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Posco posts biggest operating profit in 6 years

Steelmaker to start production of rechargeable battery components in China via joint venture

Annual sales by South Korean steel giant Posco have hit the 60 trillion won ($56.4 billion) mark for the first time in three years, with 4.62 trillion won in operating profit, the biggest gain in the last six years, the company said Wednesday.

With numbers improving in both the steel and nonsteel sectors, the company saw the biggest operating profit since 2011, the company said.

Increased sales of premium steel products as well as improved profits from the steelmaker’s overseas unit contributed to posting the biggest margins this year, it added.

With the better-than-expected performance, the steelmaker plans to invest 4.2 trillion won this year, 1.6 trillion won more than last year, including investments in R&D, human resources and facilities.

The company’s board also approved Posco’s launch of a joint venture with a Chinese company to produce anode materials and precursors for rechargeable batteries, officials said.

Under the joint venture, Posco and Huayou Cobalt Co. plan to operate a new plant in Zhejiang province in China, capable of producing 46 million tons of precursors and anode materials by year 2020.

Huayou Cobalt is the world’s largest supplier of cobalt, key ingredient for secondary batteries, producing around 50 percent of global demand for the material. The Chinese company not only owns a cobalt mine but also a nickel mine, the company said.

The two companies will set up two separate joint ventures -- one for precursor production and the other for anode materials. Huayou, which can directly supply cobalt, nickel and manganese, will hold 60 percent of shares in the precursor production business while Posco will take the rest. For the anode material production business, Posco, which is equipped with the technique of manufacturing high-quality anode materials, will invest in 60 percent of the business, the company added.

Through the venture, Posco is expected to expand its presence in China by producing and selling anode materials there and attain a reliable supply of natural resources from its Chinese partner. Meanwhile, Huayou will be able to step into the manufacturing business through the partnership, officials said.

Last year, the steel giant said it will invest 300 billion won in the anode materials business by 2020 as part of its plan to diversify its portfolio. Anode materials are core substances for rechargeable batteries used for smartphones and computers.

By Cho Chung-un (