POSCO starts unloading non-core assets

POSCO Group’s restructuring of unprofitable assets has begun, starting with POSCO Future M’s divestment from P&O Chemical, a joint venture with polysilicon maker OCI.

POSCO Future M and OCI held their respective board meetings Monday and agreed to the sale of the former's 51 percent stake in P&O Chemical to the latter, which currently holds the remaining 49 percent stake in the joint venture.

OCI said that P&O Chemical will become its wholly owned subsidiary, once the deal gets approval from the antitrust watchdog.

“With the acquisition of P&O Chemical, we will expand our presence in the advanced materials industry,” OCI CEO Kim Yoo-shin said.

“We will continue creating synergy with P&O Chemical to grow into a producer of materials for semiconductors and rechargeable batteries.”

OCI added that it will maintain its partnership with POSCO Future M, sourcing byproducts of steel from POSCO and supplying POSCO Future M with P&O Chemical’s pitch, which is used to coat anode materials.

With the inflow of 53.7 billion won ($40 million) in proceeds from the sale and transfer of P&O Chemical’s 160 billion won of debt, POSCO Future M is expected to reduce the size of its debt by around 200 billion won.

As of the end of the first half, POSCO Future M’s debt reached 4.8 trillion won, up from 3.7 trillion won at the end of last year.

Founded in 2020, P&O Chemical produces pitch and hydrogen peroxide.

Although the joint venture was once considered critical for the value chain of POSCO Future M’s anode materials business, it suffered a net loss of 67.1 billion won last year due to the growing production and logistics costs, as well as a slowdown in the battery industry amid the decelerating global demand for electric vehicles.

In June, P&O Chemical temporarily stopped the operation of its hydrogen peroxide factory in Gwangyang, South Jeolla Province, to counteract deteriorating profits.

The struggling joint venture has been therefore considered unfavorable for POSCO Group Chairman Chang In-hwa’s plan to enhance the corporate value of the group’s affiliates.

Last month, POSCO Group announced that it would reform its 120 unprofitable and non-core assets, which are not important for the group’s business strategies.

The business group said at that time that it would secure 2.6 trillion won in cash by 2026 for shareholder returns and investments in its core businesses.

In particular, the group’s steelmaking unit needs a significant amount of cash to apply the hydrogen reduction ironmaking technology to all of its furnaces by 2050 to achieve carbon neutrality.