POSCO Holdings Inc.

Presentation after the operator's announcement. Ladies and gentlemen, we will now begin the POSCO Holdings earnings call for the second quarter of 2022. For today's conference call, you'll first hear the earnings presentation from POSCO Holdings, and then we'll move on to a question and answer session with the participants present. If you have a question, please press the star button followed by one. We'll now like to hear the presentation from the company. Good afternoon.

I am Jeon Jung-Sung, CSO of POSCO Holdings. I would like to take this opportunity to thank our investors for your support and interest for POSCO Holdings. During the second quarter with the war in Ukraine continuing, the concern for inflation has become a reality, accelerating fiscal uncertainties, including sharp increases The spike in raw material prices, including iron ore and coal, did lead to difficulties in production and sales. However, thanks to proactive responses in pricing and efforts to achieve cost cuts, POSCO has recorded a revenue of $23 trillion won and operating profit of $2.1 trillion won based on our consolidated business performance. Thank you for joining us. Such as POSCO International, POSCO ENC, and POSCO Chemical. The rechargeable battery business, one of the seven key businesses, completed the construction of PLC Poland for recycling to produce black mass from battery scraps. We have also made an equity investment in Progrium, a Taiwanese company that produces hybrid solid-state batteries, and acquired Terra Technos, which holds batteries The steel industry plans to upgrade the product portfolio centered around markets expected to have Thank you for joining us. Q2 Earnings First, the consolidated business performance. The consolidated operating profits for the second quarter recorded 2.98 trillion won, which is a decrease of 160 million won compared to the previous quarter. Profits for the steel industry increased due to higher sales prices. Oversteel Steel also maintained sound profits and surround PTKP operating profits for key units in green infrastructure and green materials and energy businesses Such as POSCO International, POSCO E&C, and POSCO Chemical remain strong, recording a consolidated operating profit of $2 trillion range. And if we take a look at the debt, it seems like it did increase, but it also meant that there was $1.5 trillion won that was paid back, and so please take that into consideration. Next, let's take a look at the business performances of major units in detail. First, let's go to POSCO. Crude steel and product production volume both decreased compared to the previous quarter due to the revamping of Gwangyang No. 4 BS. But the revamp has been completed, so from the third quarter, we will be able to recover to the normal levels of production. Impacted by decrease in production volume, the sales volume recorded 8.238 million tons, a decrease of 216 million tons. The WTP sales ratio recorded 28.2%, a 2% point decrease, QOQ. This is because the materials for automobile is included for WTP, but we see that the recovery of demand from the automotive industry is not as fast as expected. Next, the POSCO income and financial structure. Operating profit for 2Q recorded 1.322 trillion won, an increase of 123 billion won, QOQ, thanks to increases in sale prices despite the decrease in sales volume and increases in raw material prices such as iron ore. The financial structure for POSCO shows financial soundness thanks to an improved cash balance based on improvements in profitability. You can see here that there is the weaker won, and so there's an increase in the won transaction amount of USD-dominated debt, but this actually has been accounted for with the exception of the very short-term debt. Next, performance by overseas steel subsidiaries. Indonesia's PTKP, which is a joint venture, recorded a higher operating profit, QOQ, And that maintained the overall international performance. There are two reasons behind this. First, due to the war in Ukraine, the provision of slab has decreased, and so the prices of slab has increased, and so that actually helped the profitability. Second, our partner, Krakatau Steel, they actually have our... We were able to sell HR with slab after being processed from KS. And so that actually led to adjustments in the sales mix as well as selling HR with slab after being processed with KS, which boosted the higher operating profit. As for China's Zhangjia Zhang stainless steel, we have seen that profitability worsened significantly. because of the raw material crust increase due to spike in nickel prices as well as the well-known lockdown in the Shanghai area. For India, POSCO's Mahastra recorded a decrease in revenues and operating profits, QOQ, due to steel export tax imposed by Indian government as well as the slow demand from non-automotive industries If we take a look at PY Vita in Vietnam, it recorded actually higher revenues and operating profits, QOQ. It actually increased by 1.5% point due to production cost drop from improvement in production yield and increases in sale prices despite this slight decrease in the overall sales volume.

Next, moving on to the earnings report for POSCO International. Oscar International saw increased, substantially increased revenue and profits queue on queue thanks to robust improvements. And you might think that this is due to the increase in unit cost and unit price of steel. And yes, the price hike in these raw materials have helped. But in terms of profits, we've also seen the gas sales improve about $61 billion. That is why we believe that this contribution from the profits was quite substantial. For agriculture and materials, the grain sales have decreased because of the war in Ukraine. However, the revenue and operating profit expanded queue-on-queue as sales improved from South American soybean and Southeast Asian fat and oil. Moving on to POSCO ENC. POSCO ENC saw increase of performance. Although the materials cost have hiked in terms of infrastructure construction, we've saw profits increase as the payment process went through on second quarter completed constructions. The order backlog is about 37.6 trillion. Next on POSCO Energy. For POSCO Energy, queue-on-queue revenue and profits fell. However, for power generation, as you know, the second quarter is seasonally slow. Sales volumes have gone down, and also there's been a scheduled revamping of number three and number seven power plants. And due to these reasons, we saw revenue and profits edge down. If we look at this on a year-on-year basis, however, we can see that the profits have been robust and have recovered down the road. Next, moving on to POSCO Chemical. For POSCO Chemical, profits for the CAFO business improved, and the CAFO business profits contributed substantially to POSCO Chemical's overall top and bottom line. We saw a hike in lithium and metal prices, which was reflected in the increased sales price, so the revenue and profits improved queue-on-queue on the back of this improved performance. For refractories and furnace maintenance as well as construction, we saw revenue and profits fell due to delay in BOF maintenance and increase in labor costs among our subcontractors. And also we've seen operating profits for quicklime and chemical business improve due to rise in the sales price of chemical products. Now I'd like to move on to discussing the major business activities of this past quarter along with our future plans. First on secondary battery materials, we are remaining on track when it comes to the construction of our lithium, nickel, cathode, anode, and recycling plants. And let me brief you on this process. First on lithium, Costco Argentina brine stage one plants will break ground, has broken ground in March and will be completed in April 2024. POSCO Pilbar Lithium Solution is an ore-based plant and is also currently under construction. For nickel, we will begin construction for converting SNNC to produce battery-grade nickel, and this went into process as of June. Upstream completion will be finalized by the third quarter of 2023. For recycling business, We completed construction of PLSC Poland in June with a black mass production capacity. Production of the black mass will begin in September of this year. This production will then be supplied to the HY Clean Metal Plant in Gwangyang. Construction for this plant is currently underway. And it's currently on track for about 47%. Completion is on schedule. Completion will be slated as on schedule. For cathodes, we established Ultium Chem, the joint venture between POSCO Chemical and GM in Canada this past May, with completion slated for the second half of 2024. The Gwangyang Stage 3 and 4 have been completed as of June, capable of 60,000 tons of cathode capacity, and the Sejong 2-2 plant for graphite anode materials was completed in May. For lithium, cathode, nickel, although this has not been reflected in revenue in our top line, we believe that all these plants, they are moving according to schedule with slated commercialization of the production down the road. Next, I'd like to briefly tell you a little bit about our inorganic growth. We are planning to pursue next generation battery materials business such as with silicon anodes and all solid state batteries through inorganic growth and MNAs. In May, we acquired a 2.1% stake in the Taiwanese from Prologium, a supply of commercialized small size solid state cells such as wearable That just put in use in wearables, and we signed an agreement on co-developing solid state batteries for EVs and material application. With Terra Technos, as well as the POSCO JK solid solutions that we established in March, and along with this Taiwanese firm, I believe that we can test these supplies in some of our commercialized products. We believe that this would be very important for our future growth. We announced the 100% stake investment in TerraTechnos, and let me briefly tell you about this company. It possesses production technology for silicon oxide anodes. The production capacity is four-fold increase as of the batch production, so we believe that this is going to cut down on costs. With this, the production capacity will increase from its current 100 tons to 500 tons by 2025. And with this objective in mind, we have acquired a 100% stake in TerraTechnos. Next on to our energy business, Costco International is planning to increase production from the Cenex gas field, which it acquired in April from It's current capacity. And it has contributed about $12 billion to our operating profits. In fact, the Senex gas field has outperformed our expectations. Its current capacity of 420K tons will be increased to 1.2 million tons by 2025. And of the approximately 800K tons of increased supply, 400K tons will be supplied domestically after 2026 to be used as fuel for No. 3 and No. 4 LNG power plants. Costco Energy is planning to expand its midstream business by expanding the production of its Gwangyang LNG No. 2 terminal. It will complete two storage tanks of 200,000 kiloliters of LNG in the Gwangyang Industrial Complex by 2025, along with expanding the anchor berth for a 270K L-sized ship by 2025 as well. It will utilize these assets in related businesses, such as storage of imported LNG, ship commissioning, and LNG bunkering. With this, I conclude the earnings report. for the first half of this year. And on this, we believe that on our 2022 year outlook, we will expect our consolidated revenue to increase to about 86 trillion KRW. We will continue to do our best to meet our top line and bottom line projected earnings. With this, we would like to conclude my presentation on our 2022 second quarter earnings, and I would like to begin the Q&A session if you have a question. Please follow the instructions of the operator.

We will now go into Q&A. If you have any questions, please press the star button followed by 1. And if you wish to cancel your question, please press star and number 2. The first question is from Hyundai. We have Park Hyun-woong. Your question, please. Good afternoon. I am Park Hyun-woong. Thank you very much for this opportunity. I have three questions. The first question is concerning the market. During the first half, it seems that the earnings are quite sound, but the market is interested in the second half. I think everyone's quite interested in the second half. If we take a look at shipbuilding, automobiles, and home appliances, How are the price negotiations for the second half for various industries? Furthermore, in China, it seems that the demand and prices may improve in China. But what about your view at POSCO Holdings concerning this point? And let's talk about lithium. Early July, there was the Rechargeable Battery Market Conference, which was very helpful. So I hope that we will have more opportunities for communication like this. It seems that the lithium value has not been reflected in the stock prices thus far, but I do believe that lithium will be very helpful in increasing the corporate value of POSCO Holdings in the future. So in our relationship with POSCO Holdings, I think we need to consider the value of lithium. So related to this, what are your investment plans for lithium, and will you be sourcing this from your own capital, or will you be doing debt financing? And because the profitability is very good, EBITDA, you mentioned, could be 70%. Well, for the Argentina subsidiary, the profits from Argentina, will we be able to... The third question is, despite the very good earnings, it seems that we have a valuation discount. And one of the reasons for this discount is because of the lower ROE. That's what we believe. Compared to the past, we can see that despite the same profits, The ROE seems to be lower compared to the past. And so when we think about lithium or new investments for growth, such as investments into next generation rechargeable battery materials, so maybe we can think about buying our own shares or having dividends. So not any ad hoc measures, but maybe some predictable constant policies that you can show the markets. Do you have any plans for such policies for the future? Thank you very much. Thank you for your question concerning the first question, which was about the forecast for the second half. What are the demand predictions and also the price negotiations? That's related to steel. So maybe we can have Mr. Um answering to that and you can add your predictions for the Chinese market as well. I am Um Gi-Chan in charge of marketing strategy at POSCO. So forecast for the second half as well as price negotiations with the partners concerning the market for the second half. As you're well aware, the demand such as the automotive market is expected to normalize and that will pivot on the supply chain disruptions which we believe will continue into the second half and it seems that interest rates are being raised around the world and this will directly and indirectly impact the steel market and we believe that unlike expectations the recovery of the steel market will be slower than expected. When President Xi confirms his third term through the official meeting in China, I believe that there will be additional stimulus packages to grow the economy in commemoration of the third term. In terms of the supply, it seems that the raw material prices The second question is, Price negotiations with the customers. Well, currently we need to make sure that there is stable supply. And so that is our focus. We also need to focus on changes in the raw material prices as well as the steel prices. So we will take the market into consideration to conduct the price negotiations for the third quarter as well as the second half. Negotiations are ongoing. The negotiations will be completed in phases depending on the order schedules, and so it's difficult to give you a direct answer. But if I may roughly talk about this issue. So up until the end of supply for August, the price negotiations have been completed, and we did have some automotive companies in Korea where we have six-month contracts, and so We will have the second half price negotiations with a slight increase for the second half. For the shipbuilding and home appliances, we will reflect the raw material and market prices. And you also asked about China, the forecast for the second half, as well as the steel market forecast, as you're well aware. If we take a look at the second quarter, the GDP growth was 0.4%, which was less than expected. And if we take a look at the overall first half, it's 2.5%, which is lower than expected. The Chinese government still targets 5.5% for the total year. However, if we take a look at the overall economic situation into consideration, 5.5% is very difficult to achieve. and many analysts both home and abroad are also forecasting somewhere in the 3% range. But after the lockdown is over, we believe that the manufacturing PMI in China has recovered to over 50 points. And so we do believe that there will be improvements and the Chinese government will also have short-term stimulus plans Thank you for joining us. May pick up overall because of the stimulus packages by the Chinese government. In particular, if we take a look at June, we can see that sales in automobiles increased by 35%, which is a quarter of a million, and therefore we can see that demand is recovering, especially around the automotive market. On the other hand, if we take a look at the supply side for the first half, For POSCO, we will... Try to deviate our exports to other markets outside of China because the prices in China are very low. And we will keep a keen eye on the price changes and market changes in China. This will definitely be reflected in our sales policies so that we can flexibly and agilely respond to this. There was another issue related to the rechargeable batteries, and the meeting was in July. It's great to see that that meeting was helpful to our investors. And we will surely have regular opportunities to communicate our details so that we can communicate concerning our value. And the second question was about investment in lithium and how we're going to finance the investment. And we also had a question on the Argentina issue. Is there a country risk where we cannot bring the profits back to our country? Maybe Mr. Lee can answer this. I am Lee Byung-Sub in charge of lithium battery materials business. Well, concerning the investment, until 2030, we will invest $6 trillion. That is our plan. And we will have investments of up to $1.5 trillion per year. If we take a look at Argentina and also our plant in Gwangyang, they will operate from 2025, and we believe that the EBITDA created by this operation can finance the investments. But if we take a look at the initial investments, we will establish a legal entity to conduct investment into lithium processing. The holdings will also have capital invested, but there will be a 30 to 60 ratio. If we take a look at Argentina, the debt is about 30%, and for Gwangyang, there is a debt financing of 58%. And so it seems that there is Not an excessive burden on this financing because once we start to produce, the cash flow will pick up and so it won't be such a big difficulty. Concerning the country risk from Argentina, well, Argentina, they are different from Mexico, Chile or Bolivia that you see in the news all the time from Latin America. In the case of Argentina, they have a legal system in place, and the mining rights does not belong to the central government, but the local governments are empowered to have approval rights and other rights related to businesses and licensing. And so because of this legal structure, Argentina was able to actively attract investments from multinational companies and companies also from Australia, China and France are also participating in this market along with us. And so I don't think there will be any situations where there will be unnecessary and illogical economic sanctions or nationalization of the companies. And there has been the 9th I have actually met the government officials in Argentina in March and they are actually looking forward to international companies producing lithium and exporting lithium from their country which will help their exports as well as their revenues. And so I think they are welcoming these opportunities. And concerning the discount of our stock prices, we talked about the lower ROE being the possible reason. I completely relate with that analysis. And in the future, we will take a look at various efforts to boost our ROE. Concerning returns to our shareholders, we can think about various policies. Well, in the beginning, we established our holdings and we did mention that we will get rid of a part of the equities held by the holdings and this is something that we will discuss within the BOD within this year and in the mid to long term we will have to take a look at dividend policies as well as other policies related to our shares and if we are able to gather the opinions and We will be able to actively share the policies with the investors and stakeholders. We are actually in the discussion process, and therefore, it is very difficult for me to discuss the details at this point in time. We ask you for your understanding.

Next, we would like to hear from Lee Hyun-Seung of V1 Social Security. Hello, my name is Lee Hyun-Seung of Yuanta Securities. I have about three questions that I would like to ask you. First, the steel business, raw materials in particular. For Australian exports, it's about $200 per ton, and for raw crude steel, it's about $100 per ton. If we take a look at the Second-half guidance, many of the steel manufacturers' production capacity is set to increase. However, China's production is set to decrease. So, do you believe that the steel ore prices would go down compared to now, or how do you consider these ore prices to fluctuate down the road? I would like to ask you that. And also for coke and coal as well, the prices have plummeted, but with China, because of their given policies, Perhaps the coking coal prices could also weaken in the second half of this year. I would like to ask you more about your projections for the second half of this year for iron ore, steel ore, and coking coal prices. My second question is on the fact that the performance of the overseas subsidiaries have been slightly different. We've seen some of these subsidiaries do well in the second quarter, but from what I've seen, From April to May, slab in Southeast Asia, the prices have fluctuated, have gone down. So from your point of view, I know that this has been reported in the news with Russian steel coming into the market. So this is low-priced steel coming into the market. And do you think that this is going to lead to plummeted prices of steel out of Southeast Asian markets? Because I understand that the steel business has been doing well So the second quarter of this year, but how do you project the performance to be in the second half of this year? My last question is on what we've heard from POSCO International and on yesterday's news on the merger that has been broadcasted. So I understand that this has been disclosed to the official authorities. Does POSCO Holdings have anything to say on the proposed merger with POSCO International? And if this merger is being kept under review, what are some of the conditions that you are currently reviewing for the proposed merger? Thank you for the question. First on ore and coke and coal prices, projections for the second half of this year, we'd first like to hear from Seo Ji-Won of POSCO Real Materials Office, and then the overseas subsidiaries' performance of the second half of this year, whether they will maintain levels of the first half or whether they will fluctuate. Perhaps we'd like to hear from Kim Young-Jung of the steel business team. Yes, we'd like to hear from Mr. Kim on prices outlook. And I would like to respond to the third last question. With the energy and international merger, yes, I understand that this has been reported in the media. This is very sensitive information. We're still in the process of internally reviewing the different information We were alarmed that this was made public by the news reports. Holdings, after we switched to Holdings structure, our big objective was that we're going to make our portfolio more robust, such as pursuing new businesses and also We're still at the internal review stage After the internal review has been conducted, the BOD will vote on this proposed merger, and after that vote, we can disclose more information and details regarding the merger and also some quantitative effects that we would project to see out of the merger. But again, we're still in the review stage of this possible merger, and our official decision-making has not been conducted, so it is not wise for me to comment on this matter. As of today. So now we'd like to hear from Seo Chi-Won of the Raw Materials Office. Hello, my name is Seo Chi-Won of the Raw Materials Office, 1 Aposko. Let me tell you about the price projections for oil. China is a steel ore. Prices have gone down. The margins have narrowed. And this has led to a decreased utilization rate of the BS. There's also seasonal effect as well because we've entered the slow season in the second quarter of this year. So we have seen A price plummet of the steel ore and we expect to see this continue in the third quarter of this year. We believe that we would see fluctuations around $90 per ton. However, going into the fourth quarter of this year, we believe that major ore-producing countries would go into the rainy season and many steel companies in China will try to move into Beefing up supply or increasing production, or slowing down production. So we believe that the prices will fluctuate in the fourth quarter of this year. Next on, Coke and Coal. Again, similarly, in the second half of this year, the industry will shrink, the demand will fall, and the supply, once we will move out of the rainy season, might expand. So we believe that it will become very stably managed at around mid-$200 per In August, Europe will have strong sanctions against Russian steel, and this would imply that there would be uncertainties in the market conditions in the future. And there's been discussions on Australian cooking oil in China, and if Australian cooking oil is imported into China, given the supply-demand balance, the prices will likely rebound. My name is Kim Young-Jung of the steel business team. You asked about overseas subsidiary PKTK. Yes, it has been impacted by the global market conditions as well. And the sales price has gone down particularly regarding slab. The raw materials have gone down and product prices have gone down as well. For KP, slab has been minimized and We're trying to try to come up with a strategy to change around our sales mix. So we've tried to sell most of these with plates, but with PTKS, we have allowed for 150 tons to be processed by KP. So compared to slab, we have switched to HR and plates to try to increase Our production capacity in the summer season, the Indonesian market would be blocked, so to speak, because of Chinese exports. So we don't believe that the plummet will be too severe. However, it will not be at the same level of the first half. That is certain. Thank you.

The next question is from High Investment, Mr. Kim Sung-Yoon. Your question, please. I am Kim Sung-Yoon. I have one question. During Value Day, you talked about the lithium price, and it was great to hear your forecast. And concerning the nickel prices, I would like to ask you about your forecast, especially because We have seen that there is a possibility of producing nickel for your batteries, and so it seems that there could be excessive supply. So concerning this point as well as the flatter market, so taking all of this into consideration, what are your forecasts for future nickel prices? I am Lee Kyung-Sub in charge of the lithium battery materials business. If we take a look at nickel, there was the issue in the market, and this issue has been resolved. And it went below $20,000, but now it's recovered to the $20,000 range. And so, of course, there are issues with the uncertainties in the economy, but it seems that there's not a drop in demand. It seems that there is an increase in nickel supply from some aspects, and so it's stabilizing at a lower price. That is true. But if we take a look at the inventory, there is an inventory of about 60,000, which is lower than the 100,000 tons that we had in the past. And so it seems that there is no more pressure to lower the prices. And if we take a look at MPI of China... Their production prices is at $18,000 or $19,000. And so in the West, they seem to think that $20,000 is probably the stable prices for nickel. But for China, they always think it's around the $18,000 to $19,000 range. But if we take a look at nickel for battery materials, the demand is increasing steadily, so the prices are adjusting, and we believe that it will be maintained at the $20,000 range. Thank you.

Next, we'd like to hear from Jeon Jong-Man of NH Investment Securities. Hello, thank you very much for this opportunity. I'd like to... Talk about the steel and the market conditions surrounding China in particular. You are thinking of possible stimulus and the Chinese economy, the second half. But right now, if you look at the speed at which the steel prices have gone down and the speed at which the product prices have gone down, as well as China's plans for CapEx and investment stimulus, etc., And yes, there is some recovery demand in automobiles, but if we look at the real estate and property market, for example, in China, we have yet to see a turnaround in those market sectors. And there's also some provincial state government debt that has been issued, but they have not been executed right now in China. So some of the municipal bonds have not been executed. So Can you tell us a little bit more about how you expect to see market conditions in China play out in the second half of this year? And next on lithium, I understand that the lithium business is bright, has a bright outlook, but can you possibly think about speeding up the investment? Because you said that the annual budget is about $1.5 trillion. However, strategically, the lithium business can contribute to your corporate value overall. Do you have plans to speed up the investment and possibly expand the size of your investments? In the lithium business. And then on energy, for POSCO Energy, the quarterly earnings has been weak because of a seasonal factor, but if we take a look at the long-term outlook for new and renewable energies, perhaps that could also be a long-term growth engine for POSCO Energy at large. Do you have plans to expand into the new and renewable energy sector? And just lastly, I'm sorry, one final question. Many shipbuilding companies have a huge labor shortage issue. I was wondering if that is something that steel companies also have or if you do not have a labor shortage issue at POSCO. Thank you very much. On China's market conditions, I think that some of the analysts are a little bit more pessimistic regarding China's market outlook in the second half of this year, so perhaps we can hear more From that, and also on a lithium business, I know that we agree that the lithium business is very prospective for us, and we believe that we should speed up the investment for lithium, but if that is the case, whether it be lithium or we need to get access of this, but for the brine lithium in Argentina, we want to be very aggressive in our investment And for lithium ore, it's important for us to secure the supply for the lithium ore because with the supply that we have, the Gwangyang POSCO Pilbar lithium solution is the only recipient of this current supply because it is quite tight, and so we would have to work really hard on gaining access to lithium ore. Next on energy, I think that we can turn to Kim Sung-Yong of POSCO Energy who can respond to this question later on. The other question was on labor shortage regarding steel workers. In the future, can anyone respond to this question? Yes, maybe Mr. Um can respond to this as well. So Mr. Um can respond to the two questions. My name is Um Ki-Ton of the Marketing Strategy Office. I know that we are not very optimistic when it comes to the Chinese market outlook. There are some areas where we are pessimistic, but I tried to highlight the optimistic areas. But again, if I were to reiterate, the Chinese market Government has announced a growth rate of 0.4%, but if we look into this deeper, for Shanghai, it's minus 13%, and for Beijing, it's minus 2.8%. So this means that the 0.4 percentage figure might have been manufactured on the part of China that we may not find this believable. And if we talk to retail owners and et cetera out of China, we are able to see Many steelmakers in China have cut production capacity because their prices are in the red. The deficit is about 23% across all steelmakers in China. And so this means that if it has not hit bottom, it may continue to fall down and continue to plummet. We don't know if this pain is going to last for one month or two months or even longer than that. And That is the crux of the problem. But if we were to try to look at some optimistic areas that the 0.4% that this growth rate may be seen as something that is optimistic because if you look at various stimulus packages by the government that perhaps this would imply that the government will work even harder to buttress the economy with stronger stimulus packages and that is why we have tried to highlight that portion and our final answer. And regarding steel workers, particularly welders, many of them are going to the Pyeongtaek semiconductor plants and many welders. Because we have not been able to bring in labor supply from overseas, it is true that many shipbuilding companies have seen their welders outflow for Gwangyang and Pohang. Many of the Gwangyang steel workers are going to Yeosu and other industrial complexes, but we have continued to Hello. My name is Kim Sang-Yong of POSCO Energy. I'm at the Corporate Planning and Finance Office. You asked about the new renewable energy business pursued by POSCO Energy. Our new renewable energy capacity includes It's about 82 megawatts of capacity. And we are currently in preparation for offshore wind. And offshore wind, we are currently preparing about 300 megawatts of capacity. As you know, the new and renewable energy sector does not have guaranteed profitability as of yet. We are being very conservative when it comes to looking at profitability because we also have to look at POSCO Group's REV as of large, and so we want to expand on profitability while also contributing to our overall group ESG management. Thank you.

The next question is from BBS, and the question will be by Lee Eun-Young. Your question, please. Good afternoon. Can you hear me? Yes, we can hear you. Thank you very much. I have a simple question concerning the Chinese market. Recently, there is the mortgage boycott that is happening in China. For example, they have bought apartments, but it's not being built properly. And recently in the news, we have seen that various suppliers for these real estate, they have not been paid properly. And so we can see that the developers in China are going through difficulties. And so some of the developers are actually going bankrupt, and there are protests related to these issues. Well, Ms. Lee Eun-Young? Well, we can't really hear you well. I think the line is not good.

So can you hear me better?

Yes, it's much better. So recently in China we have seen mortgage boycotts and the developers, the companies that are supplying to the developers are also going through cash flows and so they are going through various difficulties and there are also individuals who are Thank you for joining us. Over 50% of the steel is used for construction, especially the real estate market and the infrastructure. So there are many bonds that have been issued by the local governments, but they have not been executed. And so in the end, all of this will build up to lower the demand for iron ore and also that will trigger the decrease So the Xi government, they could use stimulus packages that could boost the steel industry. That's been talked about since the first half of this year. But if we take a look at the realistic numbers, the numbers seem quite weak. And so is it correct to have the perspective that there will be increased demand in the Chinese market? And this is my question, having said all of that. Well, if we take a look at the steel prices, it's quite strong compared to the international prices. So if we take a look at the prices in China and the global benchmarking prices, it seems that the prices internationally has dropped to about $600. But in Korea, it's still being maintained at $800. And so we can see that... The POSCO's HR coil is about $800. In China, it's about $500 to $550. And so there is that big price gap. Of course, the price gap could be due to various issues with the supply chain. But these price gaps have been maintained very well thus far. But is this price gap sustainable in the future? China is a country that's very close by. And China, they usually dump their materials into Korea when there is a price gap. But why aren't they coming into the Korean market? Will this price gap be maintained in the future? Will it be sustainable in the future? And what is the gap between the domestic prices and the export prices? And so my question mostly focuses on the market as well as the market forecast. Thank you very much. Well, concerning the second half, so what are the market forecasts? I think many people are very interested in this, probably because there are so many uncertainties. And when we have uncertainties, we could be as pessimistic as we wish. We could think about the market collapse scenario. And in these uncertainties, we could be as positive as we would like to be. We could take a look at some upsides and downsides Maybe that could offset some of our pessimism. So maybe we can go to Mr. Um. Well, I am Um Gi-Chan of POSCO Marketing Strategy Office. If we take a look at the Korean prices, the biggest variable that impacts the price is the Chinese price. And I think about three analysts have already asked this question. As I have already mentioned, the market is good. And we're not saying that there's many upsides. But we believe that we have bottomed out. And so that's why we believe that it's time to go back up. And so in other words, will we see a recovery in the fourth quarter? No one knows for sure. But if we take a look at the distributors in China, when we communicate with them and network with them, two to three out of ten talk about how there will be a prolonged situation. But five to six out of ten, of course, it will reflect their hope as well. But they believe that there will be a recovery at year end. And as you have mentioned, our steel is at $800, but internationally it's about $600, $500 range in China. But the volume is not that high. This is because if we take a look at China, the Chinese government has announced their net zero policies. They are lowering their export volume for these primary goods. That actually is a big variable. In Korea, we don't necessarily only focus on price anymore because there is renewed understanding and awareness of the issue of safety. I'm not a real estate expert, but what you have mentioned is quite true. But if we take a look at those in real estate and the Chinese people, it seems that there is a buildup of complaints against the government. And so there has not been a big achievement through the stimulus packages in the first half. And so we believe that there will be additional stimulus in the second half because of these reasons. Thank you very much. This brings us to the end of the Q&A session. Thank you very much for joining us. Thank you to the investors and analysts who have joined us for the second quarter earnings call. This brings us to the end of today's call. Thank you very much.