Chairman Choi Jung-woo Marks 2nd Anniversary: "POSCO to Improve Performance in Second Half"

First Quarter Deficit Recorded Due to COVID-19
Strengthening Steel Business Competitiveness with Gwangyang 3rd Blast Furnace Restart
Diversification Strategy in Secondary Battery Materials and Energy
Enhancing Corporate Citizenship Role

[Asia Economy Reporter Hwang Yoon-joo] Choi Jung-woo, Chairman of POSCO, emphasized on the 27th, marking his 2nd anniversary in office, that he will focus on improving performance during the remainder of his term. Despite recording the first quarterly loss since the company's founding due to the unexpected adverse impact of the novel coronavirus disease (COVID-19), he expressed confidence that performance will improve from the second half of the year. Starting with the restart of the Gwangyang No. 3 blast furnace, POSCO strengthened the competitiveness of its steel business and diversified its profits through secondary battery (electric vehicle battery) materials and energy businesses, strategies that are expected to drive performance improvement.

Chairman Choi told Asia Economy reporters on the day, "We expect performance to return to normal as we move into the third and fourth quarters of this year," adding, "We will actively respond to this."

Due to the COVID-19 pandemic, global automobile production in the second quarter fell by 48% compared to the same period last year, but demand is expected to recover from the second half. Since July, POSCO's plant operating rates have recovered to about 75% in Korea, 90% in China, 60% in the United States, and 50% in Europe.

The area Chairman Choi is most concerned about for performance improvement is production efficiency. POSCO recorded an operating loss of 108.5 billion KRW in the second quarter (separate basis) this year. This was the first quarterly loss since the company began disclosing quarterly results. The global automotive industry, the largest demand sector for steel products, was shaken by the COVID-19 impact, causing sales of automotive steel sheets in April and May to fall by more than 30% compared to the same period last year, which dealt a blow to operations.

Accordingly, POSCO is accelerating facility restructuring and digital transformation to increase productivity. The Gwangyang No. 3 blast furnace was upgraded to a smart blast furnace for this reason. The No. 3 blast furnace was reborn as a state-of-the-art facility where artificial intelligence (AI) autonomously manages everything from molten iron temperature to raw material inspection, improving productivity by 25% compared to existing blast furnaces. The Pohang No. 1 blast furnace, criticized for low cost competitiveness, is also planned to be transformed into a large-scale and smart facility.

Chairman Choi said, "Following the ignition of the No. 3 blast furnace, we plan to shut down the Pohang Steelworks No. 1 blast furnace next year." His mention of the cutting-edge Gwangyang No. 3 blast furnace and the oldest Pohang No. 1 blast furnace is interpreted as a declaration of his intention to lead business innovation through digital transformation in the steel industry, which is classified as a traditional industry.

While focusing on cost reduction measures such as the closure of Pohang No. 1 blast furnace, Chairman Choi firmly stated that there will be no workforce restructuring. The personnel working at Pohang No. 1 blast furnace are planned to be reassigned after the equipment closure next year. According to Chairman Choi’s management philosophy emphasizing the role of a "corporate citizen," reducing labor costs is considered a last-resort card that will not be used until the very end. The concept of a corporate citizen means that POSCO itself becomes a member of society and aims to coexist with various stakeholders such as partners and local communities, not only creating economic value. This management philosophy was introduced by Chairman Choi immediately after his inauguration.

When asked about his thoughts on the 2nd anniversary of his inauguration, he said, "There is nothing special about the 2nd anniversary," but added, "I will work harder on what I have been doing since taking office and will not neglect POSCO’s role as a corporate citizen."

The market expects POSCO’s performance to improve in the second half of this year. Baek Kwang-je, a researcher at Kyobo Securities, evaluated, "From July, some price increases have been reflected, and recovery is expected going forward," adding, "Although separate and consolidated results are expected to be sluggish this year due to demand decline caused by the global spread of COVID-19 and low oil prices, a gradual recovery in performance is expected from the second quarter results as the bottom."

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