Posco Holdings Inc
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Posco Holdings Inc
Earnings Call Analysis
Q3-2024 Analysis
Posco Holdings Inc
In the third quarter, POSCO's consolidated sales reached KRW 18.321 trillion, with an operating income of KRW 743 billion. This performance was on par with the previous quarter, thanks to the company’s focus on high-end steel products which contributed to their profit margin. However, the overall performance was marred by sluggish demand in both the steel sector and rechargeable battery materials, as well as initial ramp-up costs from their subsidiaries.
The steel sector saw a decline in operating profit to KRW 466 billion, down by KRW 31 billion from the previous quarter. Despite posting small improvements in POSCO's figures, the overall profitability was negatively impacted due to weakening demand, especially from Chinese subsidiaries. The infrastructure segment fared somewhat better, with an operating profit increase to KRW 449 billion, thanks to enhanced power generation revenue. Issues also arose in the rechargeable battery materials business, where operating profit saw a drastic drop of 64% due to losses in cathode materials and a decrease in anode material sales.
POSCO is taking significant steps into the Indian market through a joint venture with JSW Group aimed at building an integrated steel mill with a production capacity of at least 5 million tonnes. This collaboration also extends into the renewable energy and rechargeable battery materials sectors. The joint venture is designed to localize POSCO's operations in key markets, enhancing their growth potential and reducing geopolitical risks.
In terms of production, POSCO completed Phase 1 of its lithium hydroxide plant in Argentina, with a capacity of 25,000 tonnes. The initial output of 200 tonnes has been successful, and they plan to ramp up production significantly in the coming quarters. By the end of next year, POSCO aims to have a cumulative production capacity of 68,000 tonnes along with another 25,000 tonnes from a second phase of lithium production startup.
For the upcoming quarter, POSCO anticipates raw material prices to continue declining while production sales volumes are expected to increase slightly. Nonetheless, the sluggishness in the real estate market in China presents a challenge, indicating the sales environment will likely remain tough. The company expects profits to stabilize in the fourth quarter despite decreasing selling prices, owing to a higher proportion of long-term contracts with high-value products.
POSCO is actively pursuing a restructuring plan, having added five more targets to the original 120 announced in July. This initiative aims to streamline operations and divest non-core assets, achieving a total of KRW 625.4 billion in cash released from completed asset sales. This restructuring is expected to bolster cash reserves up to KRW 2.6 trillion by the end of 2026, which will be crucial for future investments and operational efficiency.
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Greetings. This is POSCO Holdings Earnings Release Conference. Thank you all for participating. Today, we will hear a presentation from POSCO Holdings first, and then we will have a Q&A session with all the participants. [Operator Instructions] so now I would like to begin the third quarter 2024 earnings release presentation.
Greetings. I'm CSO of POSCO Holdings. My name is [indiscernible]. We have closed third quarter revenues and operating profits at levels very similar to the second quarter. However, steel price fell slightly deeper than we anticipated. In rechargeable battery materials, key raw materials prices continue to decline, creating a challenging business environment.
These challenges notwithstanding, we try to stretch profits as much as possible, especially in steel, WTP products, our high-end steel products that make up 32% of our sales, helped to secure a level of profit margin that sustained POSCO's operating profit.
In battery materials, lithium hydroxide prices falling below $10,000 per ton. Rapid price decline is exacerbated by the reverse lag created by the time difference between when they are bought and sold. This creates added challenge and disadvantage.
In addition, our brine and lithium production plants lined up to complete construct. Anytime a plant comes online, they entail initial investment and operation cost that add to the overall burden of expenditures. However, some have recently been commissioned. The fact that these new plants have been completed and initial pilot operation have gone into effect without a hitch gives us reason to be proud that our lithium production technology and facilities have arrived at commercial scale.
Before I give you -- give the floor to the Head of IR for more detail on our earnings, I'd like to take a moment to strategic alliance struck between POSCO Group and JSW Group, which released yesterday. In your deck it pertains to slides 5 and 8. With JSW Group in India, POSCO Group has signed an MOU to cooperate not only in building an integrated steel mill in India, but also to extend that collaboration into rechargeable battery materials and renewable energy sectors.
In steel, we're delving into the details of building an integrated mill in India with at least a 5 million tonne capacity. The new upstream plant will have a 50-50 investment from POSCO and JSW Group, with plans to focus on premium automotive steel products. We have been proposed 2 potential plant sites that we are currently examining.
In addition to the JV in steel, we're also discussing collaboration in rechargeable battery materials and renewable energy. While still early in our discussions, we're studying ways to collaborate on LFP-type EV battery materials, in which cost-efficient manufacturing is an essential condition.
This business partnership with JSW Group and our entry into upstream business in India have 3 strategic implications for POSCO Group. First, it is our response to the formation of steel market blocks around the world. Given the geopolitical risks and protectionist trade tendencies, the global steel industry supply chains are grouping into blocks.
Hence, we must address this shift through localization in key markets. By entering the upstream business in India, we plan to move away from previous business strategies that focus on seeking growth centered on downstream process. Instead, we wish to get to the growth market early and to build presence through upstream business.
On Page 7, we provide a brief overview on the Indian steel market. India is one of the fastest steel demand growing economies in the world. Per capita steel consumption in India is 90 kilograms, which is a mere 40% of the global average. Moreover, it is a market that is growing with strong push from the Indian government's promotion policies.
On the other hand, the market share of the top 5 Indian steelmakers is over 60%, signaling an oligopoly. Because the government protects its national mills, profit is relatively strong, too. Finally, abundance of iron ore reserves promise ample supply of inexpensive raw materials.
In 2009, POSCO set up POSCO Maharashtra or PMH, a downstream plant. We've defined our position in the market as a key automotive steel sheet supplier. As of 2023, our market share in automotive coated steel was 28%, taking joint #1 market position. Currently, more than 50% of our products are supplied to the auto industry.
Because we've already acquired a good number of clients that use premium steel products, we hope that a new upstream facility in India will generate immediate synergy with existing networks and assets in the country. And this is the way we want to be able to build a larger market for our products.
The second implication is partnership with a formidable local partner. On page of your handout, there's a brief description. JSW Group is ranked #1 steelmaker in India by production volume. A joint venture with such a strong partner helps to mitigate local risk. Therefore, we believe our partner will help us to make our entry into the market faster and more efficient. So entering into an overseas market in a more efficient way helps us to generate more profit wherever we end up.
The third implication is in battery materials and renewable energy, we have strategic alignment in these areas for collaboration. JSW is known as a steel maker. However, they have recently acquired shares of MG Motor India and built a recycling business, too. These actions signal aggressive investment into EVs. Through JSW Energy, the renewable energy business is expanding, too.
From these perspectives, we find a great level of strategic alignment with POSCO Group's eco-friendly rechargeable battery materials business. Given the growing importance of manufacturing cost competence in the battery materials sector, India is rising in prominence, especially given its growing projections of EVs, and therefore all the more important to have a local partner in doing this business.
To our investors and shareholders, I want to stress that due to a sluggish market, cost recovery continues to be delayed in both steel and the Battery Materials businesses. We're committed to continuing sound profit management and to seek growth trajectories in key businesses. This is how we promise to do our best to surmount the current crisis.
While we expand in these business areas, we're also committed to simultaneous restructuring of nonessential businesses and nonperforming assets. Through these efforts, our long-term goal is to enhance capital efficiency. Now I'd like to hand the floor to the Head of IR, who will deliver our third quarter earnings.
I'd like to discuss the consolidated results for the third quarter. Please go to Page 4 of the presentation deck. Overall, the third quarter ended at a similar level to second quarter. We recorded KRW 18.321 trillion for the sales and operating income, KRW 743 billion. We made a lot of [indiscernible], a lot of efforts, but because of rather sluggish performance in the steel and rechargeable batteries and the initial cost of subsidiaries being reflected that turned out to be a factor.
For the third quarter, we have sales and operating income for the third quarter at KRW 18.321 trillion and KRW 743 billion. And that's EBITDA of KRW 1.75 billion in the third quarter.
And we have -- now going into the sectorial outcome. Please go to the steel side. On the operating profit, that was KRW 466 billion, and that's down by KRW 31 billion from the previous quarter. POSCO posted an improvement of KRW 20 billion, recording KRW 438 billion, but because of the deterioration in the profitability of the Chinese subsidies, including Jhanjiangang, we have seen the sluggish steel demand in China resulting to the results.
Infrastructure segment posted operating profit of KRW 449 billion, up KRW 20 billion and the profit improved at POSCO International due to high power generation profit.
For the Future M, because of the lower anode active material sales volume and losses in the cathode material, the profit shrunk and the POSCO Pillar lithium solution began to reflect the initial cost of production entities, including ramp-up of the POSCO [indiscernible] lithium solution and the completion of the POSCO Argentina.
Next, I'd like to share with you the major activities in the third quarter. Mr. [ Chung ] spoke about the strategic alliance between POSCO and the JWS Group in India and our successful entry into the Indian market. Please go to Page 9 for the completion of the POSCO Argentina Brine Lithium Phase 1 plant construction.
For the POSCO Argentina Brine Lithium Phase 1, this is upstream and downstream process with capacity of 25,000 tonnes of lithium hydroxide. It has been completed recently. Completion ceremony was held in Argentina. And the initial production of 200 tonnes of lithium hydroxide was successfully completed.
We are currently going on with a ramp-up process from November, we start the product certification process for the POSCO Future M and battery companies.
Next, on the upstream process of the POSCO Argentina Phase 2 with a capacity of 25,000 tonnes, this will be completed in the third quarter of next year. And if the downstream process in [indiscernible] is completed around that time, I think this will happen by the end of next year, and we'll have a system of 50,000 tonnes of sulphate-based lithium brine-based lithium hydroxide production.
The POSCO Lithium [indiscernible] 1 plant in [indiscernible] height of its production ramp-up schedule by about 1 quarter and is expected to be completed by the end of this year. In the third quarter, the cumulative production will be 1,965 tonnes, and we are stabilizing the production.
So we're inching closer to the stage of stable to mass production. This is the internal evaluation. And at the same time, the product validation is nearing completion. And we are pleased to announce that we recently signed a contract to supply 20,000 tonnes of lithium hydroxide for EVs in 2025, and this will be signed sometime in December of this year.
For the full scope future battery companies, we are currently going on the certification procedure. And we believe that additional supply contracts will be added in the first half of next year.
By the end of this year, as you know very well, we have a capacity of 21,500 tonnes, a second plant to be completed. We're working very hard to complete the completion. And currently, we're going -- undergoing commissioning. And this shows to be completed by December this year.
So with this, the hard rock and the brine completed, we believe that we will have a production base of 68,000 tonnes and 89,500 tons by the end of next year. More recently, we have seen the lithium prices coming down below 10,000 levels.
And by the end of this year and next year, we will have investments for the new plants, and the product certification will take a year or so. And we are not going to be able to enhance the utilization and the rate very rapidly. So we have some fixed cost coming in. So it will take time for us to come to the normalized the margin level. So we are trying to accumulate the mass production experience and also trying to make sure that we bring efficiency in the production. So we're setting our best efforts to come up with the best results.
We're also trying to advance the normalization of lithium production, and we're also working to secure key mineral acids at the time of decline in lithium prices.
And as reported by the media, you'll see that in the Chile, the Altoandinos lithium project is going on. We were included in the short list in August and negotiations are currently underway. We believe that by the end of first quarter, the final candidate will be selected.
And also for the Maricunga Salt, the brine-based lithium project, we are participating in the bidding process. And in addition, we also have like the hard rock-based lithium. This is also what the company is considering mainly in Australia and the United States.
Secondly, I want to mention that POSCO International has made equity investment in Black Rock Mining, and this is going to be 60,000 tonnes of battery grade flake graphite.
Next page, this is about the progress of restructuring program. The company has added 5 more restructuring targets on top of what we announced in July. So there will be 55 -- a total of 55 on the low-margin business is 70 non-core assets. We have 21 businesses and assets. We have completed restructuring. This led to a freeing up of KRW 625.4 billion in cash, and this is as of the end of September.
You'll be very curious what we have sold off. So some of them include heavy oil plant in Papua New Guinea and the regional steel processing center in China. So these are some of the low margin, the production centers that we have owned in the overseas countries. So these are low margin, and these are not part of the core future businesses we have in mind. So we sold them.
And for the noncore assets, I also want to mention the KB Financial Group was sold and Expressway, where we have like a simple minor equity stakes. And we also have [indiscernible] multipurpose commercial building, which is a noncore real estate assets that we held. So we sold these assets to secure more cash.
And on these points, this relates to improving the efficiency of our asset management at the group level. And as I have announced before, by the end of 2026, we'll be able to arrive at the target that we have set. So we'll be able to come up with KRW 2.6 trillion in cash, and this will be used for future investments. And we will make sure that there is like a stringent control of the management of these assets.
Next, I'd like to talk about the company results. Please go to Page 11. The first up is POSCO. POSCO's crude steel production in the second quarter turned out to be normalized. It has been reduced a bit and it's returned to normal levels. And that comes after the [ Pang ] #4 blast furnace completion. This increased by 1.233 million tonnes from the previous quarter of 9.234 trillion tonnes.
And correspondingly, our revenue has grown to KRW 9.479 trillion. Although the profit improved due to the effect of lower fixed cost due to the increase in the production volumes, we have seen some improvements, and also, you can see the raw material prices has also dropped. But the sales price, this has reduced by KRW 43,000 per tonne. So this is a large decrease. And therefore, the margin is reduced slightly. And despite the difficulties, we believe that we have seen the sales improved slightly from the third quarter.
For the fourth quarter, you see that the raw material prices are expected to decline further quarter-on-quarter and production sales volumes are expected to increase slightly compared to the third quarter. So in terms of the manufacturing cost, the fourth quarter turns out to be more positive than the third quarter.
But we see that the real estate downturn in China continues, and there are no concrete signs of recovery. So the sales environment is expected to be -- continue to be challenging.
The company has -- compared to other competing companies, we have high proportion of long-term contracts with the higher-value products. And thus, we expect the profits in the fourth quarter to be in line with the third quarter. But we are making every effort to secure profits in case the decline in selling prices continue.
Please go to Page 12. In the overseas steel business, we look at Indonesian mills, the upstream and also the short pressure mills in India and Mexico. They're improving their profitability by increasing the proportion of high-margin steel plates. In particular, for the POSCO Maharashtra, the Indian downstream subsidiary, is making structural progress in diversifying sales mix towards a high-end automotive steel. And the proportion of alternative steel sales is reaching 52%. So in terms of the mix, we are looking at structural improvement.
However, I want to mention that if you look at the [indiscernible] and the Chinese subsidiaries, we are looking at lower selling prices caused by the deteriorating market conditions. And therefore, the overall profit from the overseas steel decreased quarter-on-quarter.
Next is on the POSCO International sales and operating profit increased by 0.1 point, respectively, from the previous quarter. We have seen in the energy sector operating profit decreased due to a decrease in the cost recovery ratio of the gas fields, but we are able to result lead to a profit in the same level as the previous quarter.
On the POSCO E&C, we look at the ongoing prices in the construction market. So we are prioritizing on securing financial stability, including cash flow-oriented management. We want to maintain this profitability level.
In the third quarter, in line with the group restructuring plan, we sold noncore assets and that led to more than KRW 100 billion in the cash and improving profit by KRW 32.9 billion.
Let's go to POSCO Future M now. Sales increased slightly from the previous quarter. But if you look at the sluggish business in the Energy side, we see that the operating profit fell 64%. In the cathode active materials, sales volume increased on a quarter-on-quarter basis, and this is due to strong sales in the high-nickel products, but because of the inventory valuation losses, operating profit turned to a loss.
In the anode materials due to sluggish sales of the natural graphite, we have seen the overall decline in the profitability. For the Pohang #4 blast furnace because it has been -- because of the changes incurred there, we see that things have been turned to the normalized level.
And I think this includes a brief overview of our third quarter earnings. Now we'd like to proceed the Q&A session. Thank you.
[Operator Instructions] The first question is from Hyundai Motor Securities, Mr. Park.
I have about 3 questions. The first is regarding the market -- steel market that is. In automobiles and shipbuilding, what kind of price negotiations are ongoing? And how is it going? And there have been some announcements regarding EVs and there are mixed signals. From POSCO Holdings perspective, looking at the stimulus package that's been released in China, how does that relate to our own steel market? How do you view that?
The second question is regarding nonessential assets and underperforming businesses. These are onetime expenditures that are usually consolidated at the end of the year. And I totally understand why you would want to do that. Is this something we should be expecting this year as well? So on certain onetime expenditures, will we see all of this being consolidated towards the end of the year?
And third is something that was mentioned by the CSO. So the fact that POSCO is investing in India, I think that's practical and reasonable. However, I do have some questions. You did mention an integrated mill. Is this blast furnace based or is this based on hydrogen steelmaking?
And I also have a question about the size. it's probably going to be one blast furnace, but it's probably not going to end there. So does it have expandability?
And the location of Odisha, there's quite a distance between Odisha and Maharashtra. So if you produce in Odisha and other sheets are produced in PMH, there's quite a distance and transportation that's required. So how will you calibrate what gets produced where?
And about 20 years ago, I believe you had contemplated building an integrated mill in Odisha but failed. And I believe there was a lot of opposition from the community, and that was part of the reason why you failed. What is different this time?
And I believe it was in 2022 with [ Adani ], there was an MOU signed to invest $5 billion into some eco-friendly facility. Now that you have held hands with JSW, what happens with Adani? Has that been canceled? Or are you doing both in parallel? And if this is an investment into a blast furnace, I believe POSCO has already announced its carbon-neutral strategy. If it's blast furnace based, then how does this fare into your carbon neutrality road map? That's all of my questions.
So you asked 3 key questions. The first is regarding the steel market. And we will have Mr. [indiscernible] from the Head of Marketing Strategy Office. And on the second question, I'd like to ask Mr. [indiscernible], Chief of Corporate Strategy. And on the question regarding the investment in India, we will ask Mr. [indiscernible], Chief of Steel business.
My name is [indiscernible]. The second half of this year, we had mixed signals about either a rebound or a prolonged recession. And it was very much dependent on the stimulus package that was released in China. Since the announcement of the stimulus package, we did see a huge rebound in the Chinese domestic steel prices. But because there were lingering questions about how much impact this was going to have, the prices began to fall again.
In shipbuilding and automobile industries, you asked about the impact in those industries. We have half year contracts with the OEMs. And so when we have these half year contracts, of course, the third quarter and fourth quarter run on the same prices. But in the beginning of next year, we may see some prices negotiated upward and downward.
Currently, in shipbuilding, we have not negotiated the full price for the fourth quarter. So that is upcoming. And we are trying to up our price with some of the shipbuilding companies, but we are up against some resistance.
Since the Chinese stimulus package, what are some projections that we are making? I think that was part of your question. As mentioned before, since the stimulus package, yes, we did see a huge rebound in prices. And rather than thinking that demand was going to follow suit, we did think that there -- the prices had already reflected future stimulus packages. And so at some point, the price went above $100 per ton.
But I think thereafter, the price began to reflect some disappointment, and so it began to fall again. But I don't think it's going to fall too low. A lot of the steelmakers in China are already in red ink. And the Chinese government is likely to announce another stimulus package in December. And so we believe it's going to hit another rebound pretty soon.
Second question on nonessential assets that is regarding restructuring. And I think the question was, will all of these costs be consolidated in 1 quarter towards the end of the year? In the second quarter, during our earnings release, we did release about 120 restructuring projects and our plans to restructure these assets or businesses.
But now after some time has transpired in the third quarter, in particular, the restructuring that was scheduled is on schedule and proceeding as planned. So some of the divestments as well as sales. In some of these cases, we can generate a profit. In other cases, we may suffer some losses. And that is exactly what happened, but profits outweighed the losses, and that's why we turned a general profit.
In the past, when we sold off our nonperforming assets, yes, we did generate a lot of losses. And so I think a lot of people remember those numbers. And I want to remind you that during this restructuring, we are going to suffer some losses. But according to what we've seen so far and what we plan in the future, there will be more profits than losses. But again, there will be some impairments, but I think they will be overweighted by the profits, and so the impact is not going to be hugely negative.
I'd like to respond to the third question. Regarding hydrogen-based steelmaking and blast furnace and which part will be implemented in India. The hydrogen-based steelmaking is not yet commercial scale. So of course, we are going to install blast furnace and a shaft method, and this will have to go through discussions with our partner.
In the first stage, we will do 5 million tonnes. And what we contemplate at the moment is the first plant site is about 1,600 acres. And so yes, there is expandability to Phase 2. In addition to that site, we could be looking at other sites, too, and that is under consideration.
The location of Odisha, there's quite a bit of distance between Odisha and PMH. In Odisha, there are many rolling mills from where we get our supplies. So the upstream process, if we place that in Odisha, we will have no shortage of supplies from the local mills. And so keeping our production site here in Odisha, we have plans to go all the way from upstream to downstream.
Yes, about 20 years ago, we failed to acquire the land on which we would be able to build the integrated mill. It was not just the acquisition of land, but also mining rights that became the issue at the time. But this time, yes, we are working with a local partner, so they will take care of the mining rights.
The MOU with Adani Group, that MOU was signed at the end of 2022. I think it was in the beginning of 2023 that Adani was languishing in the Hindenburg report. And so we could not carry on that partnership. And that's why JSW and Adani will not go in parallel.
In India, carbon net zero goal is by 2070. Ours is by 2050. So in India, we intend to follow local rules. For example, if we invest in a blast furnace, there are many technologies that are under development, such as hydrogen mix technology as well as CCS. And so there are many advanced technologies that are being developed by POSCO Group right now that will all be put to the test and applied there. That's how we will try to get to carbon net zero in India.
I hope that answered your question. We'll go to the next question.
The next question is from iM Securities, Mr. Kim.
I have 3 questions, 3 very short questions. My first question pertains to India. On India, what is the demand situation, demand to supply situation? What is POSCO's view? If you look at the demand growth, I think it could be quite positive. But if you look at the supply side, I think there's a rapid increase in the supply as well. So if you look at India, it may not be like quite like the Chinese market. But what about -- how do you address the concerns you have the India market, given the market and demand situation?
Secondly, if you look at the overseas penetration, you gave us good explanations about Indian experience. What about the United States? China also the Southeast Asia, there is a lot of overflow of Chinese products. So give us an update on what you're doing in this region as well.
And for the [indiscernible] steel plates for the Hyundai, and there's been some investigation for the antidumping for the low-cost Chinese steel products, what is your position on the Chinese products? And how do you intend to respond to that situation?
Talk about the demand and supply situation. If you look at this demand, I think it's about 150 million. And by 2030, the government intend to make it to 300 million tons or 200 million tonnes from our forecast, depending on where we see it.
And also, I'd like to say that if you look at the demand itself, if you compare to China and India, I don't think there's a substantive increase in the India side. There's like a 6% or 7% increase every year. If you look at the past experiences in 2000 or right before 2000, if you look at demand increase in China, there was an increase of 20% to 30% every year. So if you look at the situation, and of course, the concerns -- there could be concerns about the oversupply, but even if there is an oversupply situation, partially there could be oversupplied, but POSCO believes that given the portfolio of our products, we focus on the high-end products. So I don't think there will be much of a problem there.
And for the steel demand, if you look at the increase in steel demand, you see a slight increase in the Chinese side as well. But in India, there's an increase by 10 million to 15 million tons every year. And if you look at the demand and supply, I still believe that there is a lot more demand than supply.
The second point about the U.S. and Southeast Asia, the upstream strategy for the United States, 2026 or 2027 will be the year that we have been considering the upstream process. For the electric furnace, we are continuing to make efforts. That's what I can tell you for now on the United States side.
On the third point, for the steel plate AD, the Southeast Asia for the upstream, the AD products, PYV in Vietnam is going on pretty well. And I think we're considering further expansion in the future. For the Indonesia, 3 million tons, we believe that we need to actively consider expanding in the future, Indonesia as well.
In Indonesia, I don't think we have anything quite concrete right now. We don't have any concrete plan going on for Indonesia right now.
On the third point, for the steel plates, on how we will respond for that POSCO, Mr. [indiscernible] is going to respond.
On steel plate AD filing and what are our responses, I'll give you the answer on that. On steel plates and the antidumping filing, there are inquiries that have been sent out by the Korean government to industries that deal in the same products. And so we will be responding to those inquiries.
Our deadline is by mid-November, and I think we may be able to get an extension on that. So we will respond to those inquiries. And of course, there's a lot of cheap Chinese products that are flooding our market. Of course, AD filing is a right protected by international law as a means to address unfair trade practices. So, key steel making economies, in an effort to protect their domestic steel makers often use AD rules as trade remedies.
Recently, Chinese and Japanese hot roll steel sheets are under investigation or subject to AD ruling in the EU, Turkey and Vietnam, and Canada, Mexico, Indonesia, Taiwan, Thailand, Australia and UK, AD rulings are being practices on HR steel sheets.
So, despite strong protectionist measures undertaken by steel producing economies, the Korean steel industry is so defenseless to imports in an essentially open market, devoid of any protectionist mechanism. Unfair trade practices are flooding the domestic market, and so POSCO has to take some action, as well. Therefore, we intend to strengthen our monitoring activities on steel imports and to address unfair trade practices, we are actively reviewing diverse means of remedy, including AD filing.
Thank you.
Next question is from Yin Securities, Eugene Lee.
Can you hear me? I would also like to ask about 3 questions. First is about the steel market and steel price that -- where recovery is delayed. I feel there are some investments that are being planned, but the cost seems a little bit high. What are your plans here?
And regarding CapEx for your Indian project, can you make some comparisons?
And regarding PMH, I think you are planning about 40 million tons. What is the feedstock that has been secured for this production volume? I'd like your analysis on that.
Silicon Solution is my next question. I wonder if you've acquired some good number of clients, customers.
On the CapEx, we will ask Mr. Kim Seung-Jun in charge of Finance and IR. On PMH and feedstock, we will ask Mr. [indiscernible], and the third question on silicon solution production plans, that question will be answered by the Head of Nickel and Next-generation business team, Mr. [indiscernible].
So first on how to secure the funding. In India, the investor is POSCO. So POSCO is going to make the investment. And our plant capacity is 5 million tonnes. So it's going to be about KRW 8 billion. But this is a joint investment with a partner, a 50-50 investment. So we will be investing maybe about KRW 5 trillion. Each year, about KRW 4.5 trillion EBITDA should be generated. And this is going to happen over a period of 4 to 5 years, not happening all in 1 year. So with that EBITDA, I think it's something we can definitely manage and accommodate.
In lithium, POSCO Holdings will be making the investment here. This is also not 100% from POSCO Holdings. We will have local partners. And so there will be some calibration of how much will be expended. If we look at cash reserves, we have about KRW 4.5 billion in cash reserves and the convertible bonds that have recently been cash, that generated about KRW 3 trillion as well. So we have sufficient funds.
Looking at our financials, these -- this CapEx is not a huge burden.
PMH, so full hards and HR products that are supplied to PMH from POSCO, it's about 1 million tons per year. If we should make this investment, the hot-rolled products will not be removed immediately. It will go through a phased reduction. So about 1 million tons of hot-rolled products will, over time, be removed. And so we will have to find other markets.
And downstream capacity is something that we would like to acquire additionally. And so that's how we intend to adjust our demand and supply.
Let me address Silicon Solutions. Our Silicon Solution plant will be commissioned next week. So prior to full capacity production, we will have to go through product certification, of course, through domestic refineries as well as Company P in Japan, cCompany M in Europe and other companies in the U.S.
We are in negotiations with a number of companies. Our certification samples have been submitted to these companies. And we have also signed MOUs with a certain part of these clients for a certain volume uptake. And so samples have been submitted and progress is being made so that we will be able to get certified as soon as possible.
Next question is from DBF, Jae Heon Jeong.
I'd like to ask you a question about your investments in India. You said that it is a 50-50% stake investment. And if you do a joint venture based on 50-50 equity, then this may lead to a number of issues, for example, shareholding rights. And so there could be a possible conflict in the future. So we have concerns about that as well because this is an Indian venture. So do you have any like a call option, any special provisions to protect the shareholders? Do you have anything reflected in the shareholder structure?
And JSW, as I understand, has sought 10 million ton of the capacity expansion on its own before it entered into a joint venture with the POSCO. So JSW has its plan for the capacity expansion. And with this investment with the POSCO, it looks like that it has a strategy to arrive at the high-end product, as well. So I have concerns that they may abuse you in the future.
If you think about the 5 million tons, on what the production process is going to be, how you intend to produce them? You said that nothing concrete has been finalized yet. But this 5 million tonnes, is that targeting purely the Indian market? Is it your -- is my understanding correct that you are just targeting the Indian market with the 5 million tons of products?
And also concerned about carbon neutrality because carbon neutrality is not something you implement just for the POSCO India or POSCO Korea or the United States, it's going to be on a consolidated basis, and you have to look at the carbon emission level as a whole. I think that's what shareholders were looking for. So if you have this 50-50 venture, financial outcome is going to be very important, but you said to be thinking about the carbon emissions level, where would the emissions be calculated? Would it be at the joint venture or the POSCO as a whole? So I'd like to ask you about the questions, ask you to explain that as well.
And you're going to begin lithium production and the lithium prices has come down quite substantively. And if you think about the cost competitiveness, if you think about what you have in Argentina, you said that your competitiveness is very high. But if you think about amortization and depreciation cost and the production cost, all considered what would be the BP for the POSCO?
You're at the initial stages of production, of course, you can't reach the breakeven point. But let's say the utilization rate rises to 70%, 80% levels. What will be the production cost, which we can realize the breakeven point? If you think about the brines and also the hard rocks, what will be the cost structure? I'd like to ask you to explain on that as well.
Well, we make 50%, 50% investment. We may -- you said that we may enter into some conflicting situation. But we have 50% equity, and we have a BOD that is structured with 50%, 50% from both sides. I don't think we're going to enter into major conflicting relationship. we are trying to secure the site and come up with the FS. And so it will take some time for us to achieve at a certain level. So it's a call options. In the future, we will certainly make considerations for that in the future.
10 million ton, I think to try to secure on their own side is already done. So if you think about the Odisha site, there could be further expansion made so that by 2030, this will be risen to 25 million levels. So what they are trying to negotiate with us is part of the 25 million they have in their plan.
And the joint venture with POSCO is not an integrated steel mill. They want to come up with the high-end mill. So that is what has been currently being discussed with the Indian partner. And India has 150 million tons in size in the market size. And the export ratio is relatively very small compared to Indian or the Korean's market size. So this will be purely an Indian market that we are targeting with this joint venture.
With the carbon neutrality, I think we need to be very realistic in our purchase. Of course, they need to be consolidated. We need to make public disclosures, but we need to be realistic in our purchase. If we make the reduction efforts in India, I think the market would understand our position in looking at the realities of the market situation in India.
On the lithium side, Mr. Lee, who is responsible for the lithium business, Mr. [indiscernible] is going to respond.
On the BP, breakeven point, for the Salt Lake, the brines, I think lithium producers all over the world are suffering because the price of the lithium is less than 10,000. So even if they do a salt lake-based brime business, they're not making good profits.
We're still at the early stages. So I'm not really sure what to say as of now. But compared with our competition, competitors, I think the Salt Lake quality is very high. The lithium content is very high. And therefore, we are not very concerned about that, but we have made quite a lot of investments. So there could be quite high amortization cost. But as we enter into full mass production, we believe that I don't think there's going to be a significant difference between what we make and what other competitors do. So I think we can make a good profit with this Salt Lake brine-based business.
And if you look at the cost difference between the hard rocks and the brines, first, as we purchase Salt Lake, we make a massive investment for the hard rocks or the lithium solutions, we make monthly investments because import from Australia on a monthly basis. And therefore, this -- there is like raw material cost, feedstock cost.
If you think about the process, the processing, I think there's not going to be a great difference, but the difference comes from the feedstock from the raw materials. And the hard rocks are more costly than the Salt Lake as of now compared to the price, it's a lot more costly.
Do we have any other questions? No one has requested to ask a question yet.
So let me speak. I'd like to thank everyone who participated today. The third quarter 2024 earnings release presentation ends now. Thank you very much for your participation.
[Statements in English on this transcript were
spoken by an interpreter present on the live call.]