POSCO Group is considering acquiring shipping giant HMM as part of efforts to diversify its portfolio beyond steel.

According to the investment banking industry, the company has formed a group of advisers, including from Samil PwC and Boston Consulting Group, to review the possibility of acquiring HMM.

The potential acquisition is seen as significant, signaling POSCO’s bid to secure new growth drivers as it restructures in response to sluggish performances in its core businesses.

POSCO has prior experience in the shipping sector, acquiring and running Geoyang Shipping. However, it stepped away when it sold Geoyang to Hanjin Shipping in 1995.

The company currently spends about 3 trillion won ($2.16 billion) annually on logistics, which covers importing raw materials such as metallurgical coal, steel products and battery materials, as well as exporting finished goods.

By buying a shipping company, POSCO is expected to stabilize procurement and exports while mitigating external risks such as surging freight rates and supply chain disruptions.

As part of its future strategy, HMM has been expanding its bulk carrier fleet, which aligns with POSCO’s needs for raw material imports. Acquiring HMM would not only cut logistics costs but also enhance the overall supply chain efficiency across the group.

HMM’s major shareholders are Korea Development Bank (KDB), which holds 36 percent, and Korea Ocean Business Corp. (KOBC), which holds 35.7 percent. POSCO is expected to acquire KDB’s stake to become the largest shareholder while either co-managing the company with KOBC or pursuing an independent strategy.

The company told local news outlets that its current review of HMM’s business is not assuming an acquisition, but intended to assess whether there are areas that could generate synergy with the group.

Since last year, POSCO has been accelerating its divestment of non-core assets to improve financial stability and build up cash reserves to invest in new businesses that will drive growth.

However, with the company still grappling with issues such as overcapacity from China, weak domestic demand and U.S. tariffs on its steel business, along with stagnation in the secondary battery sector locally and in the United States, some experts caution that any expansion into the shipping business should be carefully weighed.

KB Securities analysis indicated that POSCO has the financial capacity to consider the deal, with 16.5 trillion won in cash equivalents and a net debt of roughly 10.9 trillion won as of Q2. However, they noted that a potential acquisition could raise concerns about capital efficiency and financial risk, given the expected limited synergy with POSCO’s current core businesses.

They cautioned that this year’s planned capital expenditures of 8.8 trillion won, combined with downturns in the steel and battery sectors and potential cash outflows from last month’s POSCO E&C electrocution accident, could make the acquisition an immediate financial burden.
Source: The Korean Times