[Concall] POSCO "Impact of Novel Coronavirus... Unavoidable Contraction in Chinese Demand" (Comprehensive)

[Asia Economy Reporter Park So-yeon] POSCO expects a short-term contraction in demand from China to be inevitable due to the spread of the novel coronavirus infection (Wuhan pneumonia).

On the 31st, during the 2019 business performance conference call, POSCO stated, "China extended the Lunar New Year holiday by about ten days until February 9, so a short-term demand contraction is expected," adding, "There is no issue with product shipments, but demand contraction is inevitable due to additional shutdowns in demand industries such as automobiles."

However, they added, "If the economy slows down, the Chinese government is expected to announce measures such as economic stimulus policies to stabilize the market and recover demand. Once production plans for automobiles and others are established after the holiday, a long-term rebound is possible, so we are not overly concerned."

Regarding this year's iron ore outlook, POSCO said, "We expect the annual price to be around $80 to $85," noting, "Although prices were stronger than usual last year, it is difficult to recover to previous levels due to continued supply disruptions caused by strengthened Chinese administrative regulations."

For future new businesses, POSCO plans to increase production capacity of cathode and anode materials, which are secondary battery materials, enhance marketing capabilities, and strengthen research and development (R&D) of next-generation products. They also plan to successfully achieve the goals of the demonstration plant and proceed smoothly with commercial facility investments to enable commercial production of lithium, a key material for electric vehicle batteries, by utilizing the already secured Australian lithium mine and Argentine salt lake resources.

POSCO stated, "POSCO Chemical has significantly expanded investment in cathode and anode material facilities," adding, "Although sales of cathode and anode materials were only 250 billion KRW last year, this year we plan to expand cathode production capacity to 44,000 tons and complete anode production capacity investment at 55,000 tons, expecting sales volume of 60,000 tons and sales revenue of 700 billion KRW." They further mentioned, "As production expands throughout 2021, it is expected to account for about half of POSCO Chemical's sales revenue."

This year, the consolidated sales target was set at 63.8 trillion KRW. The crude steel production and product sales targets are 36.7 million tons and 35 million tons, respectively.

To strengthen competitiveness in the steel sector and foster new growth sectors, POSCO plans to invest 6 trillion KRW. Priority investments will be made in environment, safety, and facilities, while non-production-related investments will be selectively implemented after thorough verification.

To respond to transforming demand industries such as the future new mobility transition, POSCO will establish an integrated marketing system targeting eco-friendly vehicles and expand the sales base of eco-friendly premium high-strength steel products by differentiating them from existing markets.

At production sites, POSCO will spread AI-based smart factories to improve productivity, quality, and cost competitiveness, and innovate quality assurance systems at headquarters and overseas subsidiaries.

This content was produced with the assistance of AI translation services.