PKX

Hello. I head up the finance and IR division at POSCO Holdings. My name is Kim Seung-jun. First, I'd like to thank everyone participating in the 2026 first quarter earnings call. Thank you to the investors and analysts. In the first quarter, the U.S.-Iran war disrupted the energy supply chain, which triggered greater fluctuations in the financial market that led to unstable exchange rates, so we witnessed aggravated challenges. Despite these headwinds, POSCO Holdings recorded consolidated revenue of KRW 17.9 trillion and KRW 710 billion in operating profits. Improvements are observed in both revenue and profit against the previous quarter. Looking at each business sector in rechargeable battery materials, lithium prices rose, helping lithium production subsidiaries to perform, significantly reducing losses. Particularly in POSCO Argentina, plant operation is ramped up while elevated lithium price continues to hold.

As a result, in March, it recorded the first-ever monthly KRW profit. We believe this strong performance will continue in the second quarter. In the second quarter, we also anticipate POSCO Argentina's first-ever quarterly KRW profit. In steel, despite volume growth in sales, rise in FX causes us to pay more for raw materials, squeezing KRW profit. Nevertheless, improved performance in overseas subsidiaries helped register an overall rise in KRW profit. Once geopolitical risk in the Middle East subsides and input costs pushed up by FX and oil price hike come down, taking into consideration time delay for cost impact accounting, we anticipate gradual KRW profit gains starting in the second half. In the infrastructure business, POSCO International saw its steel exports climb, as well as demand recover in gas and energy sectors. Additionally, POSCO E&C has recovered its losses resulting from last year's accidents, transitioning to black ink through sizable KRW profit gains.

What is notable this year is the strategic shift in our steel business that is coming to fruition. We finalized the investment of PDSS, the underperforming China subsidiary, and to reduce the load of high cost to aging facilities, No. 2 FINEX has been retired. Beginning in June with the goal to expand our low-carbon production system, the world's largest new 2.5 million ton capacity electrical furnace will go into operation. To validate POSCO's proprietary HyREX technology, a 300,000 ton capacity demo plant has broken ground. We've also acquired government permits for the Pohang HyREX plant site. These developments help us to set up the groundworks to build our sustainable business structure. The integrated steelworks project in Odisha, India is progressing. In October 2024, we signed an MOU with JSW and an HOA in July 2025. Most recently, a JV agreement has been signed.

More detail regarding the recent agreement will be delivered in a few minutes by the Head of our Strategic Investment Division. Finally, allow me to speak about the third interim shareholder return policy to go into effect this year. In our effort to offer a proactive shareholder return policy, we've been paying quarterly dividends since 2016. The first installment of our interim shareholder return policy was announced in 2020. This year, we deliver its third installment. To enhance the ability of our shareholders to have better visibility into dividends, we wish to shift an earnings-based and performance-linked return policy. Based on net income attributable to controlling interests, we aim to deliver 35%-40% shareholder return ratio. We will deliver a blended mix of cash dividends and share buyback and cancellations to boost shareholder value.

Looking forward, we'll continue to drive strategic investment for future growth and harmonize that with earnings and performance-linked shareholder returns. This is how POSCO Holdings will build a virtuous cycle that generates robust business growth that will feed into boosting shareholder value. Now I would like to invite the Head of our Strategic Investment Division to discuss the JVA signing with JSW in India. Ms. Han Young-ah, our IR Office Head, will offer more detail regarding our first quarter 2026 earnings.

Hello, everyone. I'm with the Strategic Investment Division at POSCO. My name is Kim Gwang-mu. On April 20th, JSW and POSCO signed an agreement for joint venture on an integrated steel mill. Let me deliver some more detail. Looking at governance first, this is first of all a 50/50 joint venture.

Each company will represent three directors on the board, and the CEO will have a five-year term, and each will alternate to appoint the CEO. POSCO's technology capability as well as JSW's operational capability and the cost competitiveness is what we are going on on this joint venture project. From a marketing perspective, JSW has a strong sales network, and POSCO Maharashtra has a strong automotive steel sheets capacity. We want to be able to mitigate some of the entry barriers and to be able to generate stable profits in a high-growth market. For operational capability, this is not a market we enter alone. This is a joint venture. It is with the number one steelmaker in India, JSW, and we'll be able to take advantage of their business capability.

Local entry often triggers foreign risk, and we're able to eliminate that here. Product capability, of course, POSCO has a lot of product prowess, we'll be taking advantage of that as well. Low cost iron ore material use is one of our advantages. Construction-wise, we will be completing this project by 2031. Looking at the plant site and the infrastructure surrounding the site, first of all, the site is in the state of Odisha, which is an area that promises convenient supply of raw materials. Rail, shipping, power and water use offer some advantages as well. There's some geographical advantages that we can accrue.

The biggest advantage is because we've tried to do this before and had difficulties in procuring site as well as permits and licenses, this time around, because we've already acquired the site, a lot of the risk involved in this business has already been eliminated. Business overview. This will be blast furnace-based, 6 million ton capacity for high-premium steel products. High-profit automotive steel products need customer certification. First of all, we will be responding to construction steel demand in the beginning stages to be able to generate some profit before we move into automotive steel sheets. Initially, we will be taking some of the materials from Korea, exporting it to India to be processed there for final product. This project is different because we want to be able to localize all sourcing.

Previously, and facility-wise, this will be an integrated mill that is not too different from what we have here in Korea, but we've added a pellet plant. That is the big difference. Investment overview. 30% of our own assets and 70% liability is what the funding is composed of. This is to ensure that we have the highest profitability. From a competitiveness perspective, CapEx competitiveness, first of all, we'll be able to cut costs on construction with cheap labor in India. There will be a lot more competitiveness that we can add to this investment project. As mentioned earlier, we'll be able to use inexpensive iron ore available in India and of course, low-cost labor as well. Our high-tech capability will promise the production of premium steel products that will promise profitability.

Cost-wise, profit-wise, from both perspectives, we can accrue advantages on this project. This is not a one-time investment project. I think, we all know that India is a high-growth market, we will be taking advantage of all growth opportunities in the market going forward. Thank you.

Questions regarding this project, please hold on to them until a little bit later. Next, we will talk about in Q1, consolidated revenue came in at KRW 7.9 trillion, up by around KRW 1 trillion QOQ. OP was KRW 707 billion, improvement from the previous year. EBITDA of KRW 1.8 trillion, up KRW 721 billion QOQ. If you look at the Steel Business, profit increased by KRW 91 billion.

At POSCO, higher FX rates, logistics costs, and raw material prices have left the margins under pressure. That said, supported by the base effect from the Zhangjiagang operation, which had posted large loss in Q4 of last year, and due to restructuring a lot of its sales, as well as earnings recovery in India and Vietnam, the overall profit, including overseas steel, increased slightly. In the rechargeable battery materials, losses narrowed significantly, recovering about KRW 150 billion QOQ. Improvement was driven by higher operating rate at Argentina lithium plant. At POSCO Pilbara Lithium Solution, the rebound in lithium prices and reversal of inventory valuation losses were also accounted for. The profits in the infrastructure also increased by around KRW 415 billion QOQ. POSCO International delivered solid profit growth and supported by favorable market conditions.

POSCO E&C, which recorded large loss in previous quarter, also turned to profit, posting KRW 53 billion in OP. In summary, profit levels which had been way down in the previous quarter by several one-off factors, normalized overall. In particular, what is meaningful structurally is that from the recent rise in lithium prices and the start of full-scale commercial production at the Argentina operation, all of these factors combined have led this upside. Moving on to page six. Let me talk about advancing the structural transformation of steel business. POSCO is shifting business structure by reducing high-cost aging facilities, expanding its EAF-based low-carbon production system. POSCO is moving forward with the closure of No. 2 FINEX at Pohang, which is about 1.5 million tons.

This is actually very crucial, which has been very much a plus for our operations, but it's a very old facility, and it is better for us to close it for its low operational efficiency. We are currently planning to build a demo plant, preparing to transition to a HyREX. There was also approval from MOLIT for the changes to the Pohang Industrial Complex plan. POSCO is now able to utilize 1.35 million sq m of public waters near Pohang Steelworks to create the site that can be used for HyREX transition. There is Gwangyang EAF, which broke ground in February 2024, begin operation in June with an annual capacity of 2.5 million tons and will be a key facility in POSCO's transition.

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

Now, with the increase in utilization rates, the costs are going down. Other than that, there is also a mid to long-term effort being made in order to reduce production costs. To give you an example, in April this year, when it comes to the downstream strategy or downstream contract, it was changed into a fixed format, fixed form. There is also additional PP effort being made for the upstream contracts as well. When it comes to the phase II construction, it is progressing towards completion in October this year. We are also securing additional brine resources, and there's also a test commissioning that is underway. We'll be able to bring in more profits for this plant. As for this plant, it will create in a conventional way and also produce technical grade lithium.

Compared to phase I, it will be much easier for production. We completed the Argentinian brine plant resources with 100%, and we believe that we'll be able to secure more additional brine resources in the future. Now let me talk about POSCO Pilbara Lithium Solution. There was about KRW 50 billion losses, but it was actually reduced to KRW 3 billion at this time. Mostly it was driven by increased sales and production, but it was also partially driven by the reversal of the inventory losses. The biggest factor also was the higher lithium prices as well as the spodumene prices. Spodumene prices has gone up to 11% compared to lithium prices in terms of its percentage.

As for this POSCO Pilbara Lithium Solution, if the raw material costs go up, the spreads will squeeze, and it could pose as a burden for the company in the short term. Going forward, it will be very much impacted by the spread that I talked about rather than lithium prices. There are some uncertainties over there. As for the Australia's mineral resources, once we complete the definitive agreement, there are merger control procedures that need to be done. Because of this, merger control reviews, we don't know when the exact timing of the joint venture establishment will be. Both companies are working towards establish a joint venture around the fourth quarter of this year.

Since the time of investment, spodumene prices have risen sharply, we expect this to significantly boost the new JV's ability to generate cash flow. POSCO HY Clean Metal recorded its first ever quarterly profit since its commissioning. As a non-Chinese recycling company, we can say that it has entered a phase of stable operations. Moving on to page eight. From 2023 to 2025, we have implemented our second interim shareholder return policy. Over the past three years, we paid out 2.3 trillion cash dividends and 1.2 trillion KRW in canceled treasury shares, all in on 3.5 trillion KRW of shareholder return. Despite challenging business environment, we did our best to fulfill our promise to our shareholders.

With regards to treasury stock cancellation, the policy that was announced in 2024, it accumulated to KRW 1.2 trillion, and we completed about KRW 635.1 billion of cancellation that remained. All in all, the future, the treasury share cancellation plan was about KRW 1.8 trillion for the past three years, and we have completely succeeded it. Let me talk about the next three years. When it comes to our existing shareholder return policy, it was to make sure that the surplus cash flow can be used to pay out dividends as well. As the strategic investments are rising, on the rise, the pay, dividend payout based on free cash flow in terms of growth could pose limitations.

There were some voices about that. We want to reinforce our high dividend market position and payout visibility. That is why we plan to shift toward a performance-linked shareholder return policy based on earnings. We have set a target shareholder return ratio of 35% to 40% of adjusted net profit attributable to controlling interest. Now, when it comes to net profit, by using this adjusted net profit, excluding non-recurring gains and losses as a baseline, we aim to, for example, the restructuring and so forth will be excluded. By doing so, we aim to secure both the payout visibility and sustainability. We want to address the uncertainties of the dividend payout ratio, payout policy based on free cash flow.

Going forward, we will continue to maintain a balance between growth investments and shareholder returns by thereby enhancing our mid to long-term corporate value. Now let me brief you on the earnings by company in more detail. First, POSCO. POSCO's Q1 OP declined QOQ to KRW 213 billion. Sales volume recovered from the previous quarter. Production and utilization rate normalized. Selling prices also remained broadly stable QOQ, but due to higher raw material prices and because of the war in Iran, the FX rates and freight costs went up, so the cost burden for key raw materials increased. For example, when we source raw materials, because of the Iranian war, the logistics costs have gone up. All of that is serving as a cost burden. We will continue to make.

despite our efforts, this cost push pressure will remain as burden in the second quarter as well. Moving on to page 11, Overseas Steel. Indonesia, India, Vietnam operations are improving results, and the Zhangjiagang operation has been divested. Let's go to page 12, POSCO Future M. POSCO Future M recorded both higher revenue operating profit. When it comes to cathode material, it continues to secure new customers and expand sales. As for anode, the impact of inventory adjustment is still going, but earnings improved due to base effect from the large loss recorded in the previous quarter. Moving on to page 13, POSCO International. POSCO International delivered solid results in both energy and trading businesses. In energy, profits increased on higher power plant utilization rates and S&P rise.

In trading as well, profits improved thanks to higher sales of steel and materials as well as favorable market conditions. The capacity expansion effect from Senex Gas Fields and a rise in the global commodity prices also had a positive impact for trading. Moving on to page 14. POSCO E&C posted a sharp improvement in OP, turning to profit. There were some one-off factors, but the projects are becoming normalized, and we want to also strengthen our cost control. We expect to maintain such profitability level. This concludes brief presentation on 1st quarter earnings of 2026. We will move on to the Q&A session. Thank you very much.

We'd like to begin the Q&A. If you would like to ask a question, please press star one on your phone. If you'd like to cancel your question, please press star two. The first question is from Hyundai Motor Securities. Please ask your question.

Hello, my name is Park Hyun-wook. Thank you for this opportunity to ask a question. I have about four questions. The first is regarding the JV agreement in India. You mentioned that this is part of your localization strategy. Once the JV goes into effect, in the past, you exported items to POSCO Maharashtra to be processed in India. What will happen to PMH after the JV agreement goes into effect? Second question is about the steel market outlook. Hot-rolled products have been rising in price.

What is the rationale behind that price hike, and how does this impact your business? From a distribution price perspective, hot-rolled price has increased, but relatively speaking, cold-rolled has stayed stagnant. What do you project for cold-rolled products going forward? Third question regarding the Iran situation and the Strait of Hormuz. Because this is likely to become a prolonged event, in terms of your exports as well as your FX, and other business decisions, how does this situation impact your business? The fourth question is regarding your lithium business. Lithium prices are rising, and I think it's very positive that performance has improved in the first quarter. Is this the result of rising lithium prices, or is it a result of something else?

For each factor, what is the proportion you would apply as the influencing factors? POSCO Future M has turned a profit. What do you project to be its operating profit this year? That is all of my questions.

My name is Noh Sung-nae, POSCO Marketing Strategy Office.

My name is Kim Gwang-mu, Strategic Investment Division. I actually spoke to you about the JVA in India. In terms of the export volume, we need to consider the volume going to POSCO Maharashtra and the other, the volume that goes from POSCO to India per se. I think we have to separate this into two parts.

Up until the JV goes into effect, I think the hot roll products will continue to export in the same volume that we've seen in the past. Once the JV goes into effect, because we will not be able to produce automotive steel sheets immediately, it will be something that we will gradually move on to. Initially, we'll be supplying non-automotive steel products, and I think our exports will not be impacted.

Second question. I would like to address the second question. Again, my name is Noh Sung-nae, Marketing Strategy Office head. Demand has been lackluster, and because of the price drops as well as hikes in oil price and other input prices, this has caused triggered a lot of pressure. Because demand is increasing, hot roll product prices have been increasing as well.

This price is likely to hold for some time, even into the future. I believe because of the hot roll price, the cold roll product price will be impacted as well. The anti-dumping cases that are being evaluated, this is going to impact future pricing as well. There's still pressures on our cost, but given the situation in the Middle East as well as our own domestic market situation, we will continue to look at our price in consideration of these situations. We've had many factors that pushed the price in the past, but because our input cost is also increasing, our margin is being squeezed. In the future, Southeast Asia and India will become new regions where we will have to identify different sources to for selling.

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

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

Our response for the FX situation is we want to be able to bring in more dollars. Our settlement currency is being shifted, and we're seeing some impact there already. For LNG, we are diversifying our supply routes to other countries, such as Indonesia. We're seeing impact here as well. Third, by increasing efficiency of energy use, we are identifying various ways to cut energy use costs. We are making efforts to offset some of these price hikes. It's very difficult to offset all cost increases. Therefore, we will have to pass some of this on to the final price of our products. We are an infrastructure business. We have our social responsibility to keep our prices rationalized. We will be very prudent in pushing up prices here.

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

My name is Yoon Tae-il, Energy Materials Business Management Office. We have had continuous deficits, especially in brine lithium as well, as in HY Clean Metal. However, we've seen profits registered this quarter. With these profit gains, we're able to offset some of the losses we've experienced in the past.

Exactly what proportion has offset which parts of the losses, I can't tell you for sure, but what I can tell you is because our leading customer, GM, had canceled all of its contracts, we were unable to deliver what we had produced. Now we are transitioning some of our supplies to energy industries, and so our plant is at 70% utilization rate. I think all of these positive factors are mixed, to say the least.

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

Next question, please.

Next question is from Hana Securities, Park Sung-bong, please go ahead.

Hello, I'm Park Sung-Bong from Hana Securities. I would like to ask two questions. First of all, regarding the direct employment of the subcontractors, we've heard about it on the news, I believe there are about 7,000 of them. If that is realized, the SG&A costs could go up.

I would like to know how much of a hike in the SG&A costs that we can expect. The second question is, you mentioned about turning to profit in the second quarter, and probably in the latter half of the year, the utilization will go up. I think that overall we can look at profitability. When it comes to lithium prices or lithium business, profits, what are your expectations for this year?

Hello, I am Head of Finance at POSCO. Regarding the direct employment of the subcontractors, employees and, cost increase. Of course, partial increase in the cost or expenses will be inevitable because the benefits-related policy and measures need to be included. When it comes to labor costs, as well the employee, benefits costs, that could result in increased expenses.

We're going to complement the relevant policies as well as improve work efficiencies. We want to complement them, the increasing costs, with other measures. Of course, we cannot confirm the actual impact for the time being. Now, when it comes to the brine as well as the iron ore lithium businesses, we have to consider them separately. As for the lithium brine, the Argentinian project, as our CFO mentioned, we believe that it is going to continue to see profits. Last year, there are some low price contracts that will come to completion by the end of April. That could have an impact on April, but from May, we will turn to a profit.

When it comes to the overall volume, it is subject to market conditions in the second half. When it comes to lithium concentrates, since it is a concentrate, it needs spodumene as a raw material. The average spodumene price in March, and if you compare it to now, the selling price has increased about 5%, but the spodumene price has risen 20%. If you make the calculation, the raw material prices, we expected it to be 70%, but it has gone up to 85% overall. It continues to remain very high, but we have to see whether it continues to remain very high. According to our estimation, at this raw material price level, even China, without subsidy, they cannot turn to a profit.

We believe that there is going to be a narrowing of the gap going forward. In the second half, the brine lithium will be able to turn to profit, and the lithium concentrates, the 80% of the selling price is spodumene, we have to really closely watch the prices of the spodumene. Now, let me add some comments about the recruitment or employment of the subcontractor employees. When it comes to POSCO, subcontractor employees, there are some costs that have incurred over the years. Once they are directly employed, they will be translated into the labor cost as well as employee benefit costs. The direct employment will not have a huge impact.

However, when it comes to the level of if we are to include like additional employee benefits, including the communications costs as well as the in-house the meal costs and so forth, that could lead to a slight increase in the labor costs as well as the employee benefit costs. After the direct employment, you know, we will see more streamlined control and supervision structure, so that will lead to enhanced work efficiency and productivity. Overall, it will contribute to enhancing competitiveness of the company. In the long term, it is not going to have a huge impact in terms of costs.

Next question.

Next question is DB Securities. Please ask your question. I have two questions.

First, besides India, some of your overseas investments included Cleveland-Cliffs and the Whyalla steelworks in Australia. Do you have any budgets set aside or timeline set aside? In terms of HyREX investment, you once estimated KRW 40 trillion. In which areas would you continue to invest this? Can you divide this up into the different areas of investment that HyREX will need?

My name is Kim Gwang-mu, Strategic Investment Division. Let me answer your first question. In 2025, in order to enter the U.S. market, we signed an MOU with Cleveland-Cliffs. For cooperation and business synergy, we wanted to be able to cooperate. There's been a lot of negotiation ongoing, especially about corporate valuation, but there are a lot of differences in opinions that is making it difficult for us to reach an agreement.

At this point in time, I'm afraid I don't have any more update, and we do not have a scheduled date for completion of this agreement. On the Whyalla Steelworks, it has gone into bankruptcy management, and this is under Australian government supervision. For POSCO, we are cooperating with BlueScope, Japan's NSC, and India's JSW. We have submitted an NBIO to the government. By the second quarter of this year, they will be selecting priority candidates to take over this facility. Profitability schedule as well as investments will be determined at that point, and FS will continue into the third quarter. At this point in time, the first step we have to pass is to be selected among those viable candidates.

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

Next question, please.

Next question is KB Securities, Lee Joon-Hyung.

Hello, I'm Lee Joon-Hyung from KB Securities. I have a question about lithium. Now, in the slides, POSCO Argentina earnings have, in terms of revenue, increased by KRW 9 billion, but the OP by KRW 37 billion. How were you able to achieve such a dramatic earnings improvement, especially the profits improvement? Can you please elaborate more on that? The phase II will be completed by October. phase II , when will that have impact on their earnings, since when? From when? If that is accounted for, when will the overall lithium business turn to profit? I would like to ask about the timing of turning to profit.

Hello, I am from Energy Materials Office. The OPs have improved drastically compared to revenue. That is thanks to utilization rate hike. What is also more important is that the lithium prices last year when they were very, very low, we had contracts that were very competitive that were signed. We completed a ramp-up, and we will go for commercial production. The certification is underway, so that is why we have gotten the prices at the index level from our customers. Our selling prices are very much close to the index level as well. That has translated into improved profitability. When it comes to the phase II and that impacting our profitability, our depreciation cost will be reflected from October.

The depreciation level or the base line for reference for Latin America is about 25 years. We consider that it will be about 10 years. We believe that sales will be quite challenging for us because we don't have a lot of customers. We want to consider the depreciations as a fixed cost. As with the phase II, we will have about KRW 15 billion of losses. Phase I and II combined, we believe that we will definitely turn to profit this year. A similar question was made from DB Partners and Corate. I hope that this answer answers your questions as well.

Next question please.

Next question is from iM Securities, Kim Yun-Sang. Please ask your question. Sorry.

My name is Kim Yun-Sang. I have several questions. First, regarding lithium. Let me add one question. There are some plants that have closed and businesses that have gone out of business. I think lithium supply is short. I'd like to know what your projections are about the lithium demand by the end of this year. I think you are at the turnaround point as projected, because our lithium business continues to experience difficulties. There are some businesses that are hard hit, and Albemarle is projecting this as well. When will the deficits turn to profit in the market? Third, CATL's sodium-ion battery, how will this impact the lithium battery sector? Fourth, about India. Through the JV agreement, I think what you are looking to capitalize on is low cost and the availability of input materials.

Given the demand and supply projections, do you have enough to allocate to the JV in India?

Hello. Energy Materials Business Management Office. Lithium is in shortage, especially in the hard rock lithium because of the ESS demand. Brine lithium is very difficult to add volume, so we will have to replace this demand with or respond to this demand with hard rock. Because there are limitations to what we can take from China, we have to turn to Australia, and that's why spodumene prices have really soared. There are many announcements that we heard in February, which put the price at $20-$26. UBS and JPMorgan have assessed this to be above $26. What we believe is we can achieve our operating profit at prices even lower than that.

Our projection is between $24-$25. Twenty-five dollars is, I think, the standard being used by the industry. Compare to about two months ago, prices have gone up by about $2-$3. The second question. As I mentioned earlier, Pilbara Lithium Solution is very much dependent on the price of spodumene. If we can add A and B and get to a positive territory, that would be great, but this is very difficult at the moment. Even with the spodumene prices, at where they are, we want to be able to cut costs, and we are looking into other alternative mines as well. There's a lot of effort we're making. CATL's sodium-ion batteries, how does it impact our lithium battery business? Currently, the impact is small, but how much can this pervade the market is the question that we're trying to answer.

According to experts, some will be looking at about 3% penetration in the ESS market. Others put it at about 3%-4%. There is a lot of advantages here because of price, because of stability, because of charging speed. I think this will continue to pervade or make inroads into the market. How does it impact our lithium battery market? It will replace LFP, but it will not impact NCM market. We are also looking at the LH market, and so I think a calibration with the LH market is a little bit difficult at the moment.

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

Looking at it from that perspective, most of the iron ore in India is in the eastern region of India. Odisha is on the east side of India, so we are closer to these mines. JSW has 45% self-sufficiency, or so they claim. Because other steel makers have lots of mines, and they own them in the vicinity of our new plant, I don't think we will experience any difficulty in acquiring the needed iron ore. Our plan is to set up by 2031 and then to put it into operation by 2032. Our iron ore acquisition selections have already been made. Once you schedule ends. Some of the mines have sold rights that expire in 2032.

Come 2032, I think we will have more mines that we can acquire, so that we're looking forward to doing that.

Next question, please.

Next question is from Samsung Securities, Peptison. Please go ahead.

I have two brief questions. First is about investment in India. It is seeing increased structural demand, so it is attractive, a market. There is also a domestic capacity expansion in India, and also the global players have entered the Indian market to increase production. Competition is going to become increasingly fierce in that market. In that sense, we can consider ourselves as a latecomer in the market. What kind of competitive edge do we have to be able to fare well in the market? The second is about electrical arc furnace, which will go operational from Q2.

When it comes to EAF, I would like to know about additional costs that could incur because of the operation of EAF. If that is the case, how much would that be?

I am Kim Gwang-mu, Head of Strategic Investment Division. You mentioned about the mismatch between supply and demand in the India market. As of 2024, India's steel demand is about 150 million tons, and supply is about 140 million tons. 10 million tons of shortage of supply. What will be the demand in the Indian market for steel? By 2035-2040, India is going to see an increased economic growth, about 6%-6.5%, and the steel demand is also going to see an increase 5%-6%.

By 2035, we believe that about 250 million tons, 250 million tons-260 million tons of demand for steel will be there. In terms of supply, the major, four major players, according to their disclosure, we lack or we're short of 20 million tons of steel. Even though the plan, if the plan is actually goes ahead as planned, but if it doesn't, then we will have a more shortage. When it comes to a capacity expansion in India, it's a little bit different from China, because the major four represents 80% of the market share. Their influence is very big. In that case, the capacity expansion will not be a next problem. We have to, we believe that our competitive edge in the high-end or premium steel will be our key differentiator, differentiating point.

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

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

Good afternoon. Thank you for joining us for the POSCO Holdings Earnings Call. Today we will have a presentation by POSCO Holdings followed by a Q&A session with our participants. [Operator Instructions] Now let us begin POSCO Holdings earnings presentation for the first quarter of 2025.

Greetings, everyone. I am head of the Finance and IR Division at POSCO Holdings. My name is Kim Sung-Jin. I'd like to extend my appreciation to all investors, who are attending this meeting for taking time out of your busy schedule. As we're all aware including investors, the first quarter witnessed the global tariff war materialized, which has intensified economic uncertainty. Despite this headwind, POSCO Holdings achieved improvement against the previous quarter. In Q1, consolidated revenue hit KRW17.4 trillion and operating profit KRW570 billion. Looking at the general overview by key businesses, despite lingering volatility in export volume and FX rates, the domestic steel market is showing moderate signs of stability. In addition, iron ore and coking coal prices have also become more stable. POSCO Future M is selling more CAM and M, while POSCO International's gas field business continues to perform well. While these Q1 results are insufficient to jump to the conclusion that we have made a turn toward clear recovery, we do however have signals that allow positive assessments little by little. Therefore, barring unexpected exigencies out of the left field we are carefully optimistic that things cannot get any worse from here. Next I turn to a topic that I'm sure many have read in the media. I'd like to address our MOU signed with Hyundai Motor Group. As was illustrated in the POSCO Holdings corporate value enhancement program released in December 2024, we have to find a strategy to invest in the overseas upstream steelmaking process and we have been taking a close and hard look at the high growth market of India and high profit market in North America. As an outcome of that plan in October last year we signed a comprehensive MOU with JSW Group in India to seek collaboration in steel, energy materials and renewable energy businesses. This time with Hyundai Motor Group or HMG, with the goal to address the global trade environment and to enhance our competence in the future mobility materials business, we intend to strengthen our collaboration to jointly invest in to build a steelmaking plant in the US and to jointly develop next generation battery materials. This alliance can be regarded as a strategic choice made to actively address the rapidly changing environment. In steel, in compliance with the USMCA "melted and poured" origin rule, we plan to offer reliable supply of steel products melted and poured in the US to our auto panel manufacturing plant in POSCO, Mexico. Additionally, we will expand volume supply to our US OEMs to whom our volume was limited due to the export quota. In addition, by focusing the EV battery materials technology that both companies possess, we hope to be able to advance to an elevated level of Korea's next generation battery development once the EV market chasm draws to a close. Currently, we're in discussions with HMG regarding the size of equity investment into a US steel mill as well as more specifics on how we will see cooperation. Once we have more details confirmed we'll make sure to share those with you. I'd like now to invite the Head of our IR department to deliver the first quarter results.

Please refer to Page 4 of the presentation materials. On a consolidated basis our Q1 revenue and operating profit came in at KRW17.4 trillion and KRW568 billion respectively, due to a market downturn in the previous quarter and structural adjustments, operating profits dropped to as low as KRW95 billion but has since rebounded across all business segments to KRW568 billion reaching the same level as the previous year. EBITDA reached KRW1.6 trillion and our consolidated CapEx for the quarter amounted to KRW1.5 trillion. Now by business segment. Industrial, the operating profit improved from 2.3% to 3% Q-o-Q. What's particularly notable is that POSCO's OP margin recovered to 3.9%. Overseas steel business also showed improvement. Thanks to strong performance in our engine operations and reduced losses at our China's, Zhangjiagang plant. As for the energy materials, thanks to POSCO Future M's turnaround to profit, overall operating losses were reduced by half Q-o-Q. But due to ramp-up of newly built plants and investment losses continued. As for the infrastructure segment, overall performance remained quite solid. Now looking at Page 5, you will find a summary of the MOU on mutual cooperation with Hyundai Motor Group. Our CFO in his remarks earlier mentioned about the strategic rationale behind what we're seeking to pursue. In essence, it includes cooperation in entering the US upstream Electric Arc Furnace operations and in the Battery Sector, we'll work together on investments in key materials supply chain establishment and joint technology development. Let me elaborate further on page 6. POSCO currently operates not only in Korea, but also in China, Vietnam and Indonesia our upstream steel production basis, while running sales subsidiaries downstream processing lines and processing centers around the world to sell made in Korea products globally. As global steel markets increasingly continue to regionalize and form blocks, we have selected India, US, Indonesia as three priority regions for upstream expansion. In India, together with AWA we're working to establish a specialized automotive steel sheet, specialized company with an estimated capability capacity of about five million tons and we're proceeding with final site selection initial planning step-by-step. The latest announcement regarding Offshore Cooperation is driven by two needs. First is to expand our presence in the US automotive sale market our long-term objective and second is to the USMCA, which will take effect in July 2027, its mid-to-short-term need. USMCA is a revised multilateral trade agreement that replaced at NAFTA among three North American countries to qualify for tariff-free automobiles. There are three conditions one of which is the regional content requirement. Here the molten iron of the seal must be produced within North America for steel to be recognized as North American. POSCO currently uses cold-rolled steel sourced from molten iron produced at Arakongyang Work in Korea with which POSCO Mexico produces coated automotive steel sheets and starting from July 2027, from POSCO Mexico and its operations, it's essential to use cold-rolled steel, made from molten ore, iron produced within North America. So this new partnership is therefore a critical decision that aligns with our long-term strategic ambition in the Automotive Steel Sheet market, also addressing the urgent mid-term need to respond to USMCA. Now Page 7, progress on our rebalancing efforts, through the restructuring of underperforming projects and non-core assets in Q1 of 2025, we try to generate cash, so we divested a total of six assets in the first quarter raising KRW286.6 billion. And since last year, the cumulative cash generated reached KRW949.1 billion with 51 projects completed. So in Q1, we sold off loss making operations like Piano chemical as well as the power demand management business of POSCO DX. So these rebalancing measures are not only just about securing additional cash, but are also expected to help eliminate potential sources of loss going forward. Moving on to the next page, the CapEx plan for this year, this year we have established a CapEx plan of KRW8.8 trillion, slightly down from the previous year. We plan to continue investing in core businesses, while adjusting the pace. We have allocated 43% to steel, 34% to energy materials and 17% to the infrastructure. As for the steel segment, there is the construction of the new EAC in Gwangyang overseas growth and replacement of aging facilities to improve operational efficiency. We have budgeted CapEx for these initiatives and as for the energy materials, its CapEx is spending in 2024 was KRW4 trillion. But major production facilities including Argentina were completed at the end of last year and this year despite ongoing construction of second bring plants in Argentina and cut that materials plant, CapEx burden will be slightly lower to KRW3 trillion. As for the infrastructure, we planned the second project in Australia Stage 4 of Myanmar gas field and construction of a second LNG terminal. Now performance by a key area, Page 9, first is POSCO. POSCO's crude steel output in Q1 mainly due to the impact of overall maintenance works declined by 5.5% Q-o-Q. But while selling prices slightly increased and raw materials costs remain stable and we have been making cost saving efforts enterprise-wide and all of these efforts led to an improvement in op margin which rose to 3.9%. And the volumes were reduced not because of demand cut. So, in Q2, we believe there's going to be a recovery in terms of sales and so forth. And recently in the domestic retail market, there was a reduction in unfairly traded imported products, which had previously caused significant disruption in the market, but we're seeing a gradual normalization of the market prices in certain categories such as steel sheets, which are some positive developments. Now, let's move to Page 10. Profits from overseas steel operations partially recovered. First, our Indian subsidiary has steadily expanded sales of high margin products like automotive steel sheet by seeing improved profit. And second, China's Zhangjiagang, due to a rise in regional stainless steel selling prices, has reduced its losses. But subsidiaries in Southeast Asia continue to underperform. Next, POSCO Future M. With increased sales volume of cathode materials and higher prices for basic materials, operating profits improved, resulting in a turnaround in the first quarter. In particular the sales volume of high nickel cathode materials our main product rose by 64% QoQ. And as for the sales of natural graphite-based add-on materials mostly driven by the demand from customers seeking non-China origin added materials, the sales increased by 33% QoQ. Page 12 at the end of last year Argentina Plant 1 completed its construction. Ramp up is underway and it's implementing client certification process. On the other hand, the Plant 4, in light of the delayed recovery in lithium prices and continued market sluggishness, the completion has been postponed to the first quarter of 2026. So, the Lithium POSCO Solution, domestic downstream subsidiary project has also been rescheduled to the first quarter of 2026 accordingly. As for the POSCO Pilbara Lithium Solution Plant 1, which completed full construction in November last year, it began full-scale shipments of contracted volume starting in the Q2. And as for the Plant 2, which was completed at the end of last year, we aim for a client certification in Q3. That we will focus on testing and ramp up. Next is POSCO International. Due to increased electricity sales during the winter and solid domestic sales from Myanmar gas fields, operating profit and energy increased, in particular in the LNG power generation business, there was a completion of major maintenance works that led to recovery in sales. Now, let's move on to POSCO E&C. As several major large projects were completed at the end of last year first quarter revenue decreased. However, as completion related profits were accounted for, operating profit in both the plant and the infrastructure segments increased slightly. Lastly, let me update you on our recent ESG-related developments. Our group as a company with operations all around the world is striving to establish principles and systems for global standard human rights management not just in Korea, but around our business sites around the world. In Q1, the Chairman and the CEOs of each affiliate jointly proclaimed the POSCO Group Human Rights commitment and we would like to report that we have established a Human Rights Management framework aligned with the UNGC standards including trends in the global legislative landscape and human rights due diligence and grievances redress mechanisms. Now, this ends the presentation. We'll move on to the Q&A session.

We will begin the Q&A. [Operator Instructions] Yuanta Securities, Mr. Lee. Please pose your question.

Hello, my name is Lee, I'm from Yuanta Securities. Low performing businesses and restructuring of those businesses are ongoing. The PZSS office in China I think deficits have been continuing for some time. I think it's been 12 consecutive terms that it has gone into red ink. For PZSS, do you have any plans to improve its performance? Or has it just fallen into the pit of low-performing businesses and perhaps is it being considered for liquidation? Second question is about energy materials. Of course, the size of the deficit has been reduced, but still there's an operating deficit of about KRW100 billion. So I understand that some of these plants are in ramp up stage initial stage of operation, so some of this loss is inevitable. But again, KRW100 billion of deficits is quite large, and is this a repeating pattern, if this continues for about four quarters, it could add up to about KRW400 billion of deficits. Of course, the energy industry is difficult to predict. However, what are some of the projected revenues as well as operating profits that you forecast for the upcoming quarters. And I know it's difficult to look out to 2026, but last year, during the Value Day event, you proposed some revenues and EBITDA numbers. So at this point based on the numbers released last year in energy materials, what are some of the new projections? What are some adjustments downward? Adjustments that you can make at the moment. My last question. There was an earnings report at two o'clock. And I think Chairman Seong has hinted at the possibility of raising more capital. And so looking at Posco Future M, is there any possibility of raising more capital? Or do you not have any such plans in the works?

The first question will be answered by the sales management department and the second question I will address that.

So on PZSS and if there are any plans to improve performance, I think that was the gist of the question. In China for several years, there has been an overcapacity of stainless steel and so we have very little recourse but to look at restructuring. Same is true for PZSS. We've made diverse efforts to improve its performance. And at headquarters in the first half of last year, because we looked at many offices that may have to fall into low-performing assets subject to liquidation. This obviously fell into that list. But we have to look at the Chinese market situation as well as our own corporate strategy and the stainless steel market. And so we have some restructuring efforts going on, but we do need to read the situation. Within the year, we believe that we will be looking at a few more variables to make a more definitive conclusion on this The second question I would like to address. Energy materials companies include HY Clean Metal and PZSS. These are in their initial stage of operation. Some are still being constructed. So we are in ramp-up stage and some of them are supplying to customers. For those plants in ramp-up until we reach a level of stabilization, there is going to be fixed cost that will be generated. And for those who are filling customer orders, we have to provide a discount because they have not yet received quality certification. So it's going to be difficult to turn to a profit this year. That's what I can say for sure. But sequentially, we will be getting customer certification. And so starting in the latter part of next year, we will begin to see some black numbers in our operating profits. By 2027, most of the companies will have -- or plants will have reached a stable operation, and that's when we will see all of our ink turn to black. So I cannot give you any more specifics on that at this point. Please understand. And on raising more capital, paid-in capital, for POSCO Future M, we did provide some funding in about KRW500 billion and about KRW 500 billion. And about KRW 600 billion in terms of hybrid securities. And so this is a lot more CapEx than we had originally anticipated that's for sure. There is some time lag between when the investment is made and when our sales can hit our books. So, yes, there is a lot more need than previously anticipated to assist this business that we are looking into using other borrowing instruments. But S&P ratings have turned a little bit negative but our regular assessment from Moody's is already available so whether we need to look into more borrowing or not we are assessing that. Future M's financial status as well as the financing situation and raising more paid in capital. All of these things are variables that we are looking at and based on our conclusion we will be making a decision shortly. Next question, please.

Next question will be by Hyun Park, Mr. Park from Daishin Securities.

I am Tae Lee from Daishin Securities. Thank you very much for giving me the opportunity to ask the question. I have two questions, so I would like to ask a question about the production cost that was announced by the Steel industry, so about 50 million tons of estimate that has been revealed. So I would like to know if that could be feasible and when can we expect the production to be stabilized and how do you see the future? And do you believe that the production expansion could be possible for the future? And the second is about the integrated mill investment going on in India. So what is the progress on that? And also you've made investments in the secondary battery materials and you're also investing in the steel milking as well. So I would like to know if these two initiatives are taking place in tandem or in parallel.

So the first question I think that Mr. Hong Munsie from the POSCO Marketing strategic Office can answer and I will answer the second question. Yes, I am the head of the marketing strategy office at POSCO. So there was an announcement of the output cut by and I think the volume is about 1 million tons, which is minimal in terms of impact on the market. And at the beginning of March, there was the Chinese Congress party meeting and there was an estimate that the 50 million tons of production cut could be feasible so the output cut. Perspective it seems highly likely for the time being that because of the trade war as well as the Chinese government's production cut feasibility might not be also possible, because of the Chinese government's GDP growth and so forth. And there is an increasing number of private companies in the sector coming from China, so there is an influence coming from the Chinese government. So whether we'll be able to achieve the 50 million tons of production cut or not, I cannot be sure of that, but we can say that it is highly likely. So if the cut is made then of course, it's going to have an impact on the raw material prices and the prices of raw materials may go down. Stabilize, but if you look at the current steel prices as for the price, it is coupled with the raw materials prices, and if you look at the structure of our company, there is the automotive and electronics companies that are our clients. So you can see that we sign contracts price contracts based on semester or based on quarter. So we believe that the spread could go up to give us more profits going forward. So if there are additional cuts in production or output, then the over export volume coming from China could go down and we could have a positive impact on POSCO. Thank you. Now the answer to the second question. As presented the integrated mill investment, the total investment is $8 billion, and in Korean won is about KRW11 trillion. If you look at the cap or investment structure, so in that project the capital is 50% and the borrowing is 50%. And as for the capital of 50% we go in 50% of that 50%. So our fund is only about one-fourth the total investment. So if that is the case that will be KRW2.5 trillion out of KRW11 trillion and it will be implemented over the next five years. So the annual CapEx or investment will be about KRW0.5 trillion. So who is implementing the investment? It would be POSCO and as for POSCO, the annual EBITDA is at least KRW4 trillion. So as for POSCO, out of the KRW4 trillion of cash generation ability, investing about KRW550 billion per year is no problem. And as for the second battery materials investments, the initiatives are ongoing and on a consolidated basis, our cash reserve is about KRW16 trillion. So when it comes to the secondary battery materials making investments in the sector would be not challenging.

Next question.

From iM Securities, we have Kim on the line.

My name is Kim Yoon Sang. I have three questions. So tariff barriers on reduced quotas as well as clarification. All of these create more intensified trade barriers. And so this hits not only headquarters but also overseas plants. So because of these intensified trade barriers, it leads to impacts on the sales volume and also impact sales plans. I'd like to know how it's impacting yours. And because of the adverse impact, we have to have some responsive measures. Of course, the possibility seems a little bit low, but because the quota has been eliminated, there is some impact to the steel business. So what are your countermeasures against these? And next is on hot rolled products, and so we have AD complaints have been filed, and if this were to impact Japan as well, how is Japan likely to react to this? And finally, there's been some adjustment in lithium price. I'd like to know what your projections are on the lithium price going forward.

First question will be answered by Mr. Jung Gi Seop [ph], and next by the International Trade Officer Mr. Hong Yoon-Sik, and finally from EJ Young from Energy Materials Business Management. My name is Hong Yoon-Sik and I'd like to address the trade barriers. How are our affiliated companies and overseas locations impacted? We have many overseas in various locations but by region the impact varies. Let's take Vietnam as an example. So even before the Trump administration imposed tariffs, there was already a 25% tariff and there are a lot of exports to the US but there are no additional tariffs that were imposed on steel products. But US bound Vietnamese made coated steel products. The countervailing taxes are between 40% to 140%, so it's very high. So POSCO Vietnam's cold rolled products, domestic sales could be impacted by this move. But US bound cold world products from Vietnam, I think will only be positively impacted by this. And the same goes to Thailand. We have a coating plant in Thailand. And they have US bound exports that are subject to the same level of tariffs. So the coating plant in Thailand also is likely to be positively impacted by this move and Mexico is the most largely impacted and originally we anticipated high impact, but when we analyze some of the final decisions that were made because of the USMCA mandate. For home electronics still if it is built in North America then there are some provisions that act in favor of some of the products that we make for the region. With the quota eliminated are we going to be able to sell more to the United States? While the quota may have been removed still that is imported into the United States, not only from Korea, but from all other countries are closely monitored, so we anticipate more sanctions, more restrictions and so I think our sales volume is going to be very similar to what we sold last year.

I'm the head of ITO. I'd like to answer the second question. In global steel market, we are seeing various movements such as the EU safeguards, as well as the UK safeguards that are being reassessed. Canada is also imposing new safeguards and they are collecting a team. Turkey and some of the ASEAN nations are also making separate movements in order to look into some anti-dumping issues. So in order to address all of these, I think protectionist measures are going to continue for some time. So the anti-dumping regulations against Japan by the Korean government, as well as other protectionist measures that we are seeing in the market right now, we are going to have to look at some of the traded volumes, as well as prices and to be able to devise diverse countermeasures. Exactly what kinds of countermeasures to take? We cannot give you any conclusions at the moment.

I am in charge of Energy materials investment office. You asked about the lithium price. Because of demand rise with EV market recovery, we are projecting a gradual price increase, but because of the tariff policies that are coming out of the United States that has added uncertainty and therefore it's become more difficult to predict. There are six agencies that predicted prices. Going forward, after 2025 all of those six agencies expect the price to rise and on average by 2028, the price will reach about $20,000.

Next question please.

Next question will be from Park Hyun-Wook from Hyundai Motor Securities.

Thank you for giving me the opportunity to ask the question. I have a few questions for you. First is regarding the Gwangyang electronic arc furnace that will be completed this year. So in terms of sourcing what will be the percentage between domestic and overseas, and I believe that it will be very difficult to source the scraps. And as for the Toyota, it acquired Radius recently. So when it comes to POSCO, are you going to acquire any steel scrap companies going forward? And as for the products that are produced from EAC what is the quality of that produced by EAS compared to the blast furnace, if you could elaborate further on that? And the second question is regarding marketing conditions. So in the latter half of this year, how do you anticipate the steel market when it comes to automobiles and ship building? How do you expect the supply prices to be? And recently regarding the Chinese steel plates, 80 tariffs have been imposed, but can we anticipate any price increase or increase demand sales? Do you see some impact or effects coming from those initiatives? And the third is regarding POSCO E&C. So regarding POSCO E&C there was an accident Gwangmyeong. So is there a cost that should be accounted for a one-off in the second semester -- second half?

Regarding the first question it will be answered by POSCO's Head of Raw Materials One Office. And the second will be by Mr. Kyung-Jin Chung [ph] and the third will be by Mr. Vu Yongdai [ph], who is the Head of the Infrastructure Business Management Office.

Yes. I am in charge of the raw materials. Yes the EF as you said will be completed by the end of this year, but according to our internal plan it will be completed by sometime May next year. And as for the steel scrap when it comes to domestic sourcing and investment we're going to safely secure it and HBI is an alternative so we consider investing and acquiring or purchasing HBI. So when it comes to the domestic and overseas sourcing percentage, I cannot clearly say what is the percentage, but we are very much focused on flexible sourcing but we mostly focused on domestic sourcing and going forward when it comes to the high quality scrap sourcing strategy so we will collect as much as possible scrap coming from our clients and then also sign a strategic partnership with our suppliers and in order to meet the increasing demand in Korea, we are going to invest in the collection hub so that we can still high quality scraps as much as possible. And we will also invest in the facilities to transform a low quality to high quality scraps. You also asked the question about our plans going overseas. Of course if there if there is a need we're going to fully consider that and we will explore some investment opportunities if opportunities arise. And when it comes to the quality so…

Hello I'm in charge of POSCO Technology Strategy. So in Gwangyang in 2026 in the first half we're going to complete EAF -- to produce low carbon products. So when we use the scraps as raw materials compared to the BS production there are lots of impurities. Such as nitrogen and so forth, but EAS we are in the current process of developing technologies that will minimize the impurities. And as for the automotive facility sheets in first we actually produce the internal interior sheets and according to the level of maturity and advancement of the technology we plan to also employ the reinforced sheets going forward.

Now I am in charge of the POSCO Marketing Strategy Office. You asked the question about the steel market outlook for the second half. Simply put if you look at the automotive sector in Korea we're seeing the impact of the tariff war and yet it manages to respond to those initiatives and there are some positive signals or developments that are taking place. But as for the construction sector it's been sluggish since last year and as for the home appliances it's very much related with the construction sector as well. So when it comes to the home appliances sector we believe that the market will be not as good in the latter half. But in terms of prices, as for the heavy plate AD filing last year there was the tentative tariff or provisional tariff that was applied and the Ministry of Finance and Economy confirmed on the provisional tariffs today. So this helps to minimize the inflow of products that are subject to unfair trade practices. So compared to last year when it comes to the retail market prices it has gone up quite a bit and we can expect some additional hike going forward. And when it comes to stainless steel products, there was a result regarding delayed in Vietnam products, and we saw more than 18% additional tariffs compared to the preliminary rulings so we believe that this will be very helpful in blocking the influx of products subject to unfair trade practices and this is going to have a positive impact on the prices as well.

Yes I am in charge of the infrastructure business management, so you asked the question about the accident in Gwangyang. So it was the 9.209 zone of the Xinan online. So it was regarding, when it comes to the demolition cost, of course, it should be accounted for on the books, but as for the 5-209 zone the operation has been suspended fully, so it's very difficult to calculate the cost, so we can say that, it will not be accounted for in the second quarter and what is fortunate is that we have an insurance for that construction site. So when it comes to the demolition as well as the restoration work, we'll be able to be covered to a certain level to a high level by the insurance.

Next question, please.

Aishwarya Pai [ph] 0from Nomura Securities. Please ask your question.

Hi. My question is regarding the recent announcement of POSCO trying to issue a $1 bond. This one that announced a few ago. I'm trying to see if there's any update on that. And my second question is regarding the recent announced Hyundai JV and what impact is expected onto the leverage from?

[Foreign language] And the first question will be answered by the head of finance office and the second question by Mr. Ivan [ph] Steel Business Management Office.

So dollar denominated issue bond issuance progress on that let me address that. So we had this in the plan, but on April 1, with the announcement of the US clarification, the financial market fluctuated wildly, so not just us but also in other companies all bond issuances have been put on hold. We are seeing some signs of the market stabilizing, so perhaps by today maybe by Monday, we will be able to have a better assessment about what the market condition is for the issuance. So on the MOU signed with HMG and how that's going to serve as a leverage for our group. This is an MOU that was signed between POSCO Group and Hyundai Motor Group. So Hyundai Motor Group is a partner that we have a relationship that is as old as five decades. Among many of the strategies that we've had up until recently our strategy for the United States has been in flux. We had considering many options, so among those many options, looking at some of the demands that Hyundai Motor Group had in the United States, they made an announcement first about their investment plans and by Asking for Pasco's participation, we believe we can serve a mutually beneficial role here. Of course, there are some risks that could follow. So, the two largest steelmakers in Korea are investing jointly in the United States, so there could be some investment risk there and from POSCO Group's perspective, I think the CFO at Hyundai Motor Group also explained this a few minutes ago, but it proved to be a market where we can generate some competitiveness and it is a market where material flow is insured and there are some links that we can build with our downstream processes as well. So investing in the United States and jointly with Hyundai Motor Group, we believe there are many more positive impacts than negative ones. Not only in steel, but also in rechargeable battery materials, as well as the potential to extend our cooperation into other parts of the United States as well. So dollar denominated bond issuance, I'd like to add a few more comments. So once again, other company's attempts to issue bonds have been put on hold as well. So we have to look at the financial situation, as well as some of the other companies and how they are moving on these bond issuances, as well as the spread. Those are the variables we'll look at before we assess bond issue next week. At Hyundai Motor Group, I think they mentioned -- had a question about financial leverage. Building a plant in the United States, Hyundai Motor Group will be the major shareholder, the equity holder. So we will not be determining our shares in that plant, but according to Hyundai Steel. That and equity ratio will be fifty-fifty. This is what Hyundai Steel announced. POSCO Group will be a minor shareholder. And I think our shares will be assessed by our Equity, we will not be defining our equity before the investment, so I hope this helps to better explain how it will be structured. We'll take the next question.

Next question will be by Annie Guo from TD Securities.

Hello, I am Annie Guo from TB Security. I have two questions. First -- about the Chinese steelmakers, not only in China, but also abroad. They're investing in the coking coal, as well as iron ore projects. It is quite active. So as for Korea in order to, what would be your strategy in terms of the competitiveness strategy and also the pricing strategies and I believe the raw material prices are likely to go down. So that is why China's strategy could not be threatening for us. Is that your take or I would like to know your strategy or your perspective. And second is regarding the next generation secondary materials the progress on the precursor development. So, I'd like to know about how you're going to secure competitiveness in pricing or the capacity and updates on testing as well as clients.

Regarding the first question, it will be by Mr. [indiscernible], the head of the Materials One office and then the second will be by Mr. [indiscernible] from the Energy Materials Investment Office.

Together with the Chinese steelmakers has the plan to invest in raw materials projects and we are indeed implementing this type of strategy. And as for the iron ore, we are sourcing it by making a 50% investment and as for the coking coal, the level is about 20% because of the ESG issues. So we are considering all of these and making investments in this field. When it comes to iron ore, we believe that investments have been fully made and when it comes to the coking coal. We believe that there are more returns that we can achieve on our investments, so we're going to continue to monitor the ESG developments. And identify mines that will be of interest to us and make active investments and also do natural hedging with regards to price fluctuations.

Yes, I'm the head of the energy materials investments, regarding the lithium sulfate development. So of course there are companies that we have invested in our future institute and we are making – we are researching the intermediate goods coming from a lithium plants to make low priced lithium sulfate and the results have become – have realized these days. So we are now going for a more larger scale that is we are considering implementing a demo plant. And regarding the JKSS, so recently there's been a solid precursor that was produced from here. We thought it was quite promising. So together with OEM companies and battery companies we're conducting a test and for the details, please understand that we cannot disclose the details now. Thank you.

Next question please.

Eugene Securities, Lee Eugen [ph]. Please ask your question.

I am Eugen. There was a one-time impairment loss in the first quarter. Can we assume that no other impairments will be assessed and you mentioned leadership in the auto sector, we believe HBIS was mentioned. If you have any projections on the auto industry profits, please share them with us and based on automotive steel sheets, what is the tonnage? And what is the timeline on hitting these profits as well as volumes? And I'd like to know if we are experiencing a deficit in steel plates.

First question I will address that. Second question will be answered by – let me address the first question first. In the first quarter yes, we had a one-time impairment loss effects. These impairment losses usually occur in the process of restructuring when we sell off assets and close down plants. And there is a disparity between the book price and the selling price. And secondly, when the market turns downward the value of the business also declines. So there is an impairment loss there as well. So in the first quarter, we continued with our restructuring and of course, there were some losses. Last year, because market really soured and we continued to restructure. There were some priorities that we could have defined, but nonprofit and non-essential assets were first on our list. And so because of the market downturn, as well as the liquidation of our assets that were underperforming there were larger impairment losses as last year. This year, we will continue with the restructuring, but in terms of size and intensity it will be smaller than last year. And also this year -- do we anticipate the market will sour as much as last year? We don't think so. I think it's not going to be as bad as last year. And so based on that projection, the impairment losses will not be as big as last year. HBIS joint venture in China. We are looking to hit KRW420 billion in terms of revenues and we believe we'll achieve that. To hit that revenue, we are planning 170,000 tons, but our operating profit is still going to be in the red and the automotives steel sheets how much tonnage are we targeting? For wire, rods and stainless steel, setting those aside, we are looking at about 8.5 million in India. Before we set up the plants in the US and India we're not going to be adding more capacity, so our sales will be based on between 8 million to 9 million tons. The third question was whether our steel plates are suffering from a deficit. Of course each steel grade is a little bit different, but at the end of last year, we did have a lot of deficit bearing plates. But because of the AD filings, many have transitioned into black ink now. The Indian Steel works. I think the question was about the construction schedule. Our JV partner. is working to confirm the plant's site in Odisha. Once we select the site, then we will be able to add more detail to this plan. Once the site is determined we also have to do an environmental impact assessment and go through other procedures as well. But if we can stay on plan I think we'll be completing the plant by 2031.

Now this will be the last question. Last question will be by [indiscernible] from HSBC.

Hello, I’m [indiscernible] from HSBC. I have two questions. First, I think that it was addressed in your previous answers. So when it comes to the AD filing for the heavy plates, I would like to know what are the ongoing negotiations. And I would like to know if there's been any financial evaluation or valuation losses that occurred. And with regards to lithium sourcing, I would like to know if you have acquired any additional assets. So first is -- will be answered by Mr. Hong Yoon-Sik, Marketing Strategy Head Office.

So regarding the answer for the first question, after the AD filing of the Chinese heavy plates, the retail prices are constantly going up. And I think that I cannot disclose all the detailed negotiations taking place in terms of price by client. But with the three shipbuilders, we have completed our negotiations for the second quarter. And I cannot share with you the detailed numbers, but the price negotiations have been taking place reasonably in line with the current trends.

And I will answer the third question first. So it will be by the Head of the Energy Materials Investment. It was about sourcing lithium assets or securing lithium-related assets. So as said, in order to increase our cost competitiveness, we are leveraging this low market conditions in order to acquire prime assets, not only for brine, but also in terms of mine. And we are also engaged with some specific deals, but they are on the process of private deal process and also competition bidding. So we cannot disclose any further on these initiatives, please do understand.

And Energy Raw Materials Office head is going to answer a question about the second. So the metal prices are going down, the nickel as well and going down to $9. So when it comes to the valuation -- asset valuation losses is inevitable. And this is the same situation for all the secondary battery materials sector. And when it comes to the losses level, there is one plant under construction in Argentina and one plant is undergoing ramp-up. And one in Gwangyang Line is under ramp-up and another one is under study. So when it comes to losses, it will be determined by the fixed costs.

I would like to close the first quarter 2025 earnings report call for POSCO Holdings. Through this call, I hope people gained better insight into how we intend to drive our business forward. Once again, I'd like to thank everyone for your participation. Again, I'd like to close the first quarter 2025 earnings report call. Thank you.