Posco International Corp
KRX:047050
Posco International Corp
Posco International Corp., the sprawling entity born from the legacy of South Korea’s steel titan, Posco, is a master of integration in the realm of global commerce. Headquartered in Pohang, South Korea, it orchestrates a symphony of diverse operations spanning from steel production to energy exploration. While it operates under the immense umbrella of its parent company, Posco International has carved its identity as an indispensable arm of international trade and resource development. The company capitalizes on its solid expertise in trading by dealing in a broad array of commodities, from steel products to agricultural goods, ensuring its place as a vital cog in the industrial supply chain.
The beating heart of Posco International’s revenue stream lies in its strategic ventures in the energy sector, particularly through oil and gas exploration and production. These ventures are complemented by its involvement in renewable energy projects, reflecting a modern shift toward sustainable business practices. Beyond resources, the corporation's intricate web of trading networks stretches across the globe, facilitating a seamless exchange of goods and services. This diversification not only stabilizes its financial performance but also allows the firm to thrive amidst the ebbs and flows of global market demands. By leveraging these multifaceted operations, Posco International stands as a beacon of adaptability and resilience in an ever-evolving economic landscape.
Earnings Calls
In the third quarter, Posco maintained its sales at KRW 18.32 trillion, matching the previous quarter despite a 31 billion KRW drop in operating profit. Key factors included increased production post a furnace upgrade and declining raw material costs. However, challenges persist, notably sluggish demand in China and lower steel prices impacting profits. Looking ahead, Posco aims to secure KRW 26 trillion in cash by 2026 through asset restructuring, including selling low-margin businesses. Additionally, a joint venture in India with JSW plans a 5 million ton capacity steel mill, targeting premium automotive products, supported by local market demand and strategic partnerships.
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Greetings. I'm CSO of Posco Holdings. My name is Jeong Ki-Seop. We have closed third quarter revenues and operating profits at levels very similar to the second quarter. However, fuel 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 or 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 ore lithium production plants lined up to complete construction. Any time a plant comes online, they entail initial investment and operation costs 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 production-ready at commercial scale.
Before I give you -- give the floor to the Head of IR for a more detailed presentation on our earnings, I'd like to take a brief moment to communicate the strategic alliance struck between Posco Group and JSW Group, which was 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 ton 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 two 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 three 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 a 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 steelmaker. However, they've 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 see 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 would now 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 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 efforts, but because of rather sluggish performance in the steel and rechargeable batteries and the initial cost of subsidiaries being reflected, that turns out to be the other factor.
And for the third quarter, we have sales and operating income for the third quarter at KRW 18.221 trillion and KRW 743 billion and net EBITDA of KRW 1.075 trillion 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 subsidiary Zhangjiagang, we have a seen sluggish demand in China resulting to the results.
Infrastructure segment posted operating profit of KRW 449 billion, up KRW 20 billion and profit improved at the Posco International due to high power generation profits. For the Future M, because of the lower anode active materials sales volume and losses in the cathode material, the profit shrunk and Posco Pilbara Lithium Solution began to reflect the initial cost of production entities, including ramp-up of the Posco Pilbara 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. Jeong first spoke about the strategic alliance between Posco and the JWS (sic) [ JSW ] Group in India and our successful entry into the Indian market.
Please go to Page 9 for the completion of the Posco Argentina's brine lithium Phase 1 plant construction. For the Posco Argentina brine lithium Phase 1, this is upstream and downstream process with a capacity of 25,000 tons of lithium hydroxide. It has been completed recently, completion ceremony was held in Argentina.
And the initial production of 200 tons of lithium hydroxide was successfully completed. We are currently going on with the ramp-up process. And from November, we will start the product certification process for the Posco Future M and battery companies.
Next on the upstream of process the Posco Argentina Phase 2 with a capacity of 25,000 tons, this will be completed in the third quarter of next year. And if the downstream process ongoing 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 tons of phosphate-based or lithium brine-based lithium hydroxide production.
The Posco Pilbara Lithium Solution one plant is behind of production ramp up schedule by about one quarter and is expected to be completed by the end of this year. In the third quarter, the cumulative production will be 1,965 tons, 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 tons of lithium hydroxide for EVs in 2025. And this will be signed sometime in December of this year.
For the Posco Future M battery company, we are currently going on with the certification procedure. And we believe the additional supply contracts will get 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 tons, a second plant to be completed.
We're working very hard to complete the completion. And currently, we're going -- undergoing commissioning and this is to be completed by December this year. So with this, the hard rock and brine completed, we believe that we will have in a production base of 68,000 tons and 89,500 tons by the end of next year.
More recently, we have seen the lithium prices coming down below 10,000 ton 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 that utilization 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 levels. So we're trying to accumulate the mass production experience and we are also trying to make sure that we bring efficiency in the production. So we're expecting 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 assets at the time of declining lithium prices. And as was reported by the media, you'll see that in the Chile, the Altoandinos lithium project is going on. So 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 tons 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 155 -- a total of 55 on the low-margin businesses and 70 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 to what we have sold off. So some of them include a heavy ore plant in Papua New Guinea and the regional steel processing center in China. So these are some of the low-margin production centers that we have owned in the overseas countries.
So these are low margin, and these are not part of the core Future M businesses that we have in mind. So we sold them. And for the noncore assets, I also want to mention the KB Financial Group as the solo fund especially where we have like simple, minor equity stakes. And we also have handed on a 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 we 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 26 trillion in cash and this will be used for future investments, and we'll make sure that there is like a stringent control of this management of these assets.
Next, I'd like to talk about the company results. Please go to Page 11. The first up is Posco. The Posco's crude steel production in the second quarter turned out to be normalized. It has been reduced a bit and it has been returned to normal levels. And that comes after the Pohang #4 blast furnace completion and this increased by [ 1.23 million tons ] from the previous quarter's 9.234 million tons. And correspondingly, our revenue has grown to KRW 2.9479 trillion.
Although the profit improved due to the effect of lower fixed cost due to the increase in the production volume. So we have seen some improvement. And also, you can see that raw material prices has also dropped. About the sales price, this has reduced by KRW 43,000 per tons. So this is a large decrease, and therefore, the net margin is reduced slightly. And despite the difficulties, so we believe that we have seen the sales improve 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 and 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 real estate downturn in China continues, and there are no concrete signs of economic recovery. So 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 for the higher-value products. And thus, we expect 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 these 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 the high end alternative steel. And the proportion of alternative steel in steel sales is reaching 52%. So in terms of the mix, we're looking at structural improvement.
However, I want to mention that if you look at the Zhangjiagang and the Chinese subsidiaries, we're looking at lower selling prices caused by the deteriorating market conditions, and therefore, the overall profit from the overseas steel increased -- decreased quarter-on-quarter.
Next is on the Posco International. Sales and operating profit increased by 1.2%, respectively, from the previous quarter. We have seen in the energy sector, the operating profit decrease 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 crisis in the construction market. So we're prioritizing on securing financial stability, including cash flow-oriented management. We want to maintain this around the profitable 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 energy side, we see that the operating profit fell 64%. In the cathode active materials, sales volume increased on 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 active 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 concludes a brief overview of our third quarter earnings.
Now we'd like to proceed to the Q&A session. Thank you.
[Operator Instructions] The first question is from Hyundai Motor Securities, Mr. Park.
This is Park Hyun-Wook. I have about three 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 that 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 this 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 three key questions. The first is regarding the steel market, and we will have Mr. [indiscernible], 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 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 automotive 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 yet 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 was -- 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 one quarter towards the end of the year. In the second quarter, during our earnings release, we did release about 120 restructuring projects in 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 fuel making 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 tons. 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 at 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.
Thank you. I hope that answered your question. We'll go to the next question.
The next question is from iM Securities, Mr. Kim.
This is [ Kim Sam ]. I have 3 questions, 3 very short questions. My first question pertains to India. On India, what is the demand situation -- demand and supply situation? What is Posco's view? As we 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 a Chinese market. What about -- how do you address the concerns you have in the India market, given the market and demand situation?
Secondly, if you look at the overseas penetration, do you have -- given us good expansions about Indian experience. What about the United States? China [indiscernible] 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] and there's been some investigation for the antidumping for the low-cost Chinese steel products, what is your position on this Chinese product? And how do you intend to respond to that situation?
To talk about the demand and supply situation. If you look at this demand, I think it's about 150 million tons. And by 2030, the government intends to make it to 300 million tons or 200 million tons from our forecast, depending on where you see it. And also, I'd like to say that if you look at the demand itself, if you compare it to China and India, I don't think there's a standard 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, 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 decrease 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 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 [Technical Difficulty] the Southeast Asia for the upstream, the AD products. PYB, 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 plate ADs, [ I know ] 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 under 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 markets. Of course, AD filing is a right protected by international law as a means to address unfair trade practices. So key steelmaking economies in an effort to protect their domestic steelmakers often use AD rules as trade remedies.
Recently, Chinese and Japanese hot-rolled steel sheets are under investigation are subject to AD rulings in the EU, Türkiye and Vietnam, and Canada, Mexico, Indonesia, Taiwan, Thailand, Australia and U.K., AD rulings are being practiced on HR Steel sheets. So despite strong protectionist measures undertaken by steel-producing economies, the Korean steel industry is exposed to senseless to imports and an essentially open market the void 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 activity against 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 Eugene Securities, [ Yee Eugene ].
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.
So 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. [ Kyung-Jin Chung ], in-charge of Finance and IR. On PMH and feedstock, we will ask Mr. [ Tae-sung Lee ]. And the third question on silicon solutions production plans, that question will be answered by the Head of Nickel and Next-generation Business team, Mr. [ Lee Jae-yong ].
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 tons. So it's going to be about $8 billion. But this is a joint investment with a partner, a 50-50 investment. So we will be investing maybe about $5 trillion. Each year, about $4.5 million EBITDA should be generated. And this is going to happen over a period of 4 to 5 years, not happening all in one year. So within 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% investment from Posco Holdings, we will have local partners and so there will be some calibration of how much will be expanded.
If we look at cash reserves, we have about $4.5 million in cash reserves and the convertible bonds that have recently been cashed, that generated about $3 trillion as well. So we have sufficient funds looking at our financials, this CapEx is not a huge burden.
PMH. So full hard 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, Company 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 DBS, [ Lee Yin Yang ].
I'd like to ask you a question about your investments in India. You said that it's a 50%-50% stake investment. And if you do a joint venture based on 50-50 equities, then this may lead to a number of issues, for example, shareholder 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 anything 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 sort 10 million tons of the capacity expansion on steel before it entered into a joint venture with the Posco. So the JSW has its plan for the capacity expansion. And with this investment with Posco, it looks like that it has a strategy to arrive at a 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 tons, is that be targeting purely the India market? Is it your understanding -- is my understanding correct that you are just targeting the Indian market with 5 million tons of products?
And I also have concerns about carbon neutrality. This carbon neutrality is not something we implemented just for the Posco India or Posco Korea or the United States, it's just to be on 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 very important, but you said to be thinking about the carbon emissions level, where would this emissions be calculated? Will it be at the joint venture or Posco as a whole. So I'd like to ask you about the questions I 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 depletion 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 a breakeven point. If you think about it, [indiscernible] also the hard rock, what will be the cost structure? I'd like to ask you to explain on that as well.
Well, we make a 50%-50% investment. You said that we may enter into some conflicted situation. But we have 50% equity and we have a BOT that is structured with 50%-50% from both sides. So I don't think we're going to enter into a major conflicting relationship. We are trying to secure the site and come up with the adverse, and so it will take some time for us to achieve at a certain level. It's a call option. In the future, we will certainly make considerations for that in the future. 10 million tons, I think, to try to secure that on their own site is already done. So if you think about the Odisha site, there could be further expansion made. So that by 2030, so this would be risen to 25 million ton levels. So what they are trying to negotiate, even though, part of the 25 million ton that have in their plan.
And the joint venture with Posco is not an integrated steel -- they want to come up with a high-end mill. So that is what's been currently being discussed with Indian partner. And India has 115 million tons in size, in the market size. And the export ratio is relatively very small compared to Indian or the Korean's market. 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 approaches. If we make the reduction efforts in India, I think the market will understand our position. And looking at the realities of the market situation in India.
On the lithium side, Mr. Lee, who is responsible to the lithium business, [ Lee Seung Hwan ] is going to respond.
Yes, my name is [ Lee Seung Hwan ]. On the BP, breakeven point, for the Salt Lake, the price, I think lithium producers all over the world are just suffering because the price of the lithium is less than $10,000. So even if they do -- Salt Lake business, primary 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 sort like 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 the 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 prime-based business.
And if you look at the cost difference between the hard rock and the price, first, as we purchase Salt Lake, we make a massive investment for the hard rock or [ the primary ] lithium solutions that we make monthly investments because imports from Australia on a monthly basis. And therefore, there is like raw material cost, feedstock cost.
If you think about the process, the processing, I think there's 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 little more costly.
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.]