Key Points
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Q3 earnings improved:POSCO Holdings reported KRW 19.1 trillion in revenue and KRW 945 billion in operating profit, up 15% sequentially and 48% year over year. Stronger steel profitability more than offset losses in lithium-related operations.
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Steel outlook is mixed:Steel operating profit rose to KRW 455.1 billion as higher prices, volumes and cost controls lifted margins, but planned blast-furnace maintenance is expected to reduce production by about 430,000 tons in Q4 and temporarily weigh on sales through early 2027.
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Lithium remains under pressure, while finances strengthened:Lower lithium prices, production disruptions and high feedstock costs drove subsidiary losses, though POSCO expects its new Argentina plant to reach profitability from Q3. Net debt fell KRW 4.3 trillion, helped by operating cash flow and affiliate stake sales, while the company advanced LFP battery-materials and other growth initiatives.
POSCO (NYSE:PKX) Holdings reported third-quarter revenue of KRW 19.1 trillion and operating profit of KRW 945 billion, extending a three-quarter improvement in earnings as stronger steel profitability offset losses in lithium-related operations.
Operating profit rose from KRW 707 billion in the first quarter and KRW 819 billion in the second quarter. The third-quarter result represented a 15% sequential increase and a 48% increase from a year earlier, according to Kim Seung-Jun, head of Finance and IR at POSCO Holdings. The company recorded an operating margin of 4.9%.
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"Steel led the overall performance gain in Q3 across the group," Kim said, while the rechargeable-battery materials business posted an operating loss amid lower lithium prices, maintenance at POSCO Argentina and higher feedstock costs at POSCO Pilbara Lithium Solution.
Steel Profitability Improves Despite Higher Input Costs
POSCO's steel business generated KRW 455.1 billion in third-quarter operating profit, an increase of KRW 181 billion from the prior quarter. Its operating margin improved to 4.6%, compared with 2.5% in the first quarter and 2.9% in the second quarter.
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Han Young-Ah, head of investor relations, said the improvement was driven by increased selling prices, higher production and sales volumes, and cost-control measures. POSCO raised carbon-steel selling prices by roughly KRW 20,000 per ton, to a range of KRW 962,000 to KRW 982,000 per ton.
Raw-material costs increased 4.4% sequentially, however, as mine safety inspections in China and disruptions in Mongolian coal supplies raised coking-coal prices. POSCO increased crude-steel facility utilization to 90% ahead of planned blast furnace maintenance, while logistics costs that had risen amid geopolitical developments began to normalize.
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The company expects production and sales volumes to decline temporarily during the fourth quarter and the first quarter of 2027 due to relining work at Pohang Blast Furnace No. 2 and related maintenance at hot-rolling and continuous-casting facilities. Noh Sung-rae, head of POSCO's Marketing Strategy Office, said the maintenance is expected to reduce production by about 430,000 tons in the fourth quarter, with 920,000 tons of production and similar sales volumes anticipated during the maintenance period.
Looking toward 2027, Noh said domestic steel demand is expected to recover moderately but that the broader market will remain in a recessionary environment. The company sees relatively stronger demand from automotive, shipbuilding, power-related projects and data centers. POSCO said it will continue negotiating prices for products including pipes and long products while adjusting pricing based on market conditions, supply volumes and customer circumstances.
Lithium Businesses Face Price and Production Pressures
POSCO's lithium subsidiaries posted losses during the quarter, including KRW 29 billion in inventory valuation losses tied to lower lithium prices. POSCO Argentina was affected by cold and windy weather that reduced evaporation volumes, as well as interim repairs and lithium-phosphate dryer equipment replacement.
Lee Jae-young, head of Energy Materials Business Management, said lithium prices had fallen below $13,000 per ton and described the decline as excessive, though he acknowledged that electric-vehicle market growth had not met the company's expectations. He cited increased supply from mines in China and other locations, including Tanzania, as factors affecting the market.
POSCO Argentina's first plant is expected to increase production to plan in the fourth quarter. The company completed its second Argentina plant in October and began its ramp-up process. The facility is intended to produce technical-grade lithium carbonate that will be refined into lithium hydroxide at POSCO Lithium Solution in Gwangyang.
Lee said the second plant is targeted to reach a 70% operating rate by July and 90% by December. The company expects the first plant to continue generating profit, while the second plant is not expected to produce operating profit during the first half of its ramp-up. POSCO expects it to reach profitability from the third quarter, assuming its plans progress as expected.
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POSCO Argentina targeted third-quarter output of about 3,000 tons, fourth-quarter output of 5,500 tons and 2027 output of 14,000 tons, followed by a target of about 21,000 tons.
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POSCO Pilbara Lithium Solution remained unprofitable because high hard-rock lithium feedstock costs were not fully reflected in selling prices.
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The company said spodumene price declines improved the mill-margin spread, with raw-material costs falling below 70% of total costs from 83% to 87% in the first half.
POSCO said it is seeking to improve lithium profitability through process enhancements and by developing ways to use lithium fines to diversify feedstock. Lee said the company is targeting profit equivalent to an EBITDA level at its hard-rock lithium operation next year if spreads continue to improve.
Infrastructure Earnings and Portfolio Actions Support Cash Position
Infrastructure earnings also improved. POSCO International's operating profit rose 24% year over year, supported by increased gas supplies to LNG liquefaction plants from Senex Energy in Australia and improved results from Indonesian palm operations. POSCO E&C reported operating profit of KRW 48 billion, remaining profitable despite a slight revenue decline caused by summer construction stoppages.
POSCO Future M reported third-quarter operating profit of KRW 82 billion, supported by higher basic-material profits and increased anode-material sales. The company said it is converting part of POSCO Future M's NCM production capacity to LFP cathode production, with a plan to complete 50,000 tons of LFP cathode capacity by year-end and pursue long-term supply agreements with major battery makers for energy-storage-system demand.
POSCO Holdings invested KRW 1.6 trillion during the quarter, bringing cumulative consolidated capital expenditures to KRW 5.4 trillion. Net debt declined by KRW 4.3 trillion from the prior quarter, and the net debt-to-equity ratio fell to 18.4%.
The improvement reflected operating cash flow, KRW 2.5 trillion raised through partial stake sales in POSCO International and POSCO DX, and about KRW 700 billion from the sale of the company's stake in Woori Financial Group. Kim said proceeds from affiliate stake sales may be used for reinvestment in new-growth businesses and that the company does not necessarily need to wait for additional asset sales before considering buybacks and cancellations.
Triple-Core Strategy Advances
POSCO Holdings highlighted progress in its "Triple-Core" strategy focused on industrial, strategic and energy resources. In industrial resources, the company broke ground in September on a 450,000-ton-per-year automotive hot-dip galvanized steel sheet facility known as CGL No. 8.
In energy resources, POSCO acquired a 100% interest in shale-gas assets in the Marcellus basin in Pennsylvania. The company said it intends to use its portfolio to respond flexibly to changing market conditions.
POSCO also said it is monitoring trade and carbon-related developments. Company representatives said U.S. steel industry groups have sought additional measures affecting Korean steel, though no specific action has been confirmed. In Europe, the company expects carbon-border adjustment mechanism-related provisions to begin in 2027, while noting that importers bear the direct certification costs.
POSCO said it believes its emissions profile could result in comparatively lower costs than some competitors and that it will continue negotiations with customers to minimize the impact.
About POSCO (NYSE:PKX)
POSCO is a South Korean steel producer and one of the world's major integrated steelmakers. The company manufactures a broad range of steel products, including hot- and cold-rolled steel, heavy plate, wire rod, stainless steel, galvanized steel, automotive steel and electrical steel.
POSCO operates large integrated steelworks in Pohang and Gwangyang, South Korea. Its products are used in automobiles, shipbuilding, construction, energy infrastructure, appliances and other industrial applications.
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