharashtra in India increased ratio of auto sheet sales. And PY VINA in Vietnam also shifted to profits in 2025. But if you look at Q4, it showed KRW 135.9 billion of deficit. This is mainly from PZSS, which is undergoing divestment. It will be excluded from consolidated data in 2026, which will lead to decrease in deficits.

Page 10, POSCO Future M. Last year, energy materials, including CAM and AAM saw revenue decline from slowdown in EV demand. But by boosting efficiency and cost cutting, we kept the level of operating loss similar to the previous year.

And next, POSCO International. In 2025, energy and materials trading both demonstrated higher OP recording strong performance. Last October, Australia Senex Energy production expansion was completed. And in November, Indonesia palm farm was acquired, which will contribute to additional profits this year with forecast for profit growth.

Next, Page 14, POSCO E&C. Last year, the POSCO E&C had the [ Shin-Ansan ] accident loss recognition, additional costs from suspension of construction and losses from overseas projects. These one-off costs and bad debt expenses were reflected recording a sizable deficit. However, we anticipate a turnaround to profit in 2026.

This concludes the overview of POSCO Holdings performance. We will now have Q&A. Thank you.

[Operator Instructions] The first question is from Hyundai Motor Securities, Mr. Park Hyun-Wook.

My name is Park. According to your presentation, POSCO's performance is looking pretty good this year. I have 3 questions. The first one is regarding the steel market outlook. In the first half in automotive and shipbuilding, major demand industries, what are some of the negotiations that you're looking forward to? What do you expect? And some of the Japanese and Chinese HR products have posed some challenges last year and some of the impact of those products will manifest in the first half of this year. So when will we begin to see POSCO's market share increase?

Secondly, lithium prices have been rising significantly. So it's about $18,000. How do you forecast the lithium prices for the rest of this year? And based on current price levels, Argentina salt lake as well as hard rock lithium, what do you think about their prospects? And this year, I think some of the construction is continuing. Currently, when can we expect to hit BEP?

Third question. You have invested as POSCO Holdings in lithium mines. You're also investing in India and North America. So there are a lot of sizable investments being made. But I think there's still lingering concern about HMM acquisition in the market. So we are watching this. We'd be really curious to hear what your position is? That's all of my questions.

My name is [indiscernible] Marketing Strategy Officer at POSCO. So in the demand industry such as automotive and shipbuilding, you asked about the market outlook. Here's my answer. The steel market this year, first on global steel market, we'll see some appeasement from China. And because of some of the other expansion plans, I think we'll see some improvement, but we'll see some differences by region.

In China, real estate market is still in a recession. So this year, steel demand is likely to continue to decrease. So they will experience a negative growth. But in Europe and the United States, they have already hit their base point. So we believe that they will be recovering. But because of the policy uncertainties, whether demand will actually increase that we'll have to wait and see.

In the emerging economies in India and the ASEAN countries, we will see some strong demand increases. In India, in particular, because they're increasing manufacturing as well as infrastructure building, I think we'll see strong growth signals in '26 as well.

In domestic market, we'll see some disparities by industry as well. In shipbuilding and defense as well as power industries, we'll see some strong growth continue. But in home electronics and construction, we will continue to experience recession.

In automobiles, tariffs and some of the sharp demand decreases will continue to pose challenges on them. And so there will be a little bit more -- there will have to be a little bit more time before we can see recovery. On price negotiations with the auto OEMs, since last year, tariffs have become an issue. So against the negotiation formula, they are asking for additional discounts. We are going to try to stick to the formula as much as possible.

For shipbuilding companies, because they have a stable supply of orders and because they are trying to dominate or take a larger share of the market, we will take that into consideration when we negotiate with them.

For the hot-rolled AD tariffs, what kind of impact can we expect was your question, I believe. I believe the flat products have seen a decrease of about 300,000 tonnes in the fourth quarter against the third quarter of last year. But we believe that the flooding of these products into our market has come to an end. And by March or April, we'll be increasing our selling prices. And the impact of these raised prices will begin to see them in the second quarter and beyond. So we'll continue to make these kinds of efforts.

My name is [indiscernible], Energy Materials Business Management Office. On lithium price, IBs have refrained from publishing prices. But one has forecast $20. So it will be similar to the current price. And Chinese inventory, it's not increasing. So to -- this price doesn't reflect an effort to increase that inventory. It's actually reflecting actual demand. So for about 2 years, lithium prices have fluctuated. And so we went through a pretty harsh cycle. I think the lowest point was in 2018, and then we saw it go up continuously.

So in -- sorry, in '18, we hit a high point and then it began to fall. And then it began to rise again for about 2 years. And took that up to about $80. And by the end of last year, we saw those prices drop. And so this rise is only about 3 months old. So based on past lessons, I think we will see it continue to rise. We have to be very careful here. We have past lessons to reflect on. But I think very gingerly, I make the forecast that we will see it rise.

In Gwangyang and Argentina, we were deep into ramp-up in both locations. So no profits there. But we will go into commercial production this year, in particular, in Argentina, in January and February, we had some issues. The membrane component was in short supply. So in January and February, our volume did not hit our goal. And because we will be shipping out orders, filling orders for which we offered a lower price, that will not be generating too much profit either.

So because of the component that was in short supply and because we're still delivering on low-priced agreements, we will not be generating profit anytime soon. But as all plants do, we have to certify the plants. And so our clients and automakers will be making a visit out to our plant in Argentina. they have scheduled that. And so our hope is that we will be turning this tide this year.

Let me now speak about Pilbara, their hard rock lithium. Ore lithium price is important, but the price of the raw material is just as important. Spodumene price was about 4% of spodumene at lithium price. Because we need 7 tonnes of hard rock spodumene to make lithium, 30% -- 40% of raw materials price was the formula we use. But recently, we've seen that price go up.

So LH is $19,500 and spodumene is $24,000. So it went up by about 17%. So if we use 7 tonnes, the cost of our raw materials will be about 80% of our total cost structure. So this price increase needs to hit our books in a timely manner for us to be able to generate meaningful profit. So exactly how this will reflect in our books, it will depend a lot on the spread of the price of spodumene and hard rock lithium. But what we can predict is that our loss will be much smaller than last year. So we will be engaged in diverse activities in order to enhance our profit.

On HMM acquisition, I will answer that inquiry. We've already made some public disclosures on our position, and we've consistently said that this is in preliminary review stage. There are no specific decisions that have been made. Since then, there has been no progress. So this is the clear answer to your question.

The next question will be from iM Securities, Kim Yoon Sang.

I am Kim Yoon Sang from iM Securities. I have a few questions for you. The first question I'd like to ask is regarding steel and also infrastructure, POSCO International and E&C and [ bisector ], I would like to ask about the business plan. And specifically, what kind of market situation you are referring to?

And the second question is it more detailed questions about your business plans in RBM. There are some parts, for example, canceling of orders and difficulties with the hard rock lithium -- compared to this year, do you expect things to improve this year? I would like to ask -- I would like you to specify.

And for the third question, you provided more than KRW 6 trillion in terms of CapEx. And I wonder if this needs to be adjusted downward.

And finally, Cleveland-Cliffs, you mentioned partnerships. And recently, the strategic investment, are there any considerations that you're making?

I will answer the second question first. What will improve is the lithium price increase and the negative factors are maintaining the North American customers, but the orders have been on the decline. So we are currently exploring other customers. And spodumene prices are also factors that are on the negative. But whether or not this will lead to improvements will depend on our operating profit, and we expect things to improve greatly compared to the previous year. Especially POSCO Argentina is expected to perform very well and the operating profits to improve sizably.

You've also asked about the profit guidance. I would like to mention a few things. In steel, we expect POSCO to do a bit better than last year because there are a few factors. Exports are -- can be a little bit challenging, but the domestic market is improving. So compared to the overall operating profit in the previous year, we expect it to improve.

In overseas steel compared to last year, around KRW 200 billion of deficit will be taken out because PZSS will be excluded. So we expect it to improve as well.

In infrastructure, compared to last year, there are 2 factors that we would like to ask you to consider. First is the acquisition of palm oil, more than KRW 100 billion of profit occurs from the palm firm. And the effect of the investment -- so the incremental profits may drop a little bit below KRW 100 billion. And then we had KRW 540 billion in losses in construction, but we are hoping to see about KRW 100 billion profit this year. So the size of the profit that will gain in infrastructure should be meaningful in rechargeable battery materials.

Lithium price fluctuations define a lot of our business, but the deficit that we experienced in Argentina last year was about KRW 100 billion. Although impacted by lithium prices, if the price is maintained, I think we can definitely get to BEP, perhaps a little bit more, perhaps not in the first quarter, but with some of these assumptions, I think we can look forward to an improvement.

At Pilbara Lithium Solutions, in 2024 or '25, we had a KRW 2 billion loss there as well, but we'll be able to compensate for that as well. So when these pan out, I think we'll definitely be able to turn the tide. Add all of these numbers up, and you will see that there will be some pluses and some minuses. But generally speaking, I think you'll be able to get to a good number.

For the third question, we mentioned that more than KRW 6 trillion will be invested in steel, and you asked about this. Regarding steel, the India integrated steel mill project will take up around 400 -- KRW 400 billion and then the U.S. blast furnace will be another sizable amount.

And HyREX plant and other investment will total KRW 6.8 trillion. Additionally, in steel investment, this is our budget. But basically, we have included all of the overseas investment that we have planned. And with the progress, this can be adjusted. In the KRW 11.8 trillion, this includes -- in the KRW 11.8 trillion, all of this is included. Last year, we talked about KRW 8.8 trillion, but our execution is at KRW 7 trillion. So as we continue with the negotiations, we have reason to prove that there can be adjustments made.

I am [indiscernible] from Corporate Strategy Office. Third question regarding the rare earth and other considerations with Cleveland-Cliffs. We are cooperating with Cleveland-Cliffs focusing on steel. So Cleveland-Cliff at the last IR, they announced -- they made announcements regarding rare earth. Regarding rare earth cooperation, we have not made any reviews.

Next question is from HSBC, Park Yushin.

This is Park Yushin at HSBC. I have 2 questions. The first one is on lithium business. U.S. automotive OEMs are electrifying. So POSCO's lithium business, are there some target clients in the U.S. as well as the business targets in the lithium business for the U.S. market?

Next is on steel. This Saturday, I believe there were some proposals made by BlueScope and NSC was involved. If you have any updates on this, I'd like to hear some more. And any strategies regarding the steel business you can share?

On the automotive OEMs, yes, there is a slowdown in electrification in the U.S. This year, LFP will see about a 30% increase. NCM will likely stay. So in terms of client base for cathodes and Pilbara Lithium Solution because their client base is mostly predominantly in the U.S., we are trying to make a shift to Europe. So we are deeply involved in the marketing activities that are bound for Europe. So we also need to diversify our portfolio.

For POSCO Future M, we will focus on LFP. And in the lithium business, we will focus on LC or lithium carbonate. And so these are some of the shifts that we are planning. Mid- to long-term strategy, lithium capacity is 100,000 tonnes. So we want to be able to establish our client base to be able to exhaust this capacity. And because we've made new investments in hard rock lithium, we will definitely review expansion of facility, but no decisions have been made on any schedules.

Additionally, I made a brief comment about our profitability outlook, and I want to add to that. So the lithium mine that we acquired, that will be entered into our books based on the equity method. In 2027, we are planning additional production volume. So please have a look. With that in consideration, I think you will be able to accrue more meaning.

And next, we will address the question about steel. Australia's BlueScope equity shares proposal is, I think, the question. Currently, POSCO and NSC have a consortium with BlueScope to acquire the Whyalla Steelworks in Australia. So we already have a consortium. We have not had any discussions about acquiring BlueScope.

On China's steel restructuring, my name is [indiscernible] again. The Chinese market on the oversupply in order to respond to criticism from other economies about the oversupply decided to embark on restructuring.

So they have decided to abolish the tax refund on exports as one measure, and they're making adjustments to certain country-bound steel products. In January of this year, they announced a new policy for low-priced, low value-added cheap products and to constrain exports of these kinds of products. But because the Chinese domestic market is in a recession, we believe some of this will continue. It will not be in large volumes, and we are going to be able to see some positive signs on this end.

That concludes my comments.

The next question will be from [ Hana ] Securities, [indiscernible].

I'm [indiscernible] from [ Hana ] Securities. I also have 3 questions. First question, EU's CBAM and other global export regulations will be in place. how much impact will POSCO take? And how will you address this? And I also have a question about lithium. You mentioned that you expect profits for lithium business to improve. Are there any specific volumes that you have forecasted for sales and production?

And finally, there were a lot of safety accidents within the group. These investments and costs related to safety, do you expect it to go up in the future? And will it have meaningful impact on profitability? And can we believe that safety has been secured?

Regarding EU CBAM and quarter, I will tell you about our response measures. EU CBAM will be -- will come into force from October. And currently, we are talking with EU commissions regarding the national quotas. And we are doing our best to make sure that we can have an advantage in this aspect. But we will have to assume that the quota will decrease. And therefore, we will have to take out the low-priced products from our export mix and take that volume into Central and South America and other markets. And next year's steel sales policy focuses on the domestic market. So we will focus on premium products overseas to be able to complement some of these losses to be able to maintain similar levels this year.

For the second question, the sales volume is expected to be 55,000 to 60,000. Our plan is to secure enough customers to sell this volume. And this volume is twice that of last year. Our basic plan is 55,000 to 60,000. But depending on the market conditions in the second half, we will review whether we can increase this volume.

I am [ Yoo In-jong ] from POSCO's Group Safety Special Assessment Task Force. Regarding investment and costs for safety and whether it will increase in the future, the facility and other investments that are being made into improving our group safety, I looked into it and I believe that the amount that we invested into safety is not low compared to other companies and putting -- and enhancing the facilities and putting safety equipments in place will not -- we don't need to do mass scale improvements.

So we may need to improve bit by bit, but it will not impact the profitability of our company as a safety officer. And whether safety levels increase with more investment the efforts to improve safety, the technology and other measures, the level of safety investment that we have is much higher than other companies. I don't believe that accidents happened here because we didn't make enough investments.

Regarding smart safety technology, this is being talked not only in Korea, but all across the world. The technologies that actually help improve safety hasn't been applied on the ground. We are actually leading the industry in this front. But technology that can actually save time and effort to enhance safety, we are making the efforts to apply this. So making -- we don't believe that making the investment itself will significantly impact.

DB securities, Ahn Hoe Soo.

My name is Ahn Hoe Soo. I have about 2 to 3 questions. First, the steel business rationalization and restructuring have been discussed. Do you have any specific plans on these grounds for the future?

Next is on lithium. You talked about brine-based lithium plant 2 and technical grade production. If you want to make the shift to battery-grade lithium, what kind of CapEx -- additional CapEx do you need to expand? And the lithium price increase, what is the reason, rationale behind that? If you have more information on why it's rising, that would be very helpful?

The third question, you're investing HyREX and you are going to soon operate the electrical furnace. Looking at the group-wide energy mix, what is your plan? And POSCO International, has plans to import 1 million tonnes of gas from Alaska. So what implications does this have on the group-wide business?

I'll answer the second question first. So price is rising sharply. The reason behind that is about threefold. First, the abolishment of the export refund tax. So I think there was some excess demand because of that. And the recent growth of the ESS market. So the actual demand is manifesting here. And the third is the expansion of production in China, there are salt lakes in China, too, but they cannot. They have some structural issues in expanding that. And in the middle of last year, some of the mines had to be closed. And so these are the 3 key reasons that I would provide as rationale for the sharp rise in lithium price.

And our lithium is technical grade. Brine-based lithium is all technical grade. It's not just us. So to make that shift to better grade, we need to adopt equipment. So technical grade is 99% purity, battery grade is 99.5%. So we need to be able to reduce impurities by about 0.5% and equipment is required here.

So we are studying some of our options. One is in Gwangyang to bring LC from Argentina and to convert that to LH. And so we have a plant called PLS, which is being built now. It's almost completed. So we will refine to produce LH. If we inject CO2 in the process, then it can convert to LC. So this is the very back end that needs to be refined. It's not a huge investment. It's a tweaking of the last part of the process here. So it's going to be a small investment if we decide to invest. And so within the first quarter, we will be reviewing to make a decision.

I will address the first question, steel industry restructuring. My name is [indiscernible]. I'm in charge of Steel Business Management. For steel pipes and long products, I think we're hearing also some restructuring efforts and efforts made to downsize, but no one is really closing down blast furnaces or making new ones. So there is no oversupply. And so this is not an urgent need. But yes, we do need to consider this for the future.

So we are in negotiations with [ KOSA and K-Steel ] to forecast when or if this needs to happen. And in line with the changes in the steel industry, we will be aging out some of our older facilities. And we've already done our own equipment restructuring. If we see more facilities that are inferior against the current market trends, then we could consider other investment decisions such as maybe additional HyREX as well.

Let me address the third question. I'm Kim [indiscernible] Carbon Neutral Strategy Office. We have announced NDC 2035. NDC 2030 was a 5.3% reduction for steel. And so this is achievable with the current technology. But for NDC 2035, we need to reduce more, and so we need to transition some of our equipment.

At POSCO, blast furnace-based CO2 reduction and EAF-based CO2 reduction are the 2-pronged reduction efforts that we'll be making. In 2030, we will read the situation to assess what will be most efficient, most effective. And so that ratio will change based on what we assess then. In 2028, we will complete the HyREX pilot plant and the energy that will be used is cracked LNG and pink hydrogen is something that we want to be able to make possible there. After 2030, we are in discussions with the government to use nuclear energy.

My name is [ Oh Youngdal ], Infrastructure Business Management Office. Let me address the Alaska project. 1 million tonne LNG import volume, the volume has been agreed to, but we haven't signed any contract. And the conditions, the terms of the agreement are very favorable. But we do have an NDC NDA, that is. And so I cannot share any more detail. But how will this impact the energy mix in the country? I can't answer that effectively because for POSCO International, it imports LNG to generate power.

And for POSCO, it has its own LNG demand. So just because POSCO International imports LNG, will that impact POSCO's LNG price? Not necessarily because POSCO will buy its own LNG from other channels. And so the bidding conditions could change numbers, but we are 2 different entities. The cost required to reach carbon net zero, whether this will help POSCO achieve that, I don't think that's an appropriate statement to make. And by importing inexpensive LNG, POSCO International will be able to add efficiency to their power generation. So I think it will assist POSCO International in a meaningful way. That's what I can say.

Energy Materials business management, I think I misspoke. [ CP2 ] has not yet completed construction. So 67,000 tonnes is our cap. And this year, we can sell -- we plan to sell 50,000 tons. And so this is still twice the volume that we did last year. I'd like to make a correction.

The next question is from KB Securities, Choi Yong Hyun.

I'm from KB Securities, Choi Yong Hyun. I would like to ask about lithium. And you mentioned 50,000 as the lithium volume. Does this include Pilbara? The margin spread is a bit big. So I'd like to ask about your final figures.

It will be half and half Pilbara and Argentina.

No additional questions. Since we don't have any additional questions, I'd like to conclude the earnings release for 2025. Thank you very much for your participation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello, everyone. We'd like to begin the POSCO Holdings earnings call presentation. Thank you all for coming. Today, we will have a presentation from POSCO Holdings first, and then we will have a Q&A session with all those in attendance. [Operator Instructions] So let us now begin the earnings call for the 2025 second quarter.

Hello, everyone. I Head of Finance and IR at POSCO Holdings. My name is Kim Seung-Jun. As you have already seen, I would first begin -- I 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. It was a time that saw incremental uncertainties more so than ever before. Regardless of the hardship and challenges, POSCO Holdings did its best to generate sustained growth. As a result, our consolidated revenue hit KRW 17.6 trillion. Operating profit was KRW 610 billion. By key business area, we observed a notable improvement in steel. In both local and overseas steel businesses, quarter-on-quarter sales volume grew to push up revenues with lower prices of iron ore and coking coal, mill margin improved, helping to grow our OP.

Most notable is POSCO's second quarter OP margin rate of 5.7% taking the fourth quarter of 2024 as the low point, we've been recording growth for 2 consecutive quarters. Moderate improvements in the domestic market is cited as the reason for no 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. We've introduced AI, so this is the outcome of multiple efforts that have come together.

In steel, 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 Zhangjiagang Stainless Steel PZSS, a stainless-steel production subsidiary in China. Detailed negotiations are underway for the sale as we speak. Established in 1997, PZSS has consistently performed. However, due 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 PZSS subsidiary, which continues to remain in red ink, will be removed from our consolidated account.

Rechargeable battery materials operating companies completed 2 new plants at the end of last year. 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.

Additionally, for -- in this market, this is an opportune time for the lithium business. Yesterday at POSCO Argentina, there was an LOI signed with a Canadian company for joint investment and the size is $620 billion. So we will be taking mining rights in a mine juxtaposed 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.

I'd like to now go over the earnings for Q2. So the consolidated revenue was KRW 17.556 trillion and the OP margin was KRW 0.607 trillion. And so after bottoming out, we have been gaining consecutive quarters of growth. The EBITDA was KRW 1.6 trillion, and the first half cumulative CapEx recorded KRW 3.1 trillion. And net debt due to investment and working capital management and cash injection from portfolio management decreased a little bit Q-o-Q. By segment, steel operating margin recorded 3.6% of increase to record KRW 610 billion and was just mentioned, the margin for POSCO rose from 3.9% to 5.7% and overseas steel also improved.

In the rechargeable battery materials, the lithium price fall and the last years ramp-up of the 2 lithium factories that had been newly built last year led to a larger deficit. In the infrastructure, POSCO Internal showed robust performance but nonetheless, POSCO E&C POSCO overseas project incurred additional cost and so there was bit of a marginal decrease.

Page 5. POSCO has been implementing restructuring of the non-core assets under-performing projects and so we will be able to generate KRW 1 trillion worth of cash flow. And so in the first half, KRW 350 billion was attained. And in the second half, we're going to generate additional KRW 1 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 KRW 1,000 per ton fell.

But then if you look at the reason, first of all, the domestic price recovered a little bit. But due to the stronger won, the export price fell, which led to the overall selling price downfall. But the raw material 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 PT.KB 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 KRW 33 billion. And so the deficit Q-o-Q has also increased.

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 Steelmaking Line 1 and Wire Rod Line 1, 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 succeeded in fully automating the molten steel pretreatment process. 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 tons per tons. And so all of these efforts are leading to overall competitiveness and the profitability going forward. And so POSCO remains committed to these initiatives.

Next page is about R&D. So we have been developing high-value-added steel products. As you know, POSCO has been very committed to these initiatives. And in 2013, the high manganese steel for cryogenic use was first developed, and it went through registration to various organizations. And last year, it was applied in the Gwangyang LNG terminal. And in April this year, 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. Now on to the HyREX technology. So this is a long-term strategy that we are promoting since January last year. It was designated as National Strategic Technology as we had already mentioned. Then we opened HyREX Development Center inside our factory.

In June this year, the POSCO passed MOTIE's pre-feasibility study for the HyREX demonstration in project, And so we have been successfully able to lay the grounds for commercially ionization technology development. And so this demonstration project is going to cost around KRW 814.6 billion during the duration of the project from 2026 and 2030 and the government is funding KRW 308.8 billion. And so with that I will be able to have the commercialization and technology phase by phase. So let's now go to the RBM.

Next is POSCO Future M. Because the volume of f High-Ni CAM sales dipped against the previous quarter, plant utilization rate has fallen. At the same time, the Gwangyang precursor plant began operation in the 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 an inventory impairment loss.

Page 10 -- Page 12, sorry. 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. As you're aware, DLE process is an important technology to extract and process lithium. So we've already gone through a pilot project where we've tested our technology. So in the state of Utah, we planted a demo plant on a 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-tonne capacity precursor plant was completed in June by POSCO Future M. We're internally building out an intermediary plant here. So from raw materials to semi-finished products and all the way to cathode active materials, we'll be able to internally build out this process. And 3 of our RBM business entities raised paid capital. So KRW 1.1 trillion for POSCO Future M TPLS KRW 400 billion and KRW 32 billion by the parent company of POSCO HY Clean Metal.

And in July, we also entered into a major agreement with a Japanese battery maker for AAM materials. Next is POSCO International's increased recovery ratio at the Myanmar gas field and because we also have to consider seasonal factors, we need to be able to look at the last -- the same period last year, there was about a 20% decline. And there is strong profits in the materials business, but in power generation, because of the lower unit prices, we have suffered some losses here.

Page 14, POSCO E&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 Seocho District and the LNG terminal project in Thailand are new projects that we have won that brings order amount in the first half of the year to KRW 1.2 trillion.

So this concludes our brief earnings report for POSCO Holdings, and now I'd like to move into the Q&A. Thank you for your attention.

[Operator Instructions] The first question will be from Hyundai Motors Securities, Park Hyun-Wook.

My name is Park Hyun-Wook. So I have about 3 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. And there is the antidumping 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 there's shipbuilding 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 2031. Can you give us an update on the current status? And there's the -- after the Liberty Steel Whyalla 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 KRW 5,000 and KRW 8,000 to went up to about KRW 10,000. 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?

Thank you very much for your question. So regarding your first question, I think the Head of the Marketing can answer and the second can be responded by the relevant department and the third by the energy. So first of all, regarding the China decrease in production, it's been in the news for quite a while, but it has not really seen fruitioness 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. And so that's going to reach us in about 2 months. And we believe that that's going to have a positive impact on POSCO as profit in the second half. And so we believe them to be a positive impact.

So for the hot-rolled sheet, we will go from deficit to a profit, and this is an opportunity for us. Since the preliminary ruling were provided. We are looking for final rulings by the end of the year. So for this to be accounted for in our books, it will take until the end of the year. In automotive and shipbuilding user industry negotiations, you asked a question about that.

In both businesses or industries compared to other industries, they are at an advantage. 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 of 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. 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.

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 the details. So we did target for 2031, and that's still valid. 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 Rovati Steel, Whyalla steelmaker being acquired by POSCO. Well, regarding this possibility of an acquisition, the Whyalla has various different opportunities that we are looking into. And so we are internally reviewing the possibility. The steel mill itself is about 1.2 million tonnes. And so there might be not that much of a synergy that's possible, but there are mining opportunities, which we find quite positive. It has its own mine. And also there is lots of renewable energy possibilities 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 possibility of this kind of acquisition. And you also asked for the midterm production, so about 5.1 million tonnes is the target, but 2031 is the completion date for the Indian JV. So India will be about 5 million and Indonesia with the PT.KP 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 million tonnes.

So as of 2035, it will be around 15.7 million tonnes 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 the question about the lithium. The EV market is growing, especially in China and the LFP-led growth is quite notice. And the LFP is rebounding, we believe. And also the Chinese government is imposing quite strong sanctions and across the entire value chain, 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 LFP 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 the low price, 8 entities announced the lithium prices. So basically, if you look at their opinion in 2026, we 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.

The next question will come from iM Securities, Mr. Kim Yoon Sang.

My name is Kim Yoon Sang from iM Securities. I will ask 3 questions as well. First of all, our main export destinations 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. 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 million tonnes 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.S. markets and how they will impact each other? So with these sales strategies in the 2 regions, in the first half, sales volume remained in the early 8 million 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.

And HR antidumping 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. But because these using industries are going to suffer a little bit, what are your price policies going to be?

Marketing Strategy Office Chief. This is a very comprehensive series of questions. First, the 50% steel tariff from the United States, will that remain? 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 that strong commitment. So perhaps this year and until the first part of next year, yes, 50% will hold. That's what we're expecting.

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? I think that volume is going to be very minimal, maybe 10,000 to 20,000 tonnes. 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.

And -- 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. 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 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. 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. market, yes, I 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 the EU. 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.

But we'll be able to keep our prices pretty competitive in other regions such as in Southeast Asia. About 2 million to 2.5 million tonnes 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.

The next question will be posed by [indiscernible] from DBS Securities.

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. 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, 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 the increase of the capacity in Korea so what are your plans? So the second EAS in Gwangyang. So when it's going to be commercialized? What are the future plans and what's going to be the period for the ramp-up? And also, you have the Gwangyang EAS in 2026, I know that the #8 and CGL is going to be promoted also in Gwangyang, can you also give us an update on those projects?

So first of all, let me talk a bit about the PZSS. So first of all, currently, there's some progress, and we are now in the process of making the discussion of the final issues regarding the, acquisition company. So I won't be able to give you the details about the actual numbers. Please look forward to understand that.

And the second question was about the divestments that we are making due to the deficit. So there were some dividends coming from the PZSS, and there's also the cash flow 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 for the PZSS goes smoothly, then in the first half, we will see the final results from the sell-off but we do have that the government approval, and we do have to register the consolidation. So it's going to take a few months, next 6 months for that to actually be finalized. So of course, depending on how that plays out, the time frame 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. So what steel products are at a deficit was your question. So in the second quarter, I would say nearly none. During the first half, 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 to the black. And so there are hardly any products, especially in the steel plates that are recording a deficit. So for now, there are hardly any steel products that are recording a deficit.

I'm going to be talking about the EAF at Gwangyang. And so everything is going as planned. It's about 41% currently. And so we will be starting operations in 2026. So we'll be able to meet the demand and create new demand by that time.

Electrical sheet plants, those have been completed. So we are ramping up. And the Gwangyang #8 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. So we have delayed our decisions at this point.

From Eugene Securities, Eugene.

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.

And secondly, E&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. So PPLS in Gwangyang has completed certification by 3 customers and sale has begun. That's a plant 1. Second plant is going into certification, and the first stage of that certification is almost complete.

In Argentina, plant is in ramp-up and the other is under construction. The one that's in a ramp-up stage, we have not gone to full plant operation yet. 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 Gwangyang for 3 customers, we are on a smooth sale with customer certifications by 3 companies.

I'd like to answer that second question. I'm in charge of Finance. I believe you are referring to the E&C safety incident that happened at the Shin-Ahn-San line that happened on the 11th of April. And we are the lead contractor on this construction project. This 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. But as you mentioned, yes, the investigative report will probably be completed 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.

Next is from [indiscernible] Securities [ Choi Moon 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 would like to congratulate you on that regard. So right now, there are some projections regarding the cutdown 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 as -- 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 to first too fast, but POSCO, if it's going to earn a profit from lithium also would depend on how much cash cost you'd have and how much is going to go down. 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?

I'm Head of the Marketing Strategy. So first of all, deal with your first question. So is it going to be the cut in production 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 overly 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. 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 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're just going to continue to monitor the market.

Let me now answer the question about the Argentina. Since October, Argentina -- POSCO Argentina has been ramping up. And the salar are different, Korean salars are different. And even within Argentina, the Hombre Muerto and the other salars 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 costs. But for now, the things are rather uncertain, so I won't be able to give you a definitive number. But if it goes beyond $9, then it's going to be more beneficial to produce more.

Next question is from NH Investment Securities, Mr. [ Lee ].

I'm from NH Securities. My question will be simple. It's about steel. The volume down for Canada and Mexico. I wonder if you can share that volume. 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. But once the second plant is online, this utilization rate will go up. So what do you predict will be the time line 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 deficits?

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 1 has been certified. The second plant is scheduled to complete certification by October after it's fully ramped up. 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 million tons to North America each year, except in U.S. and Canada. That number is very small to Mexico. Because we have our own subsidiary there and for processing centers that apply to the automotive companies, we do sell about 1 million tons to Mexico.

Next question will be made by KB Securities, Choi Hyun Yong.

Hello. I'm from KB Securities. I have 2 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&A. And so I'm asking because your CapEx investment is projected to grow from our perspective. And so the -- is there a possibility that the SCF 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 planned for KRW 8.8 trillion. And for now, the plan has not changed. For the Argentina M&A and the investment into Hyundai Steel they are reflected in our plan already. 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 SCF deficit. The EBITDA is not going to cover that so I'm not sure how I should explain this.

Maybe I should answer the second question. So recently, the POSCO Future M and the PPLS, and this paid-in capital raise was about KRW 6 trillion. 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 2 years, additional paid-in capital will not be happening.

And what was included from the recent capital raising event was POSCO Argentina. 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 lakes, once that happens, POSCO Argentina will be the entity acquiring those additional assets. So because they were not part of this part of the capital raising invent, they could potentially do so in the future.

So regarding the first question, I would just like to say, well, there was a question about the possibility of a deficit of this year's FCS. So are you talking about the EBITDA deficit? Then 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 to say -- well, you can't really say that we'll be able to -- we'll be increasing the borrowing because of the enlarged gap.

Next question is from [ Kiwoom] Securities. [ Mr. Lee ].

I'm from [ Kiwoom ] Securities. I have one question. So NSC acquired USS, it took about 1.5 years. And the cost of price tag was about KRW 20 trillion. 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 predictions? I know this is a very broad question, but what are your assessments?

Steel business management later here, whether it's the Japanese steel company or POSCO, we have similar global investment strategies. High-growth market or high profit market. Among the 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. 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 term 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.

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, 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.

So anybody with further questions, please go ahead. Next question will be made by Yuanta Securities, Yi Hyunsoo.

My name is Yi Hyunsoo from Yuanta Securities. I have about 2 questions. First of all, regarding steel. So I think that the question was made before me, but I didn't quite get the answer. So in first quarter and in the second quarter as well, it seems that the sale was about 8.1 million 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. So in the first half, it was 8.1 million tons. 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 Finex No. 3 that was caught on fire. And so yes, 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 200 million, which is -- 2 million, excuse me. 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 today. So usually in July, you have Value Day, but that time has come and passed. And there were some forward guidance 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. 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?

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 8.1 million. So in the past, yes, we had a ramp-up of 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 Finex No. 3 has stopped operation and now repairs have been done, and so that's going to be finalized about September. The capacity is not going to reach 2 million. 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 No. 3 will start producing and then we'll be able to see those numbers being accounted for. Additionally, you have the Finex No. 3 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 KRW 2.2 trillion and EBITDA KRW 0.5 trillion. And so I think it's going to be about 5% of a decrease. The production volume is going to decrease. 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 Gwangyang -- in Pohang sorry. And so there was a bit of that decrease.

In 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 that, but the OP depends on the nickel prices, as you know well. So depending on the lithium price, the EBITDA is going to fluctuate.

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 second quarter of 2025. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]