"Expectations for Additional Orders for POSCO Future M Grow," DS Investment & Securities Says

[Financial News] An analysis has emerged that expectations are growing for additional orders for POSCO Future M, which signed its first official contract to supply lithium iron phosphate (LFP) cathode materials to SK On.
On the 28th, DS Investment & Securities explained that POSCO Future M had "secured all three domestic battery makers as cathode material customers, laying the foundation for growth in its LFP business."
According to DS Investment & Securities, POSCO Future M disclosed on the 22nd that it had signed a contract with SK On to supply LFP cathode materials worth KRW 1.0742 trillion over three years from 2027 through 2029. Assuming a selling price of KRW 14,000 per kilogram, the total contracted volume comes to 77,000 tonnes, or an average of 26,000 tonnes per year.
A definitive contract is also expected to be signed in the third or fourth quarter for 190,000 tonnes covered by a supply agreement reached with a domestic battery maker in August. The combined average annual supply under the two contracts is expected to reach 57,000 tonnes, exceeding last year's cathode materials sales of 44,000 tonnes. With SK On joining existing cathode materials customers LG Energy Solution and Samsung SDI, POSCO Future M will have secured all three domestic battery makers as customers in the cathode materials business, following the anode materials business.
Choi Tae-yong, a researcher at DS Investment & Securities, focused on SK On's potential for additional procurement. Including SK On's KRW 161.7 billion contract with another supplier, its total LFP procurement value reaches KRW 1.2359 trillion, with the contract with POSCO Future M accounting for approximately 87% of the total. However, because the contract contains no minimum-purchase clause, the actual supply volume will depend on SK On's U.S. energy storage system (ESS) order performance.
Choi said, "As SK On's U.S. ESS order performance will determine the actual supply volume, future order disclosures will be a key indicator for gauging POSCO Future M's performance."
Samsung SDI is being cited as a potential source of additional orders. Samsung SDI has been operating Synergy Cell independently and has increased its potential North American ESS production capacity to as much as 66 GWh. This has led to an analysis that Samsung SDI's procurement of LFP cathode materials could result in additional orders for POSCO Future M. Potential supply routes include supplying the materials through C&P Advanced Materials, a joint venture in which POSCO Future M holds a 20% stake, or making direct deliveries using its own production lines. Another factor cited was that converting POSCO Future M's 55,000-tonne ternary cathode materials line in Pohang to LFP production would increase capacity to 87,000 tonnes, allowing it to handle additional orders without expanding its facilities.
Third- and fourth-quarter results are expected to fall below the market consensus. DS Investment & Securities projected POSCO Future M's third-quarter and fourth-quarter sales at KRW 797.0 billion and operating profit at KRW 19.9 billion. The KRW/U.S. dollar exchange rate fell from KRW 1,502 in the second quarter to KRW 1,415 in the third quarter, immediately lowering selling prices. At the same time, inventory purchased at the previous quarter's higher exchange rate was reflected in costs, creating a lagging effect that pressured profitability.

[email protected] Kim Dong-chan Reporter