POSCO Future M to raise $771 million to bolster battery materials business

POSCO Future M Co., South Korea’s leading battery materials maker, is set to raise 1.1 trillion won ($771 million) through a rights offering as it doubles down on its bet to expand manufacturing capacity in North America amid a prolonged downturn in global electric vehicle demand.

The affiliate of Korea’s top steelmaker POSCO Holdings Inc. said in a regulatory filing on Tuesday that proceeds from the fundraising will be used to partially finance the construction of a cathode materials plant in Canada, a joint venture with US automaker General Motors Co.

Raised funds will also be used to expand its Korean facilities in Pohang and Gwangyang.

The move underscores POSCO Future M’s strategy to position itself for a rebound in EV demand beyond what analysts have dubbed an industry “chasm” – a lull in EV demand before mass market penetration.

POSCO Holdings, its parent company and majority shareholder with a 59.7% stake, has pledged to inject 500 billion won into the fundraising, reinforcing its commitment to the battery materials sector.

POSCO Future M will issue new shares on June 17 after setting the issuance price the previous day. The new share listing on the Korea Exchange will be completed on Aug. 8.

SECOND RIGHTS OFFERING

The rights issue, POSCO Future M’s second since 2021, comes as the battery materials maker grapples with deteriorating financials.

Its revenue plunged 22% last year to 3.7 trillion won, while operating profit collapsed 99.6% to just 700 million won. Its cash reserves dwindled to 444.8 billion won as of March from 644.2 billion won at the end of last year.

POSCO Future M plans to allocate 630.7 billion won of the fresh capital to its Canadian joint venture with GM, while 181 billion won is set to be spent on upgrading and expanding its domestic cathode plants.

The remainder, about 288.4 billion won, will support working capital and help bolster its anode business, where the company is vertically integrating graphite production via its newly established subsidiary Carbon New Materials Co., into which it plans to inject 396.1 billion won.

The company said last month that it will manufacture spherical graphite, a critical material for battery anodes, in-house to reduce its dependence on Chinese suppliers and fortify its electric vehicle battery supply chain.

EXTRA CASH INJECTION INTO OTHER AFFILIATES

Industry watchers said the rights offering is crucial for POSCO’s ambitions to establish a foothold in the North American market, as the group expects a demand recovery around 2027–2028.

POSCO Group’s capital injection extends beyond POSCO Future M.

The holding company plans to provide 328 billion won to its lithium joint venture, POSCO-Pilbara Lithium Solution, and 69 billion won to POSCO GS Eco Materials for stable lithium production and battery recycling.

POSCO-Pilbara Lithium Solution, a joint venture formed in 2021 with Australia’s Pilbara Minerals, is processing lithium ore into hydroxide, while POSCO GS Eco Materials, co-invested by GS Energy Corp., oversees the group’s battery recycling operations.

The rights issue follows a flurry of capital-raising efforts across the sector as battery makers grapple with an extended industry slump.

Samsung SDI Co. last month announced a 2 trillion won rights issue plan, while LG Energy Solution Ltd. opted to tap the debt market via foreign currency bonds. SK On Co., the battery arm of SK Group, secured 1.5 trillion won via a rights offering last year.

Write to Woo-Sub Kim at duter@hankyung.com

In-Soo Nam edited this article.