POSCO Holdings Inc. (NYSE:PKX) Q1 2023 Earnings Convention Name April 27, 2023 3:00 AM ET

Firm Contributors

Jeong Ki-Seop – President, Co-CEO, CSO

Han Younger-Ah – Head of Investor Relations

Eom Gichen – Head of promoting technique

Kyungsub Lee – Chief of LiB Supplies Enterprise

Kyung-Jin Chung – Govt Officer and Head of Finance Workplace

Chon, Jung-Son – Head of Company Technique

Kyung-han Kim – Head of the Worldwide Commerce Affairs Workplace

Convention Name Contributors

Pat Canon – Hyundai Motor Securities

Sung Hun Kim – Hai Funding

Lee SangHun – Citi Group

Jeong Ki-Seop

Good afternoon, girls and gents, the 2023 Q1 Earnings Launch Convention Name will now start. POSCO Holdings will first current, which might be adopted by a Q&A session with the members. [Operator Instructions] POSCO Holdings will now current.

Good afternoon, girls and gents, I’m Jeong Ki-Seop CSO of POSCO Holdings. At the start, I want to lengthen my gratitude to all of the traders in your eager and lasting curiosity in POSCO Holdings.

At this time’s earnings name is joined by key executives from POSCO Holdings in addition to from main subsidiaries together with POSCO, POSCO Worldwide and POSCO Future M. Final September, POSCO Group underwent an unprecedented pure catastrophe as Pohang metal mill was hit with Storm Hinnamnor and was flooded in consequence.

However because of the efforts and laborious work of the individuals at POSCO Holdings in addition to the companions, distributors and clients, we miraculously accomplished restoration in 135 days and reopened for regular operation as of January twentieth this yr.

Consequently, metal enterprise returned to the black in Q1 from a deficit of KRW713.8 billion in This fall final yr. And on prime of that, we lay the muse for extra efficiency enhancements for Q2. Even in instances of restoration from the pure catastrophe, our funding for progress of POSCO Group didn’t cease.

We invested in electrical arc furnaces to roll out low carbon merchandise from 2026 with a purpose to transition to eco-friendly inexperienced manufacturing system. Moreover, we spent at our product portfolio to incorporate our Hyper and ON cylindrical battery supplies for EVs to reply to the expansion of the EV business.

By way of these measures, we imagine we are able to generate demand within the subsequent and new future progress sectors. The secondary battery supplies enterprise additionally noticed some optimistic developments. In Q1 this yr inexperienced supplies enterprise gross sales jumped 44% Q-on-Q and posted as soon as once more a file excessive quarterly gross sales.

Argentina brine mission part one is nicely underway with a plant and brine pond are actually full and mechanical and electrical works initiating this April. A couple of days in the past with regard to the seawater, relatively mushy water, the lithium building mission, part two, we obtained approval and license from each the state of Salta and Catamarca.

POSCO Pilbara Lithium Resolution, a tough lithium mineral participant now has its headquarters constructing and subcenter accomplished and M&A works commenced in April. It’s shifting ahead consistent with the timetable for scheduled industrial operation. POSCO Holdings is dedicated to do its utmost to make sure progress as a number one inexperienced supplies enterprise and subsequently to boost shareholder worth.

Subsequent, I want to share with the shareholders and traders our mid-term shareholder return coverage, which might be efficient for 3 years until 2025. Please flip to web page 18 of the pre-read. The corporate first disclosed its medium time period dividend payout ratio in January 2020 and over the subsequent three years, it paid out dividends and retired shares to return a complete of KRW3.4 trillion to the shareholders.

The subsequent three years shareholder return plan is as follows. As a number one eco-friendly supplies firm, POSCO Holdings seeks to spice up company worth and keep a gradual dividend payout by pushing for enterprise progress.

As POSCO Holdings shifted to a holding firm in 2022, it unveiled its 2030 progress technique to extend shareholder worth. To this finish, for the subsequent three years, the corporate will construct a worldwide manufacturing system for its secondary battery supplies enterprise similar to lithium. By way of years of laborious work and expertise, the administration is assured that investing in these new progress companies will additional increase company worth.

Throughout 2023 to 2025, for 3 years, the corporate will return 50% to 60% of its free money stream to fairness to the shareholders. Additionally to make sure that dividends are extremely predictable. A primary dividend coverage of KRW10,000 per share might be launched, in order that shareholders can obtain regular dividends even within the midst of uncertainty. Quarterly dividends might be paid out as earlier than and through the normal shareholders assembly in March, the Articles of Incorporation might be revised to pre-emptively undertake the dividend affirmation first file date later program to boost shareholder worth.

Expensive shareholders, uncertainty within the international financial system stays and the regulatory atmosphere retains altering quickly, as will be seen from IRA and CBAM. To this finish, POSCO Group launched emergency operations. The group will proceed to give attention to its strategic core enterprise whereas responding to the altering enterprise atmosphere in a proactive and agile method to fulfill the shareholders expectations.

Subsequent, the Head of the IR group will report on the earnings launch of Q1 2023.

Han Younger-Ah

Good afternoon, girls and gents, enable me to stroll you thru our enterprise outcomes from Q1 2023. POSCO Holdings’ Q1 consolidated income rose 0.7% Q-o-Q two file KRW19.38 trillion and posted a surplus 7700 to KRW4.7 billion. Let me elaborate on every enterprise.

First is metal. Metal enterprise recorded a deficit of KRW718.4 billion in This fall, however made a turnaround in Q1 to put up a surplus of KRW337.9 billion. Pohang Metal works 100% resumed regular operation from January twentieth, and in consequence, the output and product combine are additionally recovering actually quick. Regardless of a further restoration prices of 60.9 billion in Q1, POSCO posted a surplus of 251.3 billion.

Abroad metal additionally posted a modest surplus of KRW19.4 billion from a deficit of KRW166.2 billion in This fall final yr. For those who do a deep dive into POSCO’s month-to-month OP, up till January, the corporate was nonetheless within the crimson because of the lingering results of the flood and metal value declines. However as of now it was normalized and metal costs began to development upwards in February. POSCO shortly returned to the black might be improved additional in March with extra value will increase. So judging from this development, we anticipate metal OP in Q2 might be clearly higher than Q1 this yr.

Second is inexperienced infrastructure OP climbed 63% Q-o-Q. In January, POSCO Worldwide merged with POSCO Vitality and recorded a quarterly OP of 280 billion regardless of the market downturn. And because of Sound Vitality enterprise, it was capable of obtain a substantial OP. POSCO DX a listed firm additionally posted a optimistic OP. Third is inexperienced supplies. Due to elevated CapEx gross sales. Inexperienced supplies income jumped 44% Q-o-Q and posted the very best quarterly gross sales as soon as once more.

OP additionally inched up in comparison with the earlier quarter and is predicted to take care of its upward development into Q2. Subsequent, I want to transfer on and transient you on main enterprise actions in Q1. On web page 5, you possibly can see the progress in lithium nickel recycling, subsequent era lithium battery supplies crops. POSCO Future M our capital and a facility growth and POSCO Worldwide LNG mission will be discovered individually within the presentation deck in your reference.

As for the brine mission, part one in Argentina, the manufacturing unit and the pond is accomplished upstream M&E works will start this month and downstream M&E works will begin subsequent month. The brine mission part two accredited late final yr has upstream up in Argentina and downstream in Korea. The detailed design for the 2 is at the moment underway. Onerous lithium mineral producer POSCO Pilbara Lithium resolution now has its headquarters and subcenter accomplished and commenced the M&E works out of the entire capability of 43,000 tons.

Quantity two plant will account for about half and will probably be accomplished coming October and begin commissioning. Primary plant liable for the remaining half might be accomplished by February 2024 and the progress is consistent with the schedule. SNNC and POSCO’S iron removing and nickel steel refining tasks are respectively accomplished their civil engineering works and commenced the M&E set up works in Q1.

They’re shifting in accordance with the development schedule to be accomplished in This fall. You will see in Portland was accomplished final yr and secured license and approval for waste remedy and went into operation in March, shipped the preliminary black powder manufacturing. POSCO HYC and [indiscernible] recipient of this cargo accomplished its building work late final yr and obtained a enterprise license in February.

It completed the spherical of the leaching course of to start out rolling out merchandise someday in Could. As soon as the preliminary batch of merchandise change into out there, they are going to be examined for certification and we anticipate regular operation might be achieved someday in November this yr.

Lastly there was an approval for funding in POSCO Silicon Resolution. I’ll elaborate additional on this on the subsequent web page. I belief lots of you’d recall that POSCO Holdings in July 2022, acquired 100% stake in a silicon anode producer Tera Technos. The corporate had been renamed as POSCO Silicon Resolution. And a call was made in January this yr to execute part one funding had been KRW59.1 billion to supply 450 tonnes of silicone oxide.

For the subsequent six years, the corporate could have 4 rounds of investments, in order that by 2030 the silicon oxide capability will be ramped as much as 25K tonnes. Silicon oxide is excessive in power density and thus helps to enhance mileage. Because of this, we anticipate the demand thereon will develop quickly going ahead.

POSCO Group is increasing its enterprise into not simply pure and synthetic graphite, but in addition into silicon anodes. Additionally for silicon carbonite, silicon carbonate POSCO future and is constructing a thermal plant with an annual capability of fifty tonnes in Yeongil industrial advanced and for silicon oxide POSCO silicon resolution will tackle the duty of creating subsequent era applied sciences.

On the subsequent web page, you see the map of Yeongil industrial advanced in Pohang. POSCO Holdings and POSCO Future M will make investments right here to construct a silicon anode advanced. One POSCO Silicon Resolution, which is the plant capability of 25k tonnes then its annual gross sales will exceed KRW1.5 trillion. Additionally the OP margin is predicted to be fairly excessive.

To your reference, POSCO Group additionally retains investing in subsequent era supplies aside from the core supplies for secondary batteries similar to cathode and anode and core minerals similar to lithium and nickel. Examples are on prime of POSCO Silicon Options strong electrolyte operator PJK Strong Resolution and Taiwanese strong battery maker ProLogium and POSCO Holdings is making funding into these corporations. To this finish, subsequent prime lab was constructed to give attention to manpower coaching and expertise improvement.

Subsequent, throughout Q1, progress was made in the direction of the transition to eco-friendly steelmaking, together with funding selections for the development of recent electrical furnaces. That is web page eight. Steelmaker POSCO is on observe to transition into eco-friendly steelmaking. By 2030 POSCO plans to chop carbon emissions by 10% in opposition to base yr.

To this finish, in Q1, we initiated an in depth feasibility examine of the HBI mission in Western Australia to safe low carbon eco-friendly uncooked supplies. And likewise the sweetness accredited the brand new funding in a 2.5 million ton electrical furnace set to go stay in 2026. Lastly, along with Primetals within the UK, the design of a HyREX check facility started, which is hydrogen lowering metal.

The check facility is scheduled to go on in operation in 2026 and assessments might be carried out to develop and full HyREX industrial applied sciences. These investments will speed up our plan to transition into an eco-friendly steelmaker by 2030, ’40 and ’50. So we’ve got concrete plans.

Subsequent, I’ll let you know extra in regards to the efficiency by firm. For those who have a look at web page ten, at the start, POSCO’s manufacturing and gross sales volumes virtually normalised throughout Q1 for each carbon metal and STS. As you possibly can see on the slide, there was a slight disruptions in early January.

So Q2 manufacturing is predicted to be barely greater than Q1 with normalized downstream course of. As you possibly can see on the middle, the availability of semi-finished merchandise, which exceeded 2 million tons on the finish of final yr, declined. The gross sales quantity of low value merchandise, similar to slabs in the proper desk, went down from 740,000 tons in This fall to 120,000 tons in Q1.

Alternatively, gross sales of comparatively dearer SCS and WPP recovered, though it plunged in This fall. Now shifting on to web page 11. Accordingly, because of the quantity and the gross sales combine. Q1 OP was KRW251.3 billion. So it circled and the determine turned to black, because of manufacturing restoration and discount of restoration prices. Q1 OP accounts for the restoration value of KRW60.7 billion, whereas stock loss returned at KRW5.4 billion.

S&P was 1.019 billion per ton in Q1 down 6001 Q-o-Q. The gross sales combine normalized Q-o-Q and when valuing this at KRW46,000 per ton, the web unit value on account of gradual demand and trade fee fluctuation plunged by about KRW52,000 per ton. The promoting costs continued to say no till January this yr.

Nonetheless, the worth enhance in January started to be mirrored in February and the development upward continued till April. Nonetheless, the unit value of metal in 2023 H2 continues to be unclear and we must wait and see the financial system. Subsequent, abroad nonetheless turned slack in Q1. After the brand new HR line went into operation PT Krakataus HR gross sales quantity went up and the worth rebounded partially contributing to the turnaround. As for India’s Maharshtra and Vietnam’s, Vienna P&L improved as gross sales costs went up. Nonetheless, China’s Zhangjiagang stainless noticed deteriorating P&L on account of excessive SCS stock.

Subsequent, POSCO Worldwide, Posco Worldwide’s income fell 9% Q-o-Q on account of a decline in metal costs and the $1 trade fee, however profitability improved, pushed by elevated gross sales of excessive margin, excessive revenue merchandise in markets like Europe and palm enterprise income additionally went up. Vitality additionally confirmed robust total income with Q1 OP at 280 billion. Now shifting on to web page 14. POSCO E&C enterprise precedence was profitability and posted a revenue of KRW55 billion recovering from This fall.

Nonetheless as for the long run market circumstances, it nonetheless stays conservative. It’ll thus keep its revenue oriented technique. Orders went down Q-o-Q and the order backlog as of the tip of Q1 is KRW2.7 trillion. The share of orders for captive and concrete renovation tasks is rising. As for POSCO Future M cathode supplies confirmed robust progress. As for cathode supplies 65, gross sales grew 72% Q-o-Q displaying restoration and new NCMA gross sales was posted beginning March with income rising 85% Q-o-Q.

Nonetheless, the working margin was nonetheless low at 1.8%, contemplating the preliminary working prices of the brand new line. Uncooked materials costs and gross sales costs, we anticipate improved profitability in Q2. That brings an finish to the earnings launch report of POSCO Holdings.

We’ll now transfer on to a Q&A session.

Query-and-Reply Session

Operator

We’ll now open up the ground for Q&A. [Operator Instructions] The primary query is from Hyundai Motor Securities. Mr. Pat, you could have the ground.

Pat Canon

Whats up. Good afternoon. My title is Pat. To begin with, I would prefer to thanks for the chance to ask a query. I’ve three questions. First, concerning the metal market. Ranging from early this yr, I imagine, that metal market has bottomed out. Nonetheless, the demand of metal is kind of sluggish and I perceive that this may have an enormous affect. However in the direction of the tip of this yr, there are some market outlook that China building market goes to get better. So from POSCO Holdings perspective in Q2 and in addition second half of this yr, what’s your place on the metal market outlook? Second query, with regard to new companies, I feel that there’s a lot of curiosity out there particularly on lithium. In October, I perceive that the lithium manufacturing unit goes to be accomplished in October in Gwangyang. So when do you imagine that it should commercialize and break even? And with regard to lithium, China’s lithium spot costs are usually unbiased from different elements. Now, POSCO Holdings’ lithium subsidiary, when offering lithium to varied shoppers, are you going to comply with the spot costs of China or are you going to comply with North America or European costs? Are you able to remark that that might be appreciated? To your info, the US and in addition European lithium costs are in comparison with these of China are fairly excessive. So if the benchmark value is Europe or that of North America, then I feel that you may be unbiased from the consequences from the Chinese language market. My third query has to do with IRA of the US. Now, what’s the impression of this in your subsidiaries? Thanks.

Jeong Ki-Seop

To begin with, with regard to metal market outlook. I want to invite your advertising and marketing head and we are going to begin with that.

Eom Gichen

Whats up. I’m Head of Advertising and marketing Technique, Eom Gichen. As you rightfully commented, ranging from early this yr, the metal market began to select up early this yr and in China, it is the worth for me was stayed and the true market didn’t actually catch up.

And so there’s some form of a fatigue out there. So that is what we’ve got seen thus far. Now, you talked about the true property market in China. The Chinese language authorities had its authorities conferences and parliamentary conferences and we anticipated some countermeasures to be launched, but it surely was not. So there’s some discouragement, but it surely introduced about KRW2,300 price of market stimulus bundle.

So it is fairly optimistic. And likewise, when you have a look at tax income, in accordance with the Chinese language authority. It elevated by about 1.3% and final month it was there was a rise of by about 18%. And when you have a look at the true property costs in 70 cities.

Sure, the diploma is kind of minimal. Nonetheless, 0.2, 0.3 and 0.44, you possibly can see that the market, the true property market costs are growing. So in fairly a while you possibly can see that the housing costs in China are growing. So we imagine that in the event that they proceed then within the second half of this yr, we imagine that the metal costs will decide up even additional. However due to the restricted actual demand, that will also be a damper.

Now for Q2 and second half, I feel that IR group had commented briefly anyhow international metal market consistent with the worldwide metal market, we additionally raised our metal costs in January, February and March. And for March we imagine that we had been capable of obtain common and for Q2 and Q3.

I feel that we stayed HR for residence home equipment, shipbuilding. We’re within the means of elevating our costs for Q2. We had been capable of get better absolutely from the consequences of Hinnamnor. So I feel that we will attain our regular enterprise. And I feel that we’ve got to attend and see what’s going to occur within the second half. Thanks.

Jeong Ki-Seop

Now, as for the second query, lithium associated. And for query quantity three, the query was in regards to the impression of IRA in our subsidiaries. Properly, I feel that this may be finest answered by the Chief of lithium enterprise — battery supplies enterprise head.

Kyungsub Lee

Sure. Thanks very a lot. My title is Kyungsub Lee, Chief of lithium battery supplies enterprise. I perceive that there have been three questions. First needed to do with lithium enterprise, when the commercialization will start and when the traditional operation will start.

Properly, all-in-all, when you have a look at our plans, as our group had elaborated. To this point the development is in progress with none main hiccups. So I imagine that we will full the development work in accordance with the schedule.

The ramp up interval goes to be about one yr, and in that one yr interval, we will work on normalization of operations and we will even work on receiving approvals and licenses or lithium or PPLS particularly within the Gwangyang, we have already got a demo plant. And along with OEMs, we’re getting some feedbacks. So on the subject of certification, I feel that we are able to velocity up the method a bit of.

So BEP plant or PPLS by 2025. I feel that we will obtain optimistic OP and for brine lithium I feel that ranging from 2024 we are going to break even. So that’s our projection in the meanwhile. You additionally talked about Gwangyang plant. In October, we are going to full the development and the progress is about 65%. The constructing the bottom building work is accomplished, however we’re at the moment engaged on M&E set up works. So by late September this yr we are going to end that and October we are going to do commissioning.

So late October I feel that we will begin producing merchandise. The second query was lithium value deciding mechanism. Properly, previously, on the subject of Chinese language lithium costs. Properly I feel that China, Japan and China. The costs of lithium had been introduced collectively and had weighted common.

Nonetheless, now the itemizing costs are nosedived just lately. So and seawater lithium costs are also shifting independently from the brine. I feel that check market is the benchmark that we’re following. And it is fairly totally different from the Chinese language market value or spot value of China. So I feel that going ahead, the check market goes to be the baseline for uncooked materials, procurement and gross sales.

I feel that’s going for use as a benchmark value. Now with regard to IRA. Sure, there are a lot of speculations and concerning that with regard to cathode and anode. Now, they’re now thought of as a part of elements and it isn’t important to put money into North America. It is labeled as minerals and for cathode and anodes for OEMs in the event that they require native funding, then we are able to achieve this.

If not then from Korea or from essentially the most appropriate nation, given the funding and in addition the working value we are able to produce from there. So I feel that total it is working to our favor. And on the subject of lithium, the mineral is being procured principally from Australia. So I feel that we are able to profit from RA as a result of we meet the necessities.

So and I feel that we’re okay on the subject of promoting in North America. And on the subject of brine lithium, Argentina is just not a rustic with FTA with the US, however these one — I feel that we are able to produce some in Argentina, some in Korea and worth added will be fairly totally different and RA is just not fairly clear on that but.

And FTA associated and whether or not or not Argentina goes to be included as a part of FTA necessities, one thing that the 2 nations are at the moment discussing. And SNNC has nickel refining and that’s going to fulfill the requirement of the RA. And Indonesia, it isn’t at the moment the beneficiary of RA. However we out there anticipate that it’s finally going to be a beneficiary of RA vital quantity of nickel goes to be coming from Indonesia.

So we’re going to take that into consideration in order that not only for IRA, however on the subject of different minerals and I feel that we’re going to diversify our minerals procurement. So North America, Europe and Asia, we will diversify our procurement so and manufacturing to align ourselves with the totally different laws. So I feel that the impression of RA goes to be minimal. Thanks.

Operator

Thanks very a lot. The subsequent query will come from Hai Funding. Mr. Kim Hun Sung. You may have the ground.

Sung Hun Kim

Sure, good day. My title is Kim Hun Sung. I’ve a query about lithium. I’ve two questions on that. And I’ll have yet one more query. First about lithium. So we discuss much less manufacturing in China. In order we hear that so we are saying that the worth will go even down or it’s going to get better or rebound. Properly, after we used to speak about the associated fee earlier than, and the money value stage, how do you anticipate that? And what — how do you see the outlook for lithium? And likewise you could have finalized that to speculate 980,000 tons and you’ll add up about 300,000 going ahead then, do you could have any detailed funding plans that you simply wish to open up to the traders. And just lately we’ve got been listening to information about nationalization of lithium. Do you could have any modifications in your methods or any components that may push change in technique? And likewise I’ve a query in regards to the market itself, the market circumstances. Then our market circumstances was a lot better than that of China. And what drove that? That may be the query.

Jeong Ki-Seop

So by market circumstances, do you imply metal or what precisely do you imply?

Sung Hun Kim

Sure, metal market circumstances.

Jeong Ki-Seop

Then for lithium, the 2 questions might be addressed by the Head of the Secondary Battery materials had, sure, so I feel you had three questions there. So for the lithium value, as you stated, within the early days of this yr and late final yr, it truly went as much as 85,000.

However then on the finish of the yr, as a result of China needed to safe extra inventories and there was the problem with OEMs and in addition the battery suppliers. And we had all these gamers becoming a member of the race. And due to that, we noticed this surge of lithium value. However earlier this yr, China with TL lowering the carbon lithium, the lithium carbonate, and in addition additionally they diminished then scrapped their preliminary plan for subsidy. So in consequence, we do see a change.

And for now, lithium globally, when you have a look at the worldwide tasks. So in opposition to the demand, we do not need plenty of tasks ongoing. So when you have a look at that development, so within the mid-term, so it takes about 4 to 5 years for lithium tasks to kick begin and until we’ve got a one bolt mission. It is unlikely that the worth will plunge. So within the mid-term, the present lithium value, I feel there was some bubbles final yr and I imagine that the bubble has bursted. So we are going to see stabilized costs this yr and we are going to see extra stabilized market this yr. And in consequence the worth will even rebound.

So that’s a minimum of our outlook. And through the IR final yr we stated it might be like mid-40,000 vary and we imagine that will probably be 60,000 mid-range this yr. So perhaps the market thinks between 40,000 to 50,000 and it’ll keep in that vary. And the second query was in regards to the 300,000 lithium idea we disclosed had been introduced.

And as for particular tasks, we can’t disclose any particulars. We now have to attend for that. However then for secondary battery supplies enterprise, it is a mid to long-term enterprise. So however then we wish to develop the quantity and scale up the mission. So it is on observe. And so please imagine us after we say that.

And quantity three, it was about nationalization of lithium. And also you talked about Chile. However then, in reality, whereas there are some rumors out there and it is complicated, complicated, however then in Chile and in South America, I wish to make clear that right here, nationalization is just not a seizure of personal properties or belongings, however the authorities could have like a lithium affiliation and the affiliation will perform lithium tasks, the brand new ones.

So, for example, we’ve got Argentina mission. And, for example, we do have ongoing mission in Latin America. Nonetheless, it doesn’t have an effect on us. And I wish to make clear that it isn’t nationalization, however the nationwide organizations will oversee the method going ahead. And for Chile. Now the mining rights can’t be absolutely privatized.

So like Chile while you expire your license then there are some uncertainties. However then I simply wish to make clear that the nationalization doesn’t imply seizing non-public properties or belongings. Sure, additionally in regards to the third query, that was in regards to the metal market circumstances. POSCO advertising and marketing Mr. Eom Gichen, Head of Advertising and marketing Technique Workplace, will reply that query.

Eom Gichen

Sure, good day. I’m Eom Gichen. So I want to discuss Europe than China since you noticed a value surge there and also you, I feel, talked in regards to the outlook for H2 and the rationale why the worth surged is as a result of the US and EU, they’ve a Part 232 and so they have a quota. And due to that, when it comes to provide, we’ve got to fulfill that quota.

And it was about 70% to 75% vary within the US and in Europe, as , there’s a warfare in Ukraine and there was nonetheless coming from these two nations, Russia and Ukraine. However then we misplaced that. And ArcelorMittal and the mills in France caught fireplace and there was an earthquake in Turkey as nicely and that really introduced down provide.

Sung Hun Kim

Then what in regards to the second half of this yr?

Eom Gichen

Properly, mainly, on the subject of power value, the mills will acknowledge that. They usually wished to normalize the market. So CRU outlook is as follows. So HR, it is about 1200 to 1300. So it may decide as much as 1500 down the underside might be about 1000. So that’s a minimum of the projection for now.

Sung Hun Kim

Sure. Thanks very a lot.

Operator

Subsequent query is from Yuanta Securities. Mr. Lee [HanZu] (ph), you could have the ground.

Unidentified Analyst

Sure. Good afternoon. Yuanta Securities. My title is Lee HanZu. I’ve three questions. First, with regard to POSCO’s earnings outcomes. We imagine that Q2, you are going to get better additional and for the second half of this yr we’ve got to attend and see. In terms of gross sales quantity, POSCO did say that 8.16 million tonnes had been bought in Q1. I perceive that by quarter there have been some variations, however 8 million to 9 million quarterly gross sales had been recorded previously. So all through this yr, Q1, Q2 and first half, second half, what do you see or how do you anticipate POSCO’s gross sales quantity will development? Second, when you flip to web page 19 from 2030 you talked about dividends and the dividend goes to be 101 per share. In terms of shareholder return, whatever the efficiency. You are saying that minimal dividend, so minimal dividend for a given yr goes to be KRW10,000. Is that right? And different query is that this after the holding firm was based abroad are nonetheless subsidiaries had been positioned below POSCO? So from the POSCO group’s perspective, you could have a POSCO and inexperienced supplies and inexperienced infrastructure. So do you could have any additional plans to reorganize, reshuffle the group construction sooner or later? Thanks.

Jeong Ki-Seop

Sure, sir. With regard to the primary query POSCO’s future gross sales outlook. I want to invite Mr. Kyung-Jin Chung, the Head of Finance Workplace of POSCO to reply.

Kyung-Jin Chung

In Q1, when you have a look at gross sales of metal, carbon, metal, assume it is nonetheless about 350K tons. And in Q2 in Q1. There have been some manufacturing disruptions and in Q1, the manufacturing was not absolutely normalized by Q2, every little thing goes to be regular. So in comparison with Q1, we imagine that there’s going to be a minimum of an uptick in gross sales quantity by 5%.

And within the second half, I imagine that it should be a lot better. It may decide up even higher in comparison with the second first half. So total, for the yr 2023, we imagine that comparable not as excessive as 2021 the place the gross sales was stellar. I feel that we will return to regular manufacturing.

Jeong Ki-Seop

A second query needed to do with dividends. I would prefer to ask the Head of IR group to take that query. And the third query needed to do with a difficulty that I feel Chon, Jung-Son might reply.

Han Younger-Ah

Sure, with regard to primary or base dividend of 10K1. No matter our OP yearly. The bear minimal, the dividend we will pay out to all shareholders goes to be 10K1. In order that’s how we plan to do it. So it isn’t 101, it is 10K1 and 50% to 60% of the free money stream.

What which means is that we will pay the bottom dividend, however on the identical time, the 50% to 60% of the money stream goes for use in order that if there’s an extra money, we can pay out extra to the shareholders. So we’ve got this sort of construction as a result of we wish to proceed with our funding to develop our enterprise, however on the identical time we wish to evenly and in a balanced method give out the dividends to our shareholders. So for the sake of predictability, we launched a system. Thanks.

Chon, Jung-Son

Sure, I’m Chon, Jung-Son, Head of Company Technique group. So after the launch of the holding firm, the goal or the target that we established was to maximise our values of the enterprise and in addition generate synergy results. So for these two, we labored tirelessly. And their goal was to attain ESG. So these three had been the targets that we intention to attain with the launch of the holding firm. And with that in thoughts, final yr for metal, we made some efforts with a purpose to maximize synergy and in addition for power. An power enterprise. So we labored on some organizational reshuffle to make that occur. For others, we’re going to examine numerous choices, however as of now, there isn’t any or nothing that we are able to share. Thanks.

Operator

Thanks. Subsequent NHG Securities and Funding. Mr. [indiscernible] will ask a query.

Unidentified Analyst

Sure, good day, I am from NHG, N-H-G [indiscernible]. I’ll ask a couple of questions. First, you talked in regards to the lithium value and it is a quick market, you stated. And naturally I suppose the benchmark was Korea and Japan. After which we’ve got China and Europe as a result of we’ve got the totally different classes. So what was your benchmark? I want to double verify that. And quantity two about Argentina. The contract interval as much as when will the contract final. For those who can disclose that, please do. And likewise what in regards to the construction? Properly, relying on the worth like what could be the share. So is that the enterprise mannequin that you’ve there and about for lithium? For now we’ve got a Pilbara partnership and going ahead additionally, you will work with Pilbara. That is my understanding, however then it looks like perhaps it is dangerous to speculate with only one supplier. So do you could have plans to perhaps work with one other associate? And final however not least, in regards to the electrical furnace. You’ll be investing in that, however then the dimensions might be fairly giant and it is I imagine that the metal kind is about 80 to 85%. So would that have an effect on the present enterprise follow?

Jeong Ki-Seop

Sure. For the lithium, Mr. Kyungsub Lee will reply that. And for the fourth query in regards to the electrical furnace Mr. [Seokkeun Oh] (ph) will reply that.

Kyungsub Lee

Sure. So we’ll entertain your query for the lithium market. Sure, that was based mostly on the three nations of Korea, Japan and China as of customs clearance. In order that was the benchmark value that I talked about.

And quantity two, in regards to the Argentina, nicely, we do not need a contract. We truly acquired all of the belongings. So it is everlasting. So it is totally different from Chile and there Argentina, we truly nicely, it is our asset. And for royalties. If we have a look at the Argentina, if we have a look at the enterprise mannequin or royalty enterprise mannequin, it is about 3.5% in opposition to the gross sales or income, and that was the take care of the central authorities.

And about Pilbara partnership. You requested whether or not we had plans to strike different partnerships as nicely. Properly, aside from Pilbara, we additionally for 300K as much as 2030. Properly for example if Pilbara is 1 million then lithium LH could be, how a lot wouldn’t it be. About one eighth. About 150,000 tons. So we’ve got a great we’re on a great time period with Pilbara, so they are a good provider. And naturally we plan to scale up the partnership. However then for different areas we’ve got truly tasks with different companions as nicely. That may be all for me.

Unidentified Firm Consultant

Whats up. My title is [indiscernible] from Posco Supplies. I’ll ask you in regards to the scrap. So now the steelmakers are increasing the electrical furnaces. So how are we going to safe the scrapping course of? So I suppose that was the query. And I want to briefly speak in regards to the present standing. So 27 million tons is the quantity and we’ve got about 4 million imported and the remainder is right here in Korea. And the plan is to whereas we’ve got already set the scrapping quantity as a goal and to safe that, we are going to accumulate and in addition course of and we are going to truly take that method.

And likewise we’ve got a ferrous scrapping from the shoppers and we even have an alternative choice, which is to have a partnership with abroad corporations and put money into their shares. So we’ve got these three choices, so please don’t worry. Thanks.

Operator

Thanks. In order that’s all for questions. [Operator Instructions] Subsequent query is from Citi Group, Mr. Lee SangHun. You may have the ground.

Lee SangHun

Thanks very a lot for the chance. I want to ask about web page eight Carbon Neutrality roadmap. Now, when you have a look at the roadmap, the Korean authorities makes a sure proposal, and I perceive that your roadmap is consistent with that. And in comparison with Europe or the US, do you assume that your roadmap is consistent with their tips? If not from a enterprise perspective, or they are going to be any disadvantages or from the traders perspective, do not you assume that there will be some considerations? What’s your level or place on that?

Jeong Ki-Seop

With regard to that query, I want to invite Mr. Kyung-han Kim, Head of the Worldwide Commerce Affairs Workplace of POSCO, to reply.

Kyung-han Kim

Sure, I’m. And the pinnacle of Worldwide Commerce Affairs Workplace. Now, when you have a look at the carbon neutrality roadmap, that is consistent with Paris Settlement. So by we’ve got to decrease the worldwide common temperature, the restrict, the worldwide common temperature enhance by 1.5°C, and we’ve got a sure carbon discount objectives.

I feel that totally different nations have totally different laws like CBAM in Europe and so they’re attempting to scale back carbon and so they’re attempting to speed up the method and I imagine that every one companies, not simply Korean companies are going to bear a burden accordingly. So nationwide authorities on utility roadmap and companies roadmap could differ.

For steelmakers in Korea. We additionally try to develop roadmaps and attempting to adjust to them. Thanks.

Jeong Ki-Seop

Are you able to please verify whether or not we’ve got extra questions?

Operator

We do not need any extra questions.

Han Younger-Ah

And I ask a query.

Jeong Ki-Seop

Sure, please go forward. You may have the ground.

Han Younger-Ah

Sure. Concerning the worldwide. You stated that the uncooked supplies export went up. So is that the identical with Korea as nicely? And the US and EU? You talked in regards to the quota and measures, laws, any indicators of easement. And likewise now you stated that final time you’ll put money into North America and with IRA, any plans to put money into Korea or elsewhere. So any plans for that? That may be my query.

Jeong Ki-Seop

Sure. For the primary query, put up advertising and marketing strategic group, Mr. Eom Gichen will reply.

Eom Gichen

Sure. We talked about worldwide and the income went up and the IR Head stated that export quantity went up. However when you have a look at the POSCO’s quantity, our Worldwide takes the biggest share. And in Q1, the rationale why export exceeded the home is as a result of the home market restoration was slower and the US and EU we do have quota and we wished to essentially deplete all of the inventories. So which is why you noticed that quantity. And quantity two was in regards to the quota, proper? Whether or not any indicators of easement or so.

Properly that as much as the US, the federal government and the European Union as nicely. So not within the foreseeable future. And in regards to the brine remedy. Mr. Kyungsub Lee, Chief of LiB Supplies Enterprise, will reply that query.

Kyungsub Lee

For Argentina, the brine lithium, part three and 4. Properly, I would not say home funding, however I stated, nicely, we are going to comply with IRA going ahead. In terms of core minerals. It is not a processing based mostly, but it surely’s origin of nation based mostly. Nation of origin based mostly. In order that’s for our major. After which processing is for secondary. So we have not determined but whether or not to take this mission to North America or not. Whether or not we are able to truly kick begin a mission inside North America and in addition for brine part three and 4 in Argentina.

Subsequent yr we are going to full part one. And as soon as that takes place, we are going to select which particular applied sciences or course of we wish to use. After which whether or not we wish the LH course of there or in Korea, we are going to make such a call on the latter half of subsequent yr in order that we are able to put money into 2025. That’s the plan. Thanks very a lot.

Operator

Girls and gents, thanks as soon as once more in your participation, regardless of your busy schedules. We’ll take your inputs and options in order that we are able to higher put together at POSCO Group. With that we want to end the earnings name for Q1 2023 of POSCO Holdings. Thanks.