POSCO’s 2024 Performance: Steel Production Drops as Restructuring Takes Priority
POSCO, one of South Korea’s largest steel producers, has reported a 1.1% decline in steel production for the year 2024, reaching a total of 33.17 million metric tons. The company's rolled steel sales also saw a slight dip of 1%, totaling 32.8 million metric tons. These decreases in both production and sales were primarily attributed to the reconstruction of blast furnaces, a crucial process in the company's ongoing restructuring efforts.
Despite these challenges, POSCO experienced an increase in the sales of its high value-added products, a positive sign amidst weaker global demand for steel. The company's strategy of focusing on premium products helped mitigate some of the adverse effects of the broader downturn in the global steel market.
Financial Performance: Declining Profits Amid Restructuring
POSCO’s operating profit for 2024 was reported at KRW 2.17 trillion (approximately $1.5 billion), marking a significant decrease of 38.5% compared to the KRW 3.53 trillion ($2.43 billion) achieved in 2023. The company’s sales revenue also experienced a 5.7% year-on-year decline, totaling KRW 72.68 trillion (around $50.25 billion).
Furthermore, POSCO’s net profit saw a substantial drop of 48.6%, falling to KRW 948 billion (about $655.55 million) in 2024, compared to the previous year’s figure. These declines reflect the challenges faced by POSCO as it navigates both external market pressures and the costs associated with its internal restructuring.
The Impact of Blast Furnace Reconstruction on Steel Output
The reconstruction of blast furnaces played a key role in the reduction of POSCO’s steel production. This process, aimed at improving efficiency and capacity in the long term, temporarily impacted the company’s ability to produce steel at its usual levels. The company’s focus on long-term structural improvements means that the short-term slowdown was seen as a necessary step for future growth, even though it contributed to the overall decline in output for the year.
Resilient Sales of High-Value Products
While overall steel sales declined slightly, POSCO’s strategy to focus on high value-added products has proven somewhat successful. These products include advanced steel used in industries such as automotive, construction, and electronics, where demand remains more stable despite fluctuations in the global steel market. The company’s ability to increase its focus on these segments helped counterbalance the broader downturn.
POSCO’s Strategy Moving Forward: Restructuring and Expansion Plans
Looking ahead, POSCO’s leadership has made it clear that it intends to continue its restructuring efforts in 2025. The company is planning to divest from low-margin and non-core businesses, allowing it to focus more effectively on its high-value products and its primary steel operations.
In terms of market expansion, POSCO Holdings is considering entering the US steel market, where the company currently ships only 100,000 metric tons of steel annually. While this volume is relatively small, the company has acknowledged that it is exploring investment opportunities in the US mining industry, which could help secure a more stable supply of raw materials for steel production. However, POSCO has expressed caution due to market volatility and uncertainties in the global mining sector.
Additionally, the company is closely monitoring import tariffs on its steel products in Mexico, which could further impact its international business. This concern is part of POSCO’s broader strategy to diversify its production sources and reduce dependency on specific regions for steel exports.
Future Outlook: Navigating Market Challenges
Despite the current challenges, POSCO remains committed to restructuring and enhancing its product offerings to meet evolving market demands. The company’s leadership is focused on adapting to market volatility and positioning itself for long-term success. As the company navigates global uncertainties, it will likely continue to emphasize operational efficiency, strategic investments, and innovative product offerings to remain competitive on the international stage.
