[비즈한국] Criticism is mounting against POSCO E&C (formerly POSCO Construction) due to a series of industrial accidents. Although POSCO Group Chairman Chang In-hwa is striving to improve safety management by forming a dedicated task force (TF), public sentiment toward him remains cold. Furthermore, Chairman Chang has yet to deliver any remarkable financial performance. If his tenure continues to be marred by various controversies and poor results, the public opinion surrounding him is expected to worsen further.
Continuous fatal construction accidents
Fatal workplace accidents are occurring one after another at POSCO E&C. This year alone, there have been four fatal industrial accidents at the company: a fall at an apartment construction site in Gimhae in January, a collapse at the Shinansan Line construction site in Gwangmyeong in April, a fall at a mixed-use residential building site in Daegu, and a crushing accident at a highway construction site in Hamyang/Ulsan in July. Subsequently, on August 4, a migrant worker from Myanmar fell into a coma at a POSCO E&C construction site following an accident suspected to be electrocution. The worker regained consciousness on August 12.
Political circles are criticizing POSCO E&C. On the 5th, the Ministry of Employment and Labor stated, "Minister of Employment and Labor Kim Young-hoon has expressed strong regret," adding, "We plan to review the safety management innovation plan presented by POSCO Group from the perspective of whether it is a substantive plan to prevent the recurrence of serious disasters, and we intend to order more fundamental countermeasures."
Presidential Spokesperson Kang Yu-jung announced on the 6th, "President Lee Jae-myung has ordered a thorough verification of whether POSCO E&C is complying with manuals, a detailed investigation into whether these were preventable accidents, and for all legally possible measures to be found and reported, including the revocation of construction licenses and bans on public bidding." President Lee instructed that even additional sanctions, such as a punitive damages system, be reviewed and reported to ensure industrial accidents are not repeated.
If POSCO E&C fails to present credible measures, its construction license could be revoked. If the situation drags on, performance is also expected to plummet. On the 7th, POSCO E&C already announced that it would not participate in the consortium for the Gadeokdo New Airport site preparation project. This decision follows its plan to temporarily suspend new order activities in the infrastructure sector until safety is secured.
It is not as if the POSCO Group has remained idle. A 'Group Safety Special Diagnosis TF Team' directly under Chairman Chang In-hwa was launched on August 1. POSCO Group explained, "The TF will include external experts from academia and institutions, as well as employees, labor unions, and various stakeholders, to diagnose the current status of the group's overall safety management system and derive tasks for improvement." Additionally, POSCO Holdings and POSCO sent emails to executives and staff at the department head level or higher, recommending a temporary return to a five-day workweek from the existing four-day workweek every other week.
Although POSCO Group stated that the labor union would participate in the TF, the union claims it had not heard anything about it. The POSCO Labor Union stated in its newsletter, "There was not even any explanation or guidance (regarding participation in the TF), and this is a false report meant to deflect immediate criticism," adding, "While the business entity POSCO is making efforts to build a safety culture based on labor-management trust, we hope that this situation where Chairman Chang In-hwa does not recognize the union will never happen again."
In response, Chairman Chang In-hwa visited the Gwangyang Steelworks in person to appease the union. On August 9, Chairman Chang also visited the Gwangmyeong-Seoul highway construction site to preside over a TF meeting. The labor union participated in the meeting that day.
Poor performance in secondary batteries expected to continue
While Chairman Chang In-hwa is trying his best to come up with measures, failure to restore his relationship with the Lee Jae-myung administration could act as a negative factor for future management activities. His predecessor, former POSCO Chairman Choi Jeong-woo, was famously "passed over" by POSCO during the overseas tours of former President Yoon Suk-yeol, failing to accompany him even once.
Chairman Chang In-hwa has not produced any remarkable results. POSCO Holdings' revenue fell by 5.15% from 18.51 trillion won in the second quarter of last year to 17.556 trillion won in the second quarter of this year. During the same period, operating profit dropped by 19.28% from 752 billion won to 607 billion won. In particular, the secondary battery business, which Chairman Chang emphasized after taking office, has not seen proper results. Revenue for POSCO Future M003670, the subsidiary in charge of the group's secondary battery business, fell from 915 billion won in the second quarter of last year to 661 billion won in the second quarter of this year.
The securities industry expects the steel market to recover in the second half of this year. However, there is a skeptical view regarding the secondary battery business. As the EV "chasm" (a temporary slowdown in demand) phenomenon is prolonged, observers believe it is impossible to guarantee when the industry will recover. Kwon Ji-woo, a researcher at Hanwha Investment & Securities, analyzed, "The visibility for earnings improvement in the steel sector is increasing in the second half, but the secondary battery materials sector is expected to remain in a slump for the short term."
Kim Yoon-sang, a researcher at iM Securities, forecasted POSCO Holdings' third-quarter performance, explaining, "The performance of the head office (POSCO) will improve slightly due to the effect of increased sales volume," but added, "The underperformance of subsidiaries, such as the possibility of additional loss recognition for POSCO E&C's domestic and international projects and the continued deficit of secondary battery material subsidiaries, will persist for the time being."
Chairman Chang In-hwa's term ends in March 2027. In effect, next year is his last chance to demonstrate results.
POSCO Holdings is aiming for earnings improvement in the second half through stronger competitiveness. A POSCO Holdings official stated, "In the steel business, we plan to strengthen our fundamental competitiveness by expanding the development of high-value-added products and diversifying our product portfolio, and we will focus on developing commercial technologies for 'hydrogen reduction steelmaking,' a future steelmaking technology." They added, "For the secondary battery materials business, we are focusing all our efforts on enhancing competitiveness in preparation for the full-scale opening of the EV market after the chasm period, through technological competitiveness enhancement such as the development of direct lithium extraction technology, the internalization of core raw material supply chains, and the strengthening of financial soundness through paid-in capital increases."