Bond spotlight

POSCO: greener steel elsewhere

Written by Rose Choy

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POSCO’s latest bond issuance is an opportunity to evaluate its efforts so far to shrug off a carbon-heavy legacy in favour of a climate-friendly future.

The South Korean steelmaker raised $700mn in new 5- and 10-year green tranches via its holding company, PKX. However, market talk suggests the proceeds will support POSCO Holdings’ growing battery materials segment, rather than moves to decarbonise its steel-making processes. These operations remain heavily reliant on coal-fired blast furnaces and show limited signs of meaningful near-term transition.

For investors, the risks if POSCO chooses not to accelerate its transition are clear. Not only may they be exposed to stranded asset risks as demand for green steel ramps up, they could also see increasing numbers of large investors exclude the company’s bonds from their portfolios on climate grounds – causing spreads to widen further.

As things stand, heavyweights including Norges Bank Investment Management, ATP Group, and Danske Bank have excluded POSCO. More investors could join the list if the credibility of the company’s transition continues to be questioned.

About the author

Rose Choy

Rose Choy

Research Director, APAC

Based in Singapore, Rose has over 20 years’ experience in capital markets, most recently as a Senior PM at Conning Asia, and her research focuses on credit research and analysis on the energy transition in the Asia-Pacific region.

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