Issuer Summary: POSCO Holdings / POSCO

1. Business Snapshot and Recent Developments

POSCO Holdings / POSCO is a major Korean materials and industrial group built around one of Korea’s largest steel franchises, with businesses also spanning rechargeable battery materials, resources, energy, trading, construction, and infrastructure. This report primarily analyses the consolidated credit profile of POSCO Holdings Inc. However, for bond investors, the relevant issuer or obligor — POSCO Holdings Inc., the core steel operating company POSCO Co., Ltd., POSCO International, POSCO Future M, POSCO E&C, or another group entity — affects cash-flow remoteness, guarantees, structural subordination, ratings, and refinancing risk. The baseline of this report is therefore the “POSCO group credit” profile, not an assumption that all individual bonds carry the same legal protections.

Following the vertical spin-off in March 2022, the former POSCO was split into POSCO Holdings Inc., the holding company, and the newly established POSCO Co., Ltd., which operates the steel business. According to the 2025 Form 20-F, POSCO Holdings has 64 domestic consolidated subsidiaries, including POSCO, 134 overseas consolidated subsidiaries, including POSCO America, and 115 associates and joint ventures. The current POSCO is often referred to by the historic steel company name, but legally and financially it should be analysed as a consolidated holding-company group.

The first credit question is how far the core steel business supports the floor of the group credit profile. Consolidated revenue for full-year 2025 was KRW 69.095 trillion and operating profit was KRW 1.827 trillion, both weaker than in 2024. The operating margin declined from 4.6% in 2023 to 3.0% in 2024 and 2.6% in 2025, making it risky to view POSCO only as a high-margin, stable materials company. By contrast, preliminary 1Q 2026 results showed consolidated revenue of KRW 17.876 trillion and operating profit of KRW 707.0 billion, a sharp recovery from KRW 13.0 billion of operating profit in 4Q 2025. However, this improvement is only one quarter of preliminary data and reflects a mix of steel prices, raw-material costs, the absence of one-off losses, recovery in infrastructure and construction, and narrower losses in rechargeable battery materials.

The second question is how far growth investment will pressure credit quality. POSCO is strengthening high-value-added steel and low-carbon steelmaking in Korea while pursuing large investments in steel, lithium, and rechargeable battery materials in India, the US, Australia, Argentina, and other markets. In April 2026, POSCO signed a 50:50 JV agreement with JSW Steel to build an integrated steel mill with annual capacity of 6 million tonnes in Odisha, India. The target completion year is 2031, and POSCO describes the project as part of its localisation strategy in a growth market. In May 2026, POSCO Holdings signed an agreement with Mineral Resources to invest about USD 765 million in Australian lithium mining stakes, securing lithium concentrate offtake rights from Wodgina and Mt. Marion. In November 2025, POSCO also decided to acquire interests around the Hombre Muerto salt lake in Argentina. These investments may support long-term raw-material access, growth-market exposure, and low-carbon transition, but in the short to medium term they carry cash outflows, construction and ramp-up risk, price risk, and potential additional capital-support risk.

The third question is that the ratings have already begun to reflect these pressures. POSCO’s official rating page shows S&P at BBB+ / Stable and Moody’s at Baa1 / Negative as of 2026. On March 16, 2026, S&P downgraded POSCO Holdings and POSCO from A- to BBB+, and downgraded POSCO International from BBB+ to BBB. S&P cited high capex, weak business conditions, the possibility that capex could exceed operating cash flow in 2026, rising debt, and delayed deleveraging. This indicates that POSCO’s issue is not merely temporary quarterly earnings weakness, but a capital-allocation and cash-flow problem.

The starting point of this report is therefore to analyse POSCO as an investment-grade materials group with a strong steel franchise, but with narrowing credit headroom because of growth investment and business-portfolio transformation. The company’s name recognition, position in Korean industry, and globally leading steelmaking capacity are clear supports. However, when the 2025 earnings decline, losses in rechargeable battery materials, POSCO E&C’s losses, the increase in net debt in 1Q 2026, and the KRW 11 trillion-scale capex plan from 2026 onward are viewed together, the credit question is not “large company equals safe credit.” It is how much investment POSCO can absorb through cash flow while maintaining investment-grade credit quality.

2. Industry Position and Franchise Strength

POSCO’s franchise rests on its scale, technology, customer base, and overseas footprint as a representative company of Korea’s steel industry. In World Steel Association’s World Steel in Figures 2025, POSCO Holdings was listed as the world’s eighth-largest steelmaker by 2024 crude steel production, at 37.79 million tonnes. Company rankings for 2025 had not been confirmed as of this report, but country-level data for 2025 show Korea as the world’s sixth-largest crude steel producer, at 61.9 million tonnes. POSCO is a core company in that market, supplying blast-furnace, electric-arc-furnace, rolled, and high-value-added products to Korea’s automotive, shipbuilding, home-appliance, construction, energy, and industrial machinery sectors.

The credit relevance of the steel franchise is not simply scale. Steel earnings move significantly with demand, import pressure, iron ore, coking coal, scrap, foreign exchange, logistics, power, and carbon costs. Large scale strengthens fixed-cost absorption and customer relationships, but if steel prices fall, raw-material costs remain high, and utilisation declines, operating profit and operating cash flow can thin quickly. Even a leading company such as POSCO is not free from this cyclicality. The 2025 operating margin of 2.6% indicates limited earnings thickness relative to the size of the business.

At the same time, POSCO’s strength is that it is not focused only on commodity products; it is expanding into high-value-added steel, electrical steel sheets, automotive steel sheets, products for energy and mobility, and low-carbon steel. In the 1Q 2026 materials, POSCO Co., Ltd. reported crude steel production of 8.148 million tonnes, sales volume of 7.717 million tonnes, and a utilisation rate of 86.9%. The proportion of Premium Plus products for high-value-added and growth areas was 27.3%, up from 24.7% in 4Q 2025. Compared with issuers centred on ordinary steel that compete mainly on price, this product mix gives POSCO some room to protect margins, which is a credit support.

However, product mix cannot eliminate the steel cycle. At standalone POSCO Co., Ltd. in 1Q 2026, revenue rose from KRW 8.298 trillion in 4Q 2025 to KRW 8.935 trillion, but operating profit declined from KRW 337.0 billion to KRW 213.0 billion. Company materials explain that while carbon steel selling prices were flat, raw-material costs rose because of higher raw-material input prices, foreign exchange, and freight. In other words, even if volume and prices improve, earnings can be pressured if raw materials, FX, and logistics become headwinds. Investors should acknowledge POSCO’s strong business position while focusing primarily on the spread between prices and costs.

Overseas steel, rechargeable battery materials, and infrastructure complement the core steel business, but each has a different credit character. Overseas steel returned to profit in 1Q 2026, but full-year 2025 profitability was thin and depends on country-specific demand, FX, raw materials, and import regulation. Rechargeable battery materials are a long-term growth axis, but they generated a KRW 441.0 billion operating loss in 2025, and a narrower loss in 1Q 2026 alone is not enough to conclude that the business has moved into a sustained profit trend. Infrastructure is supported by earnings from POSCO International, but it also includes construction losses at POSCO E&C. It should therefore be assessed by separating energy and trading from construction, rather than treating the segment as a single stable earnings source.

3. Segment Assessment

In assessing POSCO’s segments, it is necessary to distinguish which businesses genuinely support operating profit and cash flow and which businesses consume capital, rather than focusing only on consolidated revenue scale. Against 2025 consolidated operating profit of KRW 1.827 trillion, Steel generated KRW 1.960 trillion of operating profit. POSCO International also generated KRW 1.165 trillion of operating profit. By contrast, Rechargeable Battery Materials recorded an operating loss of KRW 441.0 billion, and POSCO E&C recorded an operating loss of KRW 452.0 billion. Viewing the group simply as a diversified group of steel, rechargeable batteries, and infrastructure risks misidentifying the profit sources and loss sources.

Note: Sources are POSCO 2025.4Q Earnings Release / Datapack. Segment figures follow the company’s presentation and do not necessarily add mechanically to consolidated profit and loss.

The steel business improved its operating profit in 2025, from KRW 1.637 trillion in 2024 to KRW 1.960 trillion. This means that, within the decline in consolidated operating profit, the steel business itself showed some recovery. POSCO Co., Ltd. standalone also improved operating profit to KRW 1.780 trillion in 2025 from KRW 1.473 trillion in 2024. From a credit perspective, it is important that POSCO’s core steel business is not loss-making; rather, it is the main earnings source absorbing loss-making businesses within the group.

However, the composition of 1Q 2026 is somewhat more complex. Overall Steel operating profit was KRW 345.0 billion, improving from KRW 254.0 billion in 4Q 2025, but POSCO Co., Ltd. standalone operating profit declined from KRW 337.0 billion to KRW 213.0 billion. The recovery in overall Steel was supported by overseas steel, which moved from a KRW 111.0 billion loss in 4Q 2025 to an KRW 87.0 billion profit. The 1Q 2026 improvement in steel should therefore be read less as a full recovery in Korean standalone margins and more as the effect of improved overseas losses and intra-group mix.

Rechargeable battery materials and lithium-related investments strengthen the future resources and materials supply chain, but they also bring losses and cash outflows during the ramp-up period. In 1Q 2026, the operating loss in Rechargeable Battery Materials narrowed to KRW 7.0 billion, and POSCO Future M also returned to profit, but the improvement reflects a mix of customer diversification, market improvement, a rebound in lithium prices, and the reversal effect from inventory valuation losses in the previous quarter. POSCO Argentina still recorded an operating loss in the same quarter, so lithium prices, utilisation, processing costs, Argentina country and FX risk, and additional investment need to be separated.

POSCO International is the most credit-supportive non-steel business. In 1Q 2026, it generated operating profit of KRW 358.0 billion, supported by power, steel trading, palm oil, and gas fields. However, it is a separate issuer, and its official ratings of S&P BBB / Stable and Moody’s Baa2 / Negative are lower than POSCO / POSCO Holdings. Conversely, POSCO E&C is a risk source requiring confirmation of construction losses, guarantee liabilities, safety-related costs, and whether parent support may be needed, as shown by its KRW 452.0 billion operating loss in 2025.

For POSCO Future M and POSCO E&C, what is confirmed at this point is their negative impact on consolidated profit and loss. Additional cash support, guarantee liabilities, contingent liabilities, and the actual status of capital injections or loans from the parent remain unconfirmed. This report therefore treats deterioration in earnings as a confirmed risk and additional support as an unconfirmed risk.

4. Financial Profile and Analysis

POSCO’s financial profile is that of a group with asset scale and an earnings base that support investment-grade credit quality, but with narrowing credit headroom because of weaker profitability and rising net debt. From 2023 to 2025, revenue declined from KRW 77.127 trillion to KRW 69.095 trillion, while operating profit almost halved from KRW 3.531 trillion to KRW 1.827 trillion. EBITDA also declined from KRW 7.376 trillion to KRW 5.984 trillion. The quality of consolidated earnings weakened because losses in rechargeable battery materials and construction were added to cyclicality in the core steel business.

Note: Sources are POSCO 2025.4Q Earnings Release / Datapack and 1Q 2026 Form 6-K. 1Q 2026 figures are quarterly preliminary data and are not annualised. The 1Q 2026 capex column shows actual capex of KRW 1.7 trillion and should be read separately from the company’s KRW 11.3 trillion plan.

The most important point in this table is not a collapse in earnings, but the simultaneous occurrence of lower earnings and higher debt. Operating profit declined to KRW 1.827 trillion in 2025, while net debt increased to KRW 12.900 trillion. In 1Q 2026, operating profit recovered, but net debt increased further to KRW 15.364 trillion, and net debt / equity rose to 24.2%. Looking only at the quarterly recovery in operating profit suggests improvement, but the balance sheet has already begun to reflect the burden of investment and working capital.

The decline in 2025 earnings cannot be explained simply by weaker steel market conditions. Steel segment operating profit improved from KRW 1.637 trillion in 2024 to KRW 1.960 trillion in 2025. By contrast, Rechargeable Battery Materials worsened from an operating loss of KRW 277.0 billion in 2024 to an operating loss of KRW 441.0 billion in 2025, and POSCO E&C recorded an operating loss of KRW 452.0 billion in 2025. POSCO International’s operating profit was solid, but it did not fully offset the losses in construction and rechargeable battery materials. The 2025 deterioration at the consolidated level was therefore not “only a steel problem,” but a deterioration in the earnings mix during a portfolio-transition period.

The quality of the 1Q 2026 recovery also needs to be separated. Consolidated operating profit increased from KRW 13.0 billion in 4Q 2025 to KRW 707.0 billion. Steel improved from KRW 254.0 billion to KRW 345.0 billion, Rechargeable Battery Materials improved from a KRW 157.0 billion loss to a KRW 7.0 billion loss, and Infrastructure improved from a KRW 10.0 billion loss to a KRW 405.0 billion profit. POSCO E&C also moved from a KRW 190.0 billion loss to a KRW 53.0 billion profit. This is a broad improvement, but it needs to be read in light of the very weak previous quarter, the inclusion of the absence of one-off losses and a reversal from inventory valuation effects, and the decline in standalone POSCO Co., Ltd. operating profit.

In cash-flow analysis, the scale of capex is central. Consolidated capex was KRW 7.0 trillion in 2025, but the 2026 plan is KRW 11.3 trillion. 2026 capex includes overseas steel investments, the India JV, US EAF-related investments, the domestic HyREX pilot facility, Gwangyang EAF, heavy-plate welding facilities, acquisition of Australian lithium assets, and investments related to Argentina, the US, and rechargeable battery materials. Compared with 2025 EBITDA of KRW 5.984 trillion, the planned 2026 capex is very large. This is why S&P noted that capex could exceed operating cash flow.

The absolute amount of liquidity is large. Cash and short-term financial instruments were KRW 15.593 trillion at end-2025 and KRW 14.897 trillion at end-1Q 2026. However, this figure alone does not justify the conclusion that liquidity is sufficient. At end-1Q 2026, interest-bearing debt was KRW 30.261 trillion and net debt was KRW 15.364 trillion. Short-term debt, the maturity schedule, bank facilities, debt by currency, parent-only cash, and constraints on cash movement within subsidiaries are unconfirmed in this report. For holding-company creditors, it matters which entity holds consolidated cash and which debt that cash can service.

The overall assessment of the financial profile is that POSCO still has an investment-grade foundation, but less headroom than before. Net debt / equity of 24.2% is not excessive leverage, but the direction of increase from 13.5% in 2023 is the issue. If capex rises further in 2026, rechargeable battery materials or construction return to losses, and steel margins are weak, a recovery in operating profit alone will not stop debt from increasing. Conversely, if steel margins recover, POSCO International remains solid, losses in rechargeable battery materials narrow, and non-core asset disposals progress, POSCO still retains cash-flow capacity to support the rating.

5. Structural Considerations for Bondholders

For bondholders, the first point to confirm is the issuer name. POSCO Holdings Inc. is the holding company and consolidated parent of the group. POSCO Co., Ltd. is the core steel operating company and the centre of actual steel cash flow. POSCO International is a listed subsidiary engaged in energy, trading, and materials trading, and its international ratings are lower than the parent’s. POSCO Future M and POSCO E&C operate rechargeable battery materials and construction, respectively, but their current focus is earnings pressure and funding-support risk.

S&P’s assignment of the same BBB+ rating to POSCO Holdings and POSCO is evidence of group-credit integration. However, it does not mean that all bonds legally have the same guarantees or collateral. S&P’s rating is a credit opinion and does not replace confirmation of guarantees, collateral, negative pledge, cross-default, change of control, tax, jurisdiction, or cash-transfer restrictions from subsidiaries for individual bonds. Investors need to confirm issuer, guarantor, debt ranking, use of proceeds, maturity, and covenants for each bond.

The structural risk for POSCO Holdings creditors is cash-flow remoteness as a holding company. Much of the steel operating cash flow is at POSCO Co., Ltd., while POSCO International, POSCO Future M, and other subsidiaries are also separate legal entities. The parent can obtain funds through subsidiary dividends, intra-group loans, asset sales, and external funding, but subsidiary cash does not automatically become a repayment source for parent-company debt. Parent-only cash, debt, subsidiary dividends, subsidiary loans, guarantee provision, and collateral arrangements remain unconfirmed items in this report.

For POSCO Co., Ltd. creditors, closeness to the Korean steel business is a support, but it is important to assess how much funding the company transfers to other group businesses and how much of the burden of dividends to the holding company or group investments it bears. Steel investments in 2026 include domestic HyREX, EAF, and overseas JVs, so POSCO Co., Ltd.’s own capital burden should be separated from broader group funding needs.

POSCO International creditors may benefit from support expectations within the POSCO group, but the S&P rating is one notch below the parent at BBB. Cash flow from energy and trading is useful for group diversification, but the business also carries risks in trading, resources, power, palm oil, and related areas. POSCO International’s solid performance is positive for group credit, but parent-company creditors need to confirm dividends, cash transfers, and guarantees.

POSCO Future M and POSCO E&C should be viewed as structural funding-support risks. Rechargeable battery materials may require capital support from the parent or group for growth investments. POSCO E&C could transmit risk to group credit if construction losses or contingent liabilities arise. If the losses at these two companies only reduce consolidated operating profit, the impact may still be manageable. If additional capital injections, debt guarantees, or liquidity support become necessary, they would directly affect the holding company’s cash and leverage.

6. Capital Structure, Liquidity and Funding

POSCO’s capital structure includes a large absolute amount of cash and short-term financial instruments, but net debt increased from 2025 to 1Q 2026, and the capex plan from 2026 onward is heavy. At end-1Q 2026, cash and short-term financial instruments were KRW 14.897 trillion, gross interest-bearing debt was KRW 30.261 trillion, and net debt was KRW 15.364 trillion. The KRW 2.464 trillion increase in net debt in just one quarter from end-2025 shows that earnings improvement alone has not absorbed funding needs.

Note: The liquidity table juxtaposes confirmed company disclosures and unconfirmed items. Short-term debt, maturities within one year, committed lines, and parent-only cash are unconfirmed in this report, limiting the final liquidity assessment.

On the use-of-funds side, the 2026 capex plan is the largest item. Company materials show consolidated capex of KRW 11.3 trillion in 2026, a large increase from KRW 7.0 trillion in 2025. Major investment examples include the India integrated steel JV, US EAF-related investments, the domestic HyREX pilot facility, Gwangyang EAF, the Australian Mineral Resources lithium asset acquisition, investments related to Argentina, the US, and rechargeable battery materials, and major infrastructure investments. However, this report cannot confirm 2026 spending by project, POSCO’s share of the burden, or whether the projects will be consolidated or equity-accounted.

The large investment pipeline carries both positives and negatives for credit. The India JV may provide access to growing Indian steel demand, local raw materials, and sales networks. The Australian lithium investment may strengthen the raw-material supply chain through concentrate offtake rights from Wodgina and Mt. Marion. HyREX and EAF are necessary for future low-carbon steel demand and regulatory compliance. At the same time, all of these projects involve short-term payment, construction, ramp-up, additional cost, and price-volatility risks. The strategic merit of the investments should be assessed separately from the funding burden on debtors.

Note: The investment pipeline table separates strategic importance from confirmed amounts. Project-level contributions to the 2026 capex plan are unconfirmed.

Funding sources include operating cash flow, cash, short-term financial instruments, bank and bond-market access, and non-core asset disposals. The company monetised KRW 1.8 trillion through 73 portfolio-rationalisation items in 2024-2025 and targets an additional KRW 1 trillion in 2026-2028. However, asset disposals are not a substitute for operating cash flow. Shareholder returns are also an issue. The Form 6-K dated April 30, 2026 set out a policy to return 35-40% of adjusted profit attributable to owners of the parent in 2026-2028. Whether POSCO can prioritise deleveraging over returns during a period of heavy capex and rising debt is a key focus for bond investors.

Funding access is still supported by investment-grade ratings. S&P BBB+ / Stable and Moody’s Baa1 / Negative are not A-category ratings, but they remain ratings that support international market access. Domestically, POSCO’s official page shows AA+ domestic ratings. However, Korean domestic ratings and international ratings use different scales and should not be compared mechanically as the same credit level. The latest domestic rating rationales have not been confirmed in this report, and the original texts from the three Korean rating agencies need to be reviewed to assess refinancing of domestic bonds, CP, and bank borrowings.

The liquidity conclusion is that confirmed cash and short-term financial instruments and investment-grade ratings are supports, but the final assessment is limited because the maturity schedule, bank facilities, committed lines, and parent-only cash are unconfirmed. At this stage, POSCO appears to have market access and liquidity buffers, but given the possible simultaneous occurrence of capex, strategic investment, shareholder returns, short-term debt, and subsidiary support, free cash flow in 2026-2027 is the most important monitoring point.

7. Rating Agency View

POSCO’s official rating page shows S&P at BBB+ / Stable and Moody’s at Baa1 / Negative. For domestic ratings, Korea Ratings, Korea Investors Service, and NICE Investors Service are all shown at AA+ / Stable. Looking only at the international ratings, POSCO is now an issuer that has moved to the middle to lower end of the investment-grade category, rather than a strong A-category credit. Moody’s Baa1 appears one notch higher than S&P BBB+, but the outlook is Negative, so rating headroom does not appear large.

S&P’s March 2026 downgrade is the most important external credit assessment in this report. S&P considered that high capex and a constrained business environment at POSCO Holdings would limit cash-flow improvement over the next two years. While S&P expected a gradual recovery in steel earnings and contributions from infrastructure, it said capex could exceed operating cash flow in 2026, potentially leading to rising debt and delayed deleveraging. This view is consistent with the increase in net debt identified in the financial section of this report.

S&P lowered the long-term issuer credit ratings and long-term issue ratings on POSCO Holdings and POSCO from A- to BBB+, and also lowered POSCO International from BBB+ to BBB. The outlook on the subsidiary was said to move in line with the parent outlook. This assessment indicates that the POSCO group is likely to be viewed as an integrated credit, while also showing that POSCO International is rated below the parent. There are group-support expectations, but the subsidiary’s standalone business risks and structural distance remain.

For Moody’s, the official page confirms Baa1 / Negative, but the original rationale for the February 2026 outlook change or Negative outlook has not been confirmed in this report. Moody’s Negative is therefore treated as directional risk, and the reasons are not inferred. The next update should obtain Moody’s original text and confirm whether it emphasises steel market conditions, capex, leverage, group support, or capital policy.

In investment terms, POSCO is not an issuer that should be considered safe simply because it has ratings; it is an issuer where the conditions for maintaining the rating need to be tracked. S&P’s Stable outlook indicates that successive near-term downgrades are not its base case. However, Stable does not mean improvement. If operating improvement is offset by investment spending and net debt continues to rise, downward rating pressure could intensify again. Conversely, if POSCO manages the capex peak in 2026-2027 and confirms non-core asset disposals, narrower losses in rechargeable battery materials, sustained earnings at POSCO International, and recovery in steel margins, the stability of the BBB+ rating would improve.

8. Credit Positioning

Within Asian steel credit, POSCO is comparable with issuers such as Tata Steel, Nippon Steel, JFE, Baosteel, Hyundai Steel, and JSW Steel. However, simple comparisons are risky because countries, ratings, business diversification, government or chaebol relationships, decarbonisation burdens, and the direction of growth investment differ. POSCO’s defining feature is that it combines a core Korean steel franchise and globally leading production scale with a post-holding-company structure in which rechargeable battery materials, resources, and infrastructure investments have become a larger part of the credit profile. Compared with Tata Steel, POSCO does not have India as its own core domestic market. The India JV with JSW is an attempt to access that growth market, but it also carries execution risk for a new large investment.

Among major Korean corporates, POSCO is not a high-growth business like semiconductors, autos, or battery-cell manufacturers. It combines materials cyclicality with capital-intensive growth investment. It is not a quasi-sovereign such as a Korean state-owned enterprise or policy financial institution, and its industrial importance in Korea should not be confused with a guarantee of debt repayment.

Within the same rating category, S&P BBB+ remains investment grade, but POSCO differs from more defensive credits such as utilities, telecoms, or consumer staples because it faces overlapping risks from steel market conditions, capex, losses in rechargeable battery materials, and construction losses. Its strengths are scale, the steel franchise, cash, market access, and earnings from POSCO International. Its constraints are thin margins, net debt, 2026 capex, and subsidiary support risk.

This report does not assess relative value because it has not confirmed market prices, yields, OAS, Z-spreads, CDS, or same-tenor comparisons. To decide whether to buy, hold, or avoid POSCO bonds, investors need to separately check the issuer, guarantees, remaining tenor, currency, covenants, market liquidity, Korean same-rating peers, Asian steel peers, and spreads versus POSCO International bonds. Based only on issuer credit, POSCO can fit within an investment-grade portfolio, but spread assessment should not assume the thick headroom associated with its former A-category rating.

9. Key Credit Strengths and Constraints

POSCO’s first strength is the scale and quality of its steel franchise. Based on 2024 data in World Steel in Figures 2025, it ranked eighth globally by crude steel production and supplies high-value-added steel to Korea’s major manufacturing sectors. POSCO Co., Ltd. is the core earnings source for the group credit profile.

The second strength is business diversification. POSCO International’s energy and trading businesses provide earnings that do not move in exactly the same direction as steel market conditions. Full-year 2025 operating profit of KRW 1.165 trillion and 1Q 2026 operating profit of KRW 358.0 billion are important supports for the group. Resources, gas, LNG, trading, food, and biomaterials broaden the revenue base relative to a pure steel issuer.

The third strength is cash, short-term financial instruments, and market access. Cash and short-term financial instruments of KRW 14.897 trillion at end-1Q 2026 are large, and the group maintains investment-grade international ratings. Recognition in domestic and international bank and bond markets, market access as a major Korean corporate, and room for non-core asset disposals support refinancing and liquidity.

The fourth strength is long-term strategic growth optionality. The India JV, Australian and Argentine lithium, low-carbon steel, rechargeable battery materials, and POSCO International’s energy business may create long-term growth opportunities.

The first constraint is declining profitability. The consolidated operating margin declined from 4.6% in 2023 to 2.6% in 2025. 1Q 2026 recovered, but it is preliminary quarterly data, and standalone operating profit at POSCO Co., Ltd. declined quarter on quarter. If the spread between steel prices and raw-material costs does not improve, margins could become thin again.

The second constraint is rising net debt. Net debt increased from KRW 8.063 trillion in 2023 to KRW 15.364 trillion at end-1Q 2026. Net debt / equity rose from 13.5% to 24.2%, which is also part of the background to S&P’s downgrade.

The third constraint is losses in rechargeable battery materials and construction. Rechargeable Battery Materials generated an operating loss of KRW 441.0 billion in 2025, and POSCO E&C generated an operating loss of KRW 452.0 billion. They improved in 1Q 2026, but confirmation is still needed on whether this is temporary or could lead to additional losses or parent support.

The fourth constraint is the weight of capex and strategic investment. The 2026 consolidated capex plan of KRW 11.3 trillion is materially larger than 2025 EBITDA of KRW 5.984 trillion. If this cannot be absorbed through operating cash flow, asset disposals, and external funding, it will lead to further net debt growth.

10. Downside Scenarios and Monitoring Triggers

The first realistic downside is renewed deterioration in steel margins. If steel prices are flat or decline while iron ore, coking coal, freight, and FX rise, operating profit at POSCO Co., Ltd. will quickly come under pressure. In 1Q 2026, sales volume increased, but standalone operating profit at POSCO Co., Ltd. declined quarter on quarter because of higher raw-material costs. This shows that the core steel business remains sensitive to market conditions and costs. Monitoring indicators are carbon steel selling prices, raw-material input prices, crude steel production, sales volume, utilisation, the Premium Plus ratio, and the operating margin.

The second is a scenario in which capex exceeds operating cash flow. The 2026 capex plan of KRW 11.3 trillion is heavy. If steel, the India JV, US EAF, HyREX, Australian lithium, Argentina, rechargeable battery materials, and infrastructure investments proceed at the same time, free cash flow could be negative even if the group is profitable. This is also the point S&P highlighted. Monitoring indicators are operating cash flow, capex, strategic-investment payments, asset disposals, net debt, and short-term debt.

The third is a scenario in which rechargeable battery materials and lithium investments are delayed more than expected. POSCO Future M and POSCO Argentina depend on demand recovery, utilisation, customer acquisition, raw-material prices, inventory valuation, and technology ramp-up. If monetisation is delayed, growth investment becomes a credit burden. Monitoring indicators are operating profit, utilisation, lithium prices, customer contracts, inventory valuation losses, and additional capital support.

The fourth is additional losses at POSCO E&C. If the KRW 452.0 billion operating loss in 2025 proves one-off, it may be manageable. However, if weaker profitability in the order backlog, guarantee liabilities, safety-related expenses, litigation, and domestic property-market weakness overlap, group earnings and cash could be affected again. Monitoring indicators are quarterly operating profit, order backlog, provisions, guarantee liabilities, and legal and safety-related costs.

The fifth is funding-transfer constraints under the holding-company structure. Even if consolidated cash is large, the liquidity assessment for POSCO Holdings creditors weakens if parent-only cash, subsidiary dividends, or intra-group funding transfers are constrained. Monitoring indicators are parent-only cash, subsidiary dividends, subsidiary loans, guarantees, parent-only debt, and short-term maturities.

The sixth is further deterioration in ratings and market access. S&P’s outlook is Stable, but it has already downgraded POSCO from A- to BBB+. Moody’s is at Baa1 / Negative. If net debt rises further, POSCO cannot absorb 2026 capex through operating cash flow, and losses continue in rechargeable battery materials or construction, the likelihood of an outlook change or further downgrade would increase.

The seventh is overlooking bond-specific terms. Debt issued by POSCO Holdings, POSCO Co., Ltd., POSCO International, subsidiaries, or overseas entities may differ in guarantees, collateral, subordination, jurisdiction, and covenants. This report organises issuer credit, and before investing in individual bonds, investors should confirm the issuer, guarantees, collateral, maturity, currency, and hedging in the contractual documents.

11. Credit View and Monitoring Focus

The appropriate current view of POSCO Holdings / POSCO is as a BBB+ / Baa1-rated materials and steel group that remains investment grade but has clearly stepped down from the A-rating category. In direction, 1Q 2026 operating profit alone shows signs of improvement, but including the increase in net debt and capex, the near-term direction is flat to modestly cautious. The probability of a rapid change in credit level or direction is not high, but if renewed steel-margin deterioration, capex overshoot, losses in rechargeable battery materials and construction, and additional downgrades coincide, market assessment could move significantly within one to two years.

The supports are clear. POSCO has a core Korean and globally leading steel franchise, and the steel segment improved operating profit in 2025. POSCO International contributes to group diversification through energy and trading earnings and was also solid in 1Q 2026. Cash and short-term financial instruments are large, and domestic and international market access remains in place. These factors provide some resilience against short-term market weakness.

The constraints are equally clear. The consolidated operating margin declined to 2.6% in 2025, and profit attributable to owners of the parent narrowed to KRW 658.0 billion. Operating profit recovered in 1Q 2026, but net debt increased to KRW 15.364 trillion and net debt / equity rose to 24.2%. The 2026 capex plan of KRW 11.3 trillion is heavy and, as S&P noted, could exceed operating cash flow. The rating has already been lowered to BBB+ by S&P, and Moody’s has a Negative outlook.

For bond investors, POSCO is not a simple credit story of buying a strong steel company cheaply. The core steel earnings recovery, holding-company structure, losses in rechargeable battery materials, construction losses, India JV, lithium investment, low-carbon investment, shareholder returns, and asset disposals all need to be assessed together. In particular, POSCO Holdings bonds, POSCO Co., Ltd. bonds, and POSCO International bonds may differ in ratings and legal protections. For individual investments, issuer and guarantee should be confirmed first.

There are five priorities for monitoring. First, POSCO Co., Ltd.’s steel margins, raw-material costs, sales volume, and utilisation. Second, the gap between 2026 capex and operating cash flow. Third, whether rechargeable battery materials and POSCO E&C can sustain profitability. Fourth, net debt, short-term debt, and parent-only liquidity. Fifth, the next actions by S&P, Moody’s, and Korean domestic rating agencies.

The current practical view is that POSCO Holdings / POSCO Co., Ltd. issuer credit can be considered within the investment-grade universe, but investors should demand a higher risk premium than before. POSCO International and other subsidiary bonds should be assessed as separate issuers with their own ratings, guarantees, and structures. Because market spreads have not been reviewed, this report does not judge whether the bonds are cheap or expensive.

12. Short Summary & Conclusion

POSCO Holdings / POSCO is a major materials group built around Korea’s core steel franchise and also covering rechargeable battery materials, resources, energy, trading, and construction. The investment-grade foundation remains, but the 2025 earnings decline, increase in net debt through 2026, large capex, and losses in rechargeable battery materials and construction have reduced credit headroom. Bond investors should distinguish among POSCO Holdings, POSCO Co., Ltd., and POSCO International as issuers, and focus primarily on steel margins, free cash flow, investment burden, and rating trends.

13. Sources

Confirmed sources

• POSCO Holdings Inc., Form 20-F for the fiscal year ended December 31, 2025, filed with the SEC on April 29, 2026. https://www.sec.gov/Archives/edgar/data/889132/000119312526188766/d26797d20f.htm
• POSCO Holdings Inc., Form 6-K, Q1 2026 provisional consolidated earnings, filed April 30, 2026. https://www.sec.gov/Archives/edgar/data/889132/000119312526196110/d138676d6k.htm
• POSCO Holdings Inc., Form 6-K, shareholder return policy for 2026-2028, filed April 30, 2026. https://www.sec.gov/Archives/edgar/data/889132/000119312526196146/d61370d6k.htm
• POSCO Holdings, 2025.4Q Earnings Release / Datapack, January 29, 2026, Publicnow mirror via MarketScreener. https://www.marketscreener.com/news/posco-2025-4q-earnings-release-ce7e5bdeda80f124
• POSCO official credit rating status, accessed May 13, 2026. https://www.posco.co.kr/homepage/docs/eng7/jsp/ir/s91b6000070c.jsp
• POSCO International official credit rating status, accessed May 13, 2026. https://www.poscointl.com/eng/creditRating
• S&P Global Ratings, "Posco Holdings, Posco, And Posco International Downgraded On Sustained Financial Pressure; Outlook Stable," March 16, 2026. https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3531333
• POSCO Group Newsroom, "POSCO to Build Integrated Steel Mill in India via Joint Venture, Securing a Strategic Bold Move for Future Competitiveness," April 23, 2026. https://newsroom.posco.com/en/posco-to-build-integrated-steel-mill-in-india-via-joint-venture-securing-a-strategic-bold-move-for-future-competitiveness/
• POSCO Group Newsroom, "POSCO Holdings Secures Stake in Top-Tier Australian Lithium Mine, Strengthening Competitiveness in Rechargeable Battery Lithium Supply Chain," May 11, 2026. https://newsroom.posco.com/en/posco-holdings-secures-stake-in-top-tier-australian-lithium-mine-strengthening-competitiveness-in-rechargeable-battery-lithium-supply-chain/
• POSCO Group Newsroom, "POSCO Holdings invests KRW 1.1 trillion to secure global lithium resources," November 14, 2025. https://newsroom.posco.com/en/posco-holdings-invests-krw-1-1-trillion-to-secure-global-lithium-resources-continuing-future-growth-investments-for-materials-patriotism/
• World Steel Association, "December 2025 crude steel production and 2025 global crude steel production totals," January 23, 2026. https://worldsteel.org/media/press-releases/2026/december-2025-crude-steel-production-2025-global-crude-steel-production/
• World Steel Association, World Steel in Figures 2025, Top 50 steel-producing companies 2024. https://worldsteel.org/data/world-steel-in-figures/world-steel-in-figures-2025/

Unconfirmed items

• Moody’s original rationale for the February 2026 Negative outlook. This report confirms Baa1 / Negative on the official rating page, but does not infer the reason.
• POSCO Holdings parent-only cash, debt, subsidiary dividends, subsidiary loans, guarantee provision, and restrictions on cash transfers from subsidiaries.
• Offering circulars, guarantees, collateral, negative pledge, cross-default, change of control, tax, jurisdiction, currency, and hedging for individual bonds issued by POSCO Holdings, POSCO Co., Ltd., POSCO International, and other subsidiaries.
• Detailed maturity schedule from 2026 onward, short-term debt, committed lines, bank facilities, foreign-currency debt, interest-rate hedges, and debt by currency.
• Total investment amount, POSCO-side equity contribution, guarantees, debt burden, land, environmental and other permits, additional funding in the event of construction delays, and consolidation or equity-method treatment for the India JSW JV.
• Annual spending, funding method, and potential additional investment for Australian and Argentine lithium investments, HyREX / EAF, and rechargeable battery materials investments.
• Loss drivers, order-backlog profitability, contingent liabilities, guarantee liabilities, safety and legal expenses, and existence of parent support for POSCO E&C.
• Customer concentration, utilisation, inventory valuation, impairment, and history of parent capital support for POSCO Future M.
• Current bond prices, yields, OAS, Z-spreads, CDS, same-tenor comparisons, and market liquidity. This report does not make a cheap-or-expensive valuation judgment based on market levels.