POSCO International is prioritizing investments to strengthen its midstream capabilities in the liquefied natural gas (LNG) value chain, which encompasses procurement, trading, storage, and terminal operations. The company aims to enhance the efficiency of its integrated LNG value chain, from gas fields to power generation, to improve both profitability and capital efficiency.
In an interview with Aju Economy, Jeong Gyeong-jin, Vice President and Head of Management Planning at POSCO International, stated, "We are focusing on connection points that can enhance the overall profitability of the value chain. Among these, I believe the midstream sector will be the most critical area moving forward."
POSCO International's LNG operations are structured to integrate upstream assets, such as gas fields in Myanmar and Australia’s Senex Energy, with LNG procurement, trading, the Gwangyang LNG terminal, and power generation.
Since merging with POSCO Energy in 2023, POSCO International has unified its gas field development and LNG procurement and trading capabilities with terminal and power generation operations into a single system. This integration has bolstered the group's energy procurement stability while allowing for more flexible responses to global energy price fluctuations and supply chain risks.
Jeong emphasized, "The significance of the merger lies in the fact that the entire energy business has been integrated into one value chain. This has also positively impacted our ability to mitigate volatility across different businesses and secure stable cash flow."
He noted that upstream gas field assets play a crucial role in ensuring stable resource acquisition and cash generation, while downstream power generation enhances demand stability and the overall reliability of the value chain.
However, he stressed that the key to determining the efficiency and profitability of the entire value chain lies in the midstream sector. "By strengthening our capabilities in LNG procurement, trading, storage, and terminal operations, we can go beyond merely securing volumes to implement optimal procurement and sales strategies based on market conditions," he said.
Jeong also pointed out that this approach would enhance both profitability and risk management capabilities, predicting that the efficiency of LNG operations will significantly influence profitability in the future.
The recently established Singapore-based LNG subsidiary is part of this strategy to enhance midstream competitiveness. The plan is to increase flexibility in procurement and sales by leveraging long-term contracts, spot trading, regional price differences, and transportation and storage conditions in the global LNG market.
Jeong remarked, "In the global LNG market, the ability to comprehensively utilize long-term contracts, spot trading, and regional price differences is becoming increasingly important. We plan to focus on strengthening our midstream competitiveness to enhance the flexibility and profitability of our entire portfolio."
Despite the global energy transition, POSCO International remains committed to investing in LNG. The company believes that as coal power generation declines, LNG will serve as a stable bridge energy source, sustaining demand for a considerable period.
Jeong stated, "Energy transition is not an overnight process where one energy source completely replaces another. It must be carried out gradually, considering stable power supply, carbon reduction, and economic viability."
He particularly highlighted the Asian market, noting, "Asia's electricity demand continues to grow, and as coal power generation decreases, the demand for stable alternative energy sources is also expanding. In this context, LNG is a realistic bridge energy source during the energy transition."
From a financial perspective, Jeong assessed the LNG value chain as highly attractive. Gas fields generate stable cash flow, terminals provide infrastructure-based revenue, and power generation serves as a demand outlet for secured LNG.
By integrating procurement and trading functions, the company can flexibly manage volumes based on market prices and supply-demand conditions. POSCO International plans to leverage this foundation to enhance energy procurement stability at the group level.
Additionally, the company aims to secure energy reliably for its key businesses, such as steel and secondary battery materials, thereby increasing its resilience against global energy price fluctuations and supply chain risks.
POSCO International's investments are not limited to LNG. The company seeks to secure stable cash flow from energy while utilizing the current electric vehicle market stagnation as an opportunity for long-term supply chain development in the materials sector.
Jeong noted, "While the growth rate of the electric vehicle market is adjusting, considering carbon neutrality policies and major automakers' electrification strategies, it is difficult to argue that the long-term growth trajectory of the electric vehicle and battery industries has changed. Rather, from the perspective of securing core raw material supply chains, the current adjustment phase may be an opportune time to proactively acquire competitive assets."
He added, "POSCO International is not simply investing with the expectation of rising raw material prices; we are approaching this from the perspective of building a raw material supply chain connected to POSCO Group's secondary battery materials business." The strategy focuses on investing in assets with clear long-term demand that can create synergies within the group’s value chain.
However, Jeong emphasized that while expanding investments in growth sectors such as energy and materials, maintaining capital efficiency and financial soundness remains a principle. He stated that rather than pursuing expansion solely due to market interest, the company will allocate capital to projects with confirmed profitability and investment recovery potential.
Jeong concluded, "We must consider not only growth and strategy but also capital efficiency, cash flow, and investment recovery potential. We plan to actively secure growth opportunities centered around our core business pillars of energy, materials, and food while focusing on investments that can enhance financial soundness and long-term corporate value."
He added, "If POSCO International's corporate value is evaluated differently in five years, it will not be due to the performance of a single business but because energy has created stable cash flow, materials have expanded future growth potential, and food has supported supply chain stability and portfolio balance."
* This article has been translated by AI.
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