[K-Steel: A Major Survival Transformation]②POSCO Eyes Global Food Giant Status with 400 Million Square Meter Palm Plantation in Indonesia and Grain Terminal in Ukraine

Expanding from Steel to Food
Restructuring the Value Chain from Palm Oil to Biofuel
Securing Export Channels to China and Control over Price and Volume

Editor's NoteDue to supply glut from China and the rise of protectionism, the survival formula for the global steel industry is changing. The era of growth based solely on steel is fading, and a new phase of supply chain competition—encompassing resources, energy, food, and materials—is emerging. POSCO Group is also accelerating the restructuring of its business portfolio, moving away from a steel-centered structure. The Asia Business Daily examines POSCO's transformation and the global steel industry's survival strategies through its 'K-Steel: Surviving the Great Transition' series.

Sumatra Island, Indonesia. Palm trees densely packed across plantations stretch endlessly to the horizon. Even after driving for a long time, the landscape remains unchanged. This is where POSCO Group's plantations are located. The total area of plantations scattered throughout Indonesia exceeds twice the size of Seoul. POSCO Group's business restructuring, which has reduced the proportion of steel business revenue to half, goes beyond just resources and energy. Another pillar is food.

Palm plantation landscape in Indonesia. POSCO International

According to industry sources on May 7, POSCO Group is accelerating the expansion of its food business, centered on approximately 1.32 billion square meters (about 400 million pyeong) of palm oil plantations in Indonesia, a refinery with an annual refining capacity of 500,000 tons, and a grain terminal in Ukraine. By securing both production and distribution, POSCO is expanding its business model beyond simple trading to directly control the entire process from sourcing raw materials to processing and sales.

The transformation is also evident in its performance. In the first quarter of this year, POSCO International recorded sales of approximately 8 trillion won and an operating profit of 357.5 billion won. Operating profit increased by 32.3% compared to the same period last year. Resource development and energy businesses led the performance. Last year, the company achieved record-high results with sales of about 32 trillion won and operating profit of 1.1653 trillion won, maintaining its status in the "1 Trillion Won Operating Profit Club" for the third consecutive year.

The expansion of the food business is also continuing. In November last year, POSCO International expanded its production base by acquiring the Indonesian palm company Sampoerna Agro (now PAR) for 1.3 trillion won. Its annual refining capacity is 500,000 tons, surpassing 80% of Korea's imported palm refined oil volume.

The company is also expanding its palm oil sales channels. It is increasing exports not only within Indonesia but also to China and other countries. Additionally, it plans to increase crude palm oil (CPO) sales from 190,000 tons to 550,000 tons. By securing both production and refining, POSCO aims to improve profitability.

This trend is leading to a restructuring of the value chain. By building a system that covers everything from seed development, farming, oil extraction, refining, to biofuel raw materials, the company is accelerating its transition to a raw material-based business operator. As demand for eco-friendly fuels increases, especially in Europe, the potential for a palm oil-based biofuel business is also growing.

Overview of the Ukrainian grain terminal. POSCO International

The same applies to the grain business. In 2019, POSCO established a grain terminal at the Port of Mykolaiv in Ukraine, creating a structure for directly handling procurement, storage, and export. By reducing intermediate distribution steps and securing supply at the source, the company has established a foundation for controlling both price and quantity.

Although the terminal is currently operating with limitations due to the Russia-Ukraine war, it continues to serve as a key hub for grain supply to Asia. Based on this, POSCO International has expanded supply to Asia—including Korea—as well as the Middle East and North Africa, and plans to strengthen its inland procurement functions in the future. The company aims to expand into a structure that supplies both grain and edible oil by combining its Indonesian palm business.

The expansion of the food business is in line with the group's broader restructuring efforts to reduce reliance on steel. Son Yanghoon, professor of economics at Incheon National University, said, "The steel industry is facing structural difficulties due to China's oversupply and carbon regulations. POSCO appears to be under pressure to restructure its overall business in response to these environmental changes," adding, "Expanding into sectors with business opportunities seems to be an inevitable choice."

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