POSCO, South Korea’s largest steelmaker, has sold Zhangjiagang Pohang Stainless Steel (PZSS), its loss-generating stainless steel joint venture, to Tsingshan Holdings Group for about 400 billion won ($300 million), according to industry sources on Wednesday.
The sale is the latest in a series of POSCO's divestments of low profit and non-core assets as it pivots toward high-end steel products and battery materials amid a supply glut triggered by aggressive production from Chinese steelmakers.
The proceeds will be injected into POSCO's new manufacturing facilities in the US, India and Indonesia, including an investment into an electric furnace to be built in Donaldsonville, Louisiana, by Hyundai Steel Co.
POSCO Holdings Inc. recently signed an agreement to sell its entire 82.53% stake in PZSS to Tsingshan Holdings, China's largest stailness steel producer and the world's top nickel supplier.
Jiangsu Shagang Group holds the remaining stake in the JV founded in 1997.
By 2006, PZSS had grown into China’s first integrated stainless steel mill, encompassing hot- and cold-rolled steelmaking facilities.
PZSS had accounted for about one-third of stainless steel production in China with an annual capacity of 10 million tons. Its output has since shrunk to 800,000-900,000 tons annually since 2023.
It saw its operating loss more than double to 170 billion won in 2023 from 77.3 billion won in 2022.
POSCO has decided to sell its Chinese unit amid a bleak outlook for the stainless steel market as China's construction industry shows few signs of a near-term recovery.
Stainless steel is used primarily for construction materials, storage tanks, and piping.
"Zhangjiagang Pohang Stainless Steel is grappling with aging facilities that would require major reinvestment,” a senior POSCO official said.
Since last year, POSCO has been shedding non-core assets, including a heavy oil power plant in Papua New Guinea, P&O Chemical Co. and a stake in a petroleum-fired power plant in Vietnam, raising 949.1 billion won in cash.
It aims to secure 2.1 trillion won ($1.5 billion) by the end of this year through asset sales conducted since 2024.
Some of the proceeds will also fund the construction of an integrated steel mill in India, a joint venture with India’s JSW Group.
By Woo-Sub Kim, Jin-Won Kim and Jun-Ho Cha
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