POSCO HOLDINGS INC. American Depositary Shares (Each representing 1/4th of a share of Common Stock)

I am Jeong Gi-seok, CSO at Pusko Holdings. Before we begin today's earnings call, I would like to extend my deepest gratitude to all of our investors on behalf of the company for your trust and support to Pusko Holdings, as well as our operating companies. Going forward, the company will strive further to promote a balanced growth between steel and youth growth businesses, and enhance the long-term corporate value of POSCO Holdings so that we can continue to meet the expectations of our investors. POSCO Holdings in the second quarter of this year recorded an operating profit of 1.33 trillion won. This is because the steel business, which had been impacted from the Pohang mill flooding and the economic downturn, quickly recovered its quarterly OP of 1 trillion won. Such profit recovery in our core business, the steel business, holds a very important meaning for our company. It helps us to maintain global competitiveness in the steel sector, as well as generate stable flow of revenue. And when this is coupled with our new business growth strategy, it will indeed create a virtuous cycle in enhancing our corporate value.

POSCO is also striving for excellence in its steelmaking business to meet the demand of the changing times, which is carbon neutrality. POSCO has placed low-emission steel production as its top priority, such as early operation of Hyrex pilot plant in 2026. The company is also advancing low-carbon product portfolio by boosting the high-grade hyper-NO production capacity for agro-friendly EV traction motors. Also to prepare for the commercialization of hydrogen reduction still in the future, Postco Holdings has developed a 2050 phase hydrogen roadmap based on specific hydrogen demand outlook. And in the short term, it's working hard to deliver success by pursuing CCU and reformed hydrogen-enabled blue hydrogen on top of green hydrogen. Moving on to secondary battery materials business as communicated during the recent value day, the company keeps accelerating investment to gain a strong leadership position in the global market. And especially for lithium, the plan is to commercialize it by this year to deliver strong performance as an independent business. Also, I am glad to announce that significant progress has been made to secure nickel. With that, I will give the floor to our team head who will brief you on 2023 Q2 results.

Good morning, everyone. Let me share with you the 2023 second quarter earnings. So in Q2, Postco Holdings saw consolidated revenue of 20.12 trillion won, up 3.8% quarter on quarter, with OP up by 88% at 1.33 trillion won. Cumulative investments for the first half of the year were $3.7 trillion on a consolidated basis, and the quarter and net debt ratio was 13.3%. Let me explain by business areas. First, the steel business recovered to the average level of quarterly operating profits since the past 20 years in domestic and overseas combined, posting $1.1 trillion in OP following a loss in 2022, Q4, and 2020. 338 billion won profit in 2023 Q1. And this is because all Pohang mills were back in full operation, recovering both production and sales volume, and we had no additional restoration costs this quarter, and the selling price increased slightly as well. So not only the domestic, but the overseas sale business also showed a recovery, posting an OP of 93 billion won. Now, as for the green infrared businesses, revenue and OP all increased QOQ by 9.6% and 16.5% respectively. If you look at the green materials, the revenue increased by 2.7% QOQ, but OP declined by 55%. Actually, POSCO Future M turned around from their previous quarter's lower profit with OP of $52.1 billion, up 60% from the previous quarter. However, the initial costs were incurred for the new plant construction for newly established entities like Pusko HY Clean Metal and the recognition of inventory impairment losses. So this gap will be reduced as the plant becomes operational and generates sales. And Pusko HY Clean Metal began its first shipment at the end of Q2 and is gradually increasing its utilization rate. Next is the major business activities for Q2. The first thing to mention is the rollout of low-carbon steel products. In Q1, POSCO launched renewable energy steel with increased use of renewable energy like solar and wind power. And in Q2, we launched a third-party verified low-carbon product called green certified steel. Going forward, POSCO will secure electric furnace capacity by 2026 and launch products using more scraps and make products with hydrogen direct-reduced iron by completing the hybrids facility by 2030. And it aims to achieve 10.5 million tons in sales of low-carbon products annually by 2030. So building such a proactive low-carbon system is a process transformation for a more sustainable business. the effort to secure a market-leading position with technologies and products in the low-carbon product segment. Second, we are expanding our production for green industries. As you may well know, POSCO currently produces in our Pohang mill 100,000 tons of high-grade NO products annually for green vehicle motor course. The demand for high-grade NO is expected to increase due to the accelerated growth of green vehicles, and there are only about 10 steelmakers in the world capable of manufacturing high-grade NO due to manufacturing technology patent issues. So we plan to additionally expand our investment in Korea and abroad and build a plan to – and has a plan to build a system for producing and selling 1 million tons of high-grade NO by 2023. April 2022, we broke ground for the construction of a 300,000-ton facility expansion in Gwangyang, and it's almost completed, and the operation is planned for the fourth quarter of this year.

Next page, hydrogen business for hydrogen reduction steel. So, Posca Holdings-led global consortium has won a license to develop and operate green hydrogen projects in Dukum, Oman. Renewable energy will be used to produce hydrogen and convert to ammonia. For now, Posco Holdings has secured the project development license. The company will review project feasibility by 2024 and determine the final project scale. Hydrogen produced overseas will be sold locally as eco-friendly raw materials for steelmaking. And Posco Holdings is looking into green and blue hydrogen, and the Dukum project is the first step in the company's journey to hydrogen reduction steelmaking business. Now moving on to page 8, it shows the nickel, dry, and wet smelting business of Q2. Posco Holdings signed a deal for joint pyrometallurgical project in which the company has 49% share in Halmahera, Indonesia. Under the project, nickel met production volume is expected to reach 52,000 tons in June in Suwawesi, Indonesia, a hydrometallurgical JV project in which the company invested 20% share was BOD approved. The JV will lead to nickel MHP 62,000 tons generation. As the world's top nickel producer, Indonesia will help the company secure prize competitive nickel by smelting nickel locally. The construction... of the two smelting plants is expected to be completed by 2025. And also in June, Posco Holdings signed a JV to build a refining plant in Pohang. Posco Holdings and China's CNGR own 60% and 40% share respectively. The plan is to produce 50,000 tons of high-purity nickel under the JV, which will help us complete a nickel precursor cathode value chain by 2025, thereby ensuring supply chain stability. Next, I'll give you more details of performance by company. Page 10 is POSCO. POSCO's production and sales volume went up TOQ, and in terms of crude steel production volume, Operation rate reached 87.3%, achieving normalization. Out of production by product, CR production volume declined due to regular repair of the CR line. In addition, WTP sales and the overall sales mix normalized. Starting end of June, we've had heavy rain, which caused slight delay in product shipment. However, HR sales sheet sales went up. Moving on to the next page, as a result, Q2 OP stands at 841 billion Korean won with OP rate at 8.2%. So we saw slight recovery, QOQ. As you can see down, Q2 saw no additional flooding-related costs in Pohang Steelworks, such as recovery costs and inventory loss, and crude steel production went up 4.1% QOQ, lifting weight on fixed costs. Also, if you look at the price, selling price of carbon steel rose 4.6% QOQ to 1.06 mil Korean won, boosting profit rate. Now, if you look at S&P of the company, during Q1, we talked about this as well. S&P hit bottom this January, then rebounded However, despite the reopening in China, the pace of economic recovery is slower than expected, which has dragged down price starting June. H2 steelmaking market conditions are still uncertain. So if you look at steel price, most of the Chinese steelmakers are struggling to generate profit. So despite slow demand, attempts are made to bring up steel price. But as I said, uncertainty remains. If Chinese steelmakers reduce production in Q4, the market conditions might recover. Now, moving on to Q2 overseas steel profit, the level recovered QOQ. In particular, PTKP, the Indonesian JV, started operation of new HR as of end of last year. So before, it was based on graphite, but it shifted to high-grade And high-priced HR sales expanded internally, pushing HR sales product domestic sales share to 77%. In May, PTKS suffered fire, which leads us to think that domestic sales, which is highly profitable, will continue for the foreseeable future. Moving on to PZSS, Zhang Jiagang. It's still in the red due to sluggish market, and POSCO Maharashtra enjoyed improved profit thanks to competitive high-grade materials. India's high economic growth and strong auto sales drove up the sales of high-grade materials, such as carbon steel sheets for autos, as well as household electrical goods. And we see better profit. Next, POSCO International. OP went up 27.5% QOQ. First, if you look at the steel price, as steel price recovered, the global business revenue went up 12% QOQ, which drove up steel trading profit by 55% QOQ. As for its energy business, despite the sales reduction due to the cyclone which hit the gas field in Myanmar, profit level went up thanks to higher payback rate of development cost. Next, POSCO ENC. Revenue went up 9.6% QOQ, but OP went up only slightly. So new order amounts keep growing as the group want more secondary battery plant projects. So it's not more construction, but because of the secondary battery plant projects. Now moving on to POSCO Future M. POSCO Future M keeps posting steady growth. In particular, with high-end N86 share increasing, cathode revenue went up 10.2% QOQ. N86 sales share reached 31% in Q2, which drove up average selling price by 22% QOQ. However, anode sales for EVs dropped by 15% QOQ. This brings an end to Q2 2023 earnings release presentation. We will now move on to the Q&A session. Thank you.

Now we'll move on to Q&A. If you would like to ask questions, please press asterisk followed by one. And if you want to cancel, press asterisk followed by two. So the first question will be by Park Hyun-wook from Hyundai Motor Securities. Please go ahead. Hello, I am Park Hyun-wook. First of all, thank you for sharing with us with the good earnings as well as the presentation. I have three questions for you. So as it was explained in the presentation, the Chinese steel prices are showing stable situation. However, there is a lower expectation for the pickup of demand in the latter half of this year. So as per Postal Holdings, including the price, how do you forecast the latter half of this year in terms of market conditions? And second is regarding the lithium secondary battery materials. And during the value day, all the presentations were very much useful. But I would like to ask a few questions for those who haven't actually attended the event. So in the latter half, as well as in the mid to long term, how do you forecast the lithium prices? And last year, our lithium production capacity was 300,000 by 2030. And you actually increased to $420,000 by 2030. Is this increase explained by our increased capability, or is it because of the changing market conditions? And when it comes to EBITDA margin, it is slightly lower than what had been suggested last year. So is it because you factored in the lithium prices as well? So can you explain a little bit about the reason for a lower EBITDA margin this year? And the third question is the following. So most of the steel makers regarding the hydrogen or reduced iron, they're very much focused on shaft flow, but we have a finex. So I think that we have a different path to take. So when it comes to the liquid reduction of flow, what is the difference between ours and the shaft one? So as for the latter, the capacity will be about 200,000 to 300,000 tons. So I would like to actually have your take on this matter as well. So regarding the demand forecast, it will be by Ham Dong-un from the Marketing Strategy Office who's going to answer. And regarding the Lean Prices Outlook, The answer will be given by Lee Gyeong-seop, who is in charge of the lithium materials businesses. And as for the answer for the third question regarding the hybrids, it will be Jung Beom-soo from Steel Production Technology Strategy Office from Poland who will give you the answer. So let me first share with you the market conditions or outlook for the latter half. So until June, the price was going down continuously. But after July, the global steelmakers actually made efforts to increase the prices because of cost pressure. And as for Europe, Actually, we saw a stop to the 12 consecutive week of price turn, and ArcelorMittal is also making efforts to increase still prices, and there were also some price increase cases coming from China. So from July, we see a rebound of the distribution prices from China as well as from Europe as well. Fortunately, July 18th in China, There was actually a commitment to see the steel price recovery, and there was also a commitment made to continue with the reconstructing as well. So when it comes to the latter half of this year, it is very much dependent on how effective the economic recovery plan in Korea and China will take, and also the cut in the production of Chinese crude steel. And there's also the effect factor as well, and we consider the effect factor as an important factor for the next semester as well. And the low yen, Japanese yen, is also an issue as well. And there was lots of Korean steel going to Japanese market, but there was the internal adjustment mechanism to lower the import of Japan of the steel. So there are some concerns surrounding this issue. But when it comes to the Japanese actually products, it's very much limited for the use of the shipbuilders and so forth. So we decided to maintain our August price. And we will continue to strengthen our relationship with the clients to defend the domestic. And so we believe that the domestic market will be less impacted. And as for the automotive sector, the automotive sales will increase. So we believe that the steel plate demand will be quite good. And when it comes to the shipbuilding, the new ship prices are also increasing as well recently. So if the shipbuilding sector actually sees a higher profit, that will not very much impact us. But since the construction sector and also household appliance sector are showing a downturn recently, we believe that these sectors will need some time to recover. So I'd like to share with you the answer for lithium. I think you asked three questions. So first is the lithium price outlook for second half and in the mid to long term. So this year and next year, the lithium prices, as for the fast market and with McKinsey outlooks, it will be about $50,000 to $40,000. And in the mid to long term, by 2030, for example, we look towards like $27,000 to $30,000 U.S. range. But since there are lots of changes in the market, it's very difficult to give you a long-term outlook. But the EV demand, as for the EV demand, there was the economic downturn, and there was reduced subsidies in Europe and China, and there was a drastic, actually, downturn of the EV sales. But things have turned around, and by the end of May, The EVs were sold in 480,000 in numbers. So that's about 40% increase in sales of cars and also the 50% increase in sales of batteries. So overall, you can say that the EV sales will also increase by 42% this year. So the market expects about 15 million units for EVs. So we believe that there is a growing demand for EVs as we had planned. So it actually surpasses the target. But as for the Chinese lithium or lithium in China, it is very much fluctuating according to the Chinese domestic market conditions. But when it comes to the supply, the supply is going up. So I believe that the lithium prices will hover around $40,000 to $50,000 in the market. And the reason we expanded our lithium capacity to 430,000 by 2030 is so that was an increase from 300,000. That was because as we implemented this business, we came to gain more confidence and commitment to this business. That explains one of the background. And we plan to become a global top three lithium player by 2030. And as for the Alba Day and the Chinese competitor, they are like global number one and number two. And their goals have also been adjusted upward as well. They have adjusted, you know, for example. So that is why we are also increasing our target in line of the trend. But one of the biggest reasons is that we want to apply a bottom-up approach to all of our plans and projects, and that is what we're doing. So we believe that the goal that we set is quite feasible and And the EBITDA margin was lowered because, as I said, in the lithium price outlook in the mid to long term, actually the EBITDA margin was lowered due to that outlook as well compared to our target planned or set last year. Hello. I am from Pohang. So I would like to answer your question. A lot of the global companies are going for low-carbon products, and many steelmakers are very much committed to achieve net zero, and that is why they're accelerating the hydrogen-reduced iron projects. But there is the ESF type, which is our type, and there is the shaft type and EAF, electric arc furnace type, done by the EU. So these are the two major types. But the biggest difference between the two is that as for the shaft type, we have to use a very high quality iron ore. So that is why there is a limited reserve of this ore. And that's the case. And as for the fluidized, fluidic, we can actually use lower quality. There is not much limited access to reserve, so that is one of the advantages that we have. As for the Hirex and the electric arc furnace, you mentioned about the size. As for the EAF, we have a lot of know-how in running. There is the good know-how accumulated through the FINEX, and we also have the know-how of the electric arc furnace. So if we combine all of these know-hows, there will be actually a synergy, and we believe that we'll be able to accelerate the overall speed of the shaft furnace. So when it comes to the HIREX, and if we consider it as 100 in total, then in terms of cost or technological advantage, And in terms of development speed, if we factor in all of these factors, we believe that we'll be able to, we have a secured technology that is quite leading. Thank you.

Thank you very much. Now we'll move on to the next question. From Yuan Ta Securities, Mr. Lee Hyun Soo will ask questions. You have the floor. Yes, hello. My name is Lee Hyun Soo. So I have about three questions. First of all, about POSCO. So you said that the sales recovered to about 8.3 million, and the volume will also reach about 9 million. So do you think that the sales will recover in H2 of the year? Do you have any specific numbers in terms of sales volume? And also, you talked about this during the presentation. but results recovered in age quarter two. And what about the age two? Do you see that in age two, the results will even increase compared to Q2? And also, I have a question about lithium for secondary batteries. So in the mid and long term, so now brine, lithium, the production capacity will be about 100,000 and others have to come from ore and so on and so forth. And from what you've mentioned so far, so of course you keep saying that brine is the most profitable. However, now we see more production volume for other elements as well. So if you look at Argentine, maybe it's a project that we carried out a long time ago And is that because of profit level that you're making such a decision? And in the mid and long term, how would the share be between iron ore and brine? And last but not least, recently, not only Postco Holdings, but also we've seen the share increase So we are seeing a rally of the share price. And you said that it's about 70%. And for now, well, we do not have financing right away. But in the past, I believe that the acquisition cost has changed. So Like for affiliates, do you plan to adjust the share? So that is my last question. Thank you very much. Yes, thank you very much for the questions. So the first question was about the H2 sales volume outlook and also any room to improve performance in H2. So Mr. Lee Sung Kyu, of the finance team will give you the answer. And the second question was about the lithium, and you talked about the EBITDA margin. And Mr. Lee Kyung-sub will give you the answer. The head of LIB materials business will give you the answer. And for POSCO Interco, Mr. Jeong Dae-han will give you the answer. He's the head of the corporate strategy team. Yes, hello. Well, as for H2 cells volume outlook, well, if you look at H1 in Q1, operation did not recover fully. So because of that, it did not fully normalize. But it normalized in Q2, so we were able to rebound. But in Q3 and Q4, compared to H1, we won't have much repair of the facilities. So compared to H1, we do believe that the sales volume will slightly go up. But then if you look at China's reduction of production or expectations for economic recovery in H2, well, if we were to consider that, I do believe that in H2, sales volume will slightly recover. And also for H2 performance, now in Q2, the steel market conditions hit bottom, but it bottomed up. And also, if you look at the raw materials and iron ore, the price stabilized. So the low cost... raw materials consumption may recover and that will bring an upward trend to the sales volume for the company. And as a result, we believe that we could drive up the cost slightly in H2. So we do believe that in H2, we're able to post a better performance than H1. That's what we are aiming for, and we do believe that it will going to happen. Thank you. Yes, about lithium and the price for lithium. By 2030, the lithium project goal is as follows. So 100,000 tons of lithium and for ore, we have 220,000. And we have clay lithium as well as the low type. So recycle about 30,000. So that is the mix of lithium. Now, if you look at brine lithium, the reason why we do not increase the share of brine is this. So now the plant is at 420,000, and we wanted to make the minerals available, and we wanted to attain a reasonable goal. But if you look at Argentina, Bolivia, and Chile, while these three countries produce the most brine. And for Argentina, they have small-scale mines where also the lithium content tends to be low. So the quality is low for some mines. And for the large-scale, the high-quality ones, we see depletion of such a salt flat. So in Argentina, We plan to increase the size at a smaller scale, but we don't see any new opportunities for big-size saltwater lithium mining. And for Chile, we are now in the process of winning the license for mining rights. And once that is complete or over, we believe that instead of transferring that to the private sector, Chile said that the government will take the ownership. And of course, if they were to open the bidding to the private sector, then we could join the bidding. However, we don't have any plans for that. And for Bolivia, now the project itself has been nationalized. So we do not see any potential opportunities in Bolivia. We have Australia and RNX. So for instance, North America, we have mining lithium, and we plan to focus on those locations and strike a deal with the local companies. And as for the non-traditional lithium, we do see high share in North America. So the plan is to work with the mining companies to carry out projects. Now, you talked about EBITDA. For brine, of course, it's high. It's only natural because the lithium processing from the mine, it's just one single process. So mining and brine, they go hand in hand, which is why EBITDA is high. And for ore, that takes second place of EBITDA. So you have profit from mining, and also you have profit from ore, and you have to split the two, which is why for ore, EBITDA is lower. And for brine, well, we haven't kick-started the project. However, The project margin rate EBITDA is about 60% and over. And that includes processing as well as mining. So if you look at the margin, then brine is the highest, then ore, and then non-traditional lithium. So that would be the order. Thank you very much. Yes, thank you. So you talked about the possible adjustment of shares. And after we kickstart the launch of the surviving company, we have been working on the stock governance. But then given the share price change and also the funding and the ownership, well, you talked about that. But anyways, from that perspective, we do not have any plans to adjust the shares. So that would be all for me. Thank you. Thank you.

Next question, please. Next question will be from High Investment Securities, Kim Yunsang. Please go ahead. I have a quick question. So in the beginning of this month, you said that you were going to invest about $121,000 trillion one by 2030. So you actually unveiled your investment plan. So I know that you haven't executed all your investments, so I would like to know how much of that you have invested, and can you also provide us with a breakdown of your investment? So the second is regarding the lithium sales. So when it comes to production, you actually mentioned about it, but – and you also elaborated on how you're going to produce lithium. You said that by 2023, it will be about 160,000 tons. So I would like to know if you have any like mid-term like milestones, and can you elaborate more on that as well? And third is regarding the energy sources, especially in terms of renewables as well as offshore projects. What are their share in our overall revenue? and how much of these projects and businesses are ongoing, and how are they being accelerated, and what can we expect in terms of revenue from these businesses? Thank you. Regarding the first question, regarding KPEX, so that will be Jung Dae-young, head of corporate strategy team, who is going to answer questions. And as for the lithium sales and production, that will be, of course, by Mr. Lee Kyung-seop of the lithium battery materials business. And the third question will be answered. So regarding the offshore project, it will be by Ham Dong-eun, the group leader of Marketing Strategy Office. I am Jung Dae Young from Corporate Strategy Team of Holdings. You mentioned about the breakdown of 121 trillion won of CAPEX. So that can be divided into three. So there is the steel, the secondary materials, and green infrastructure. And for each segment, by 2030, if you look at the volume of CAPEX, so steel will represent about 35%, secondary materials 46%, and green infrastructure 15%. So that will be the breakdown of our CAPEX. And if you break further down the steel, in order for green steel, that will be 20%, and for the growth investment, 30%, and recurrent or operational investment will be the rest. And when it comes to the secondary battery materials, So basically, the cathodes and the lithiums will get the investments on an equal basis. So that will be about 70% or more of the entire secondary materials of CAPEX. Thank you. Now about the lithium production capacity. So currently at Gwangyang, PPLS, It's about half of the 43,000 tons will be completed by October this year. So that's phase one. And next year, it's going to be sequentially completed for construction. And we also have 25,000 tons expected for next year as well. And as for recycling, 20. 2,500 ton. It has been actually completed, and we are currently in the ramp-up process. And in 2026, there is additional 60,000 and also 10,000 for recycling ton expected. But when it comes to lithium, when we actually build the process, the ramp-up and also the licensing, all of that takes about 12 months. So at the time of completion, the production will gradually increase. And even though without the certification or licensing, we can actually sell these products with a little bit of a discount, but we actually consider about one year for all the production to be stabilized. It will be by 2025 when all of the things that we produce, that is 166,000 tons, to be completely sold. Regarding the energy steel, so we believe the energy actually market to be very important in terms of our strategy. And actually, we have a separate entity working for the energy steel materials business. And actually for this year, we run about 1 million tons for 700,000 for solar and 300,000 for wind. And wind will be actually increased by threefold by 2030, and PV will increase by double by 2030. That will be the market growth. So we want to be in line with the market growth. And we also hope to increase our goal to 1.5 million tons and also to increase the PV goals or solar goals by two-fold. And when it comes to wind power, we have a greenable brand separately launched and rolled out. So as for the wind power market, we consider it to be very important. So overall, if you look at the growth potential, the Korean market or domestic market is very much limited. So the Korean market will be about 20%, and we will focus more on the European as well as America's. So there is Osteda and Bestas, the big wind-powered turbine manufacturers. We want to actually collaborate with them so that we can focus on the substructures for the offshore projects. And when it comes to the growth potential, we believe it is very, very promising. Thank you.

Thank you very much. Do we have additional questions? Do we have more questions? Next. From Eugene Securities, Mr. Lee Eugene will ask questions. Ms. Lee Eugene will ask questions. Hello. I have about two questions. So first, for recycling, so on Monday of last week, you said that you will handle a black powder, and the total will be about 10,000 tons of And is that included to the 30,000 tons by 2030 goal? And also, I have a question about recycling margin. So if you look at the sales of black powder, as of LNE, it's about 70% or 70% equal. So that's how it's being sold right now. And I would like to know more details about that and also the recycling margin. Thank you. Yes. So for recycling and for lithium, you asked a few questions, and Mr. Lee Kyung-sup, head of LIB materials business, will give you the answer. Well, for recycling, so by 2030, the goal is, so it depends on the type of battery, but we have N622, target, about 70,000 tons of total minerals. And cobalt takes up about 10,000. So yes, it is included in the 30,000. And for cobalt, we haven't released any plants yet. But for cobalt, we plan to recycle. And then during nickel refining, we can then get cobalt, which is why we don't have it as a separate business. And also the recycling margin, it's not a stable margin. But the hurdle rate, that's 9.98%. And together with new businesses, It would be approximately about 15% to 20%. That is the target. But black mass and scraps for recycling, the prices keep fluctuating. So I can't give you the exact number for now. Thank you very much.

Next question, please. Next question will be by from Morgan Stanley. Thank you very much for giving me the opportunity. I would like to ask a few questions. The first is regarding the Guangyang lithium business. So with Pilbara, we see a slight delay in the ore price negotiations. So we have three months before the production. So when will this price negotiations or contract negotiations end with Pilbara? And second, regarding the Argentinian lithium business, it's going – I would like to know about the latest updates on the margin as well as price structure. And you mentioned about the mid- to long-term asset strategy. So what is the profit level that you're looking at in the next two to three years? Thank you. Regarding the Pilvara PPS or price, actually initially we expected We actually agreed on the price structure in 2021. But in 2022, you see that the lithium ore price is going up recently, and we're currently negotiating, and the negotiation is underway. So we believe that it will be concluded by mid-August latest, because in the beginning of September, we have to actually agree on the initial product so that we can actually complete the construction and go ahead with the tests. So you can say that the negotiations are under its final stage. And when it comes to the margin structure, it may vary depending on the price negotiation outcome, but there is not much change compared to the initial cost structure. So as for the details, we will be able to share it with you once everything is finalized. Thank you.

Next, from Marshall Waste, Sean Zhu will ask a question.

Hi, yep, thank you. This is Sean from Marshall Ways. I just had a quick question on first the precursor self-sufficiency target by 2030. So I understand that there's a JV with CNGR, but I just wanted to understand, you know, as a percent of total expected output for cathode, how self-sufficient will you be in terms of ternary precursor? And the second question that I have is in terms of CAPEX, the 121 trillion, You guided sort of the split between steel, secondary materials, and green infra, but I just wanted to understand in terms of the funding profile, how much will come from internal cash flows versus, you know, raising of additional debt versus, you know, any other potential funding mechanism for this big CAPEX plan going forward. Thank you.

Yes, I will ask you a question. My name is Shan Zhu from Marshall Ways. First of all, I would like to ask two questions. The first is related to the state-owned enterprises. You said that you will achieve independence by 2030, and you are organizing a partnership with CNGR on that journey. But ultimately, I would like to ask you about how long it will take to achieve independence and how much time it will take to achieve independence. Yes. Thank you very much about precursor. Yes, you asked question about CAAT-FED. Mr. Lee Dong-Seop, head of LIB materials business, will give you the answer. And for the second question about the CAPEX, is it going to be internal cash flow, or are we going to borrow some debt or liability, and so on and so forth? Now, from Postco Holdings, Mr. Kim Seung-joon, head of finance team, will give you the answer. Yes, for precursor, for now, for precursor, by 2030, the plan is to have about 460,000 self-sufficient precursors. That is about 50%. That is the target, and the reason for that is For cathode, so we have some external contract for cathode. So we can source some cathode from the outside, and depending on the market conditions, for a certain volume, it will be spot purchase so that we meet the demands of the market, which is why the number of 460,000 came up. and nickel, as well as other raw materials needed for that, we have secured the raw materials. And for precursors, so we have Gwangyang, about 100,000 tons, and in Samyang, we will also complete the construction of the plant by next year. And, well, you asked the question about self-sufficiency of precursors, but anyways, we do have the production process technology and capacity to do that. So we will go hand in hand with cathode plant construction, and we plan to expand the capacity going forward. Yes, my name is Kim Seung Joon. I'm the head of the finance team. So about CAPEX, you asked a question about that. So first and foremost, so what we have, we have holdings as about $4 trillion. and POSCO about $9 trillion. So in total, we have about $13 trillion in reserve. So we do not think that we need to rely on borrowings or any other sourcing for now. But then going forward, when the time comes, yes. So liability, we plan to take out more liability. That is the first priority. But then we have to make sure that our credit ratings does not slip. And at the same time, we may use our shares. But that's the next step in the far future. That would be all for me. Thank you.

Are there any other questions? There are no further questions. If you would like to ask questions, please press asterisk followed by 1. on your phone. Well, then, with that, I would like to wrap up the Q&A. Thank you, everyone, for your participation today. So we will keep in mind all the questions and the comments that you have made so that we can open up a better future for So with that, I would like to wrap up and close the second quarter earnings call release of Postco Holdings. Thank you very much.