POSCO Group Chairman Chang In-hwa, second from right, inspects POSCO Future M's anode materials plant in Sejong in this May 21 photo. Courtesy of POSCO Holdings

POSCO Future M has delayed and canceled its planned investments to improve profitability amid a lingering slump in the rechargeable battery industry caused by a slowdown in global demand for electric vehicles (EVs).

Last Wednesday, POSCO Future M said in its regulatory filing that it decided to stop considering investing in the joint construction of a precursor factory in Pohang, North Gyeongsang Province, with China's Huayou Cobalt.

The decision came a year and four months after the two companies signed a memorandum of understanding on a 1.2 trillion won ($895 million) investment to build the factory by 2027.

Although some industry insiders attributed the decision to Washington's designation of China as a foreign entity of concern, which makes it ineligible for consumer subsidies in accordance with the U.S. Inflation Reduction Act, POSCO Future M cited uncertain profitability as the reason.

Last month, the battery materials firm decided to sell its entire 51 percent stake in P&O Chemical to OCI, which currently holds the remaining 49 percent stake in the joint venture.

P&O Chemical was founded in 2020 as a joint venture between POSCO Future M and OCI to supply the battery materials firm with pitch, which is used to coat anode materials.

POSCO Future M said that its divestment from the joint venture is intended to help it focus more on the production of cathode and anode materials.

However, there is speculation that POSCO Future M may scrap its 500 billion won investment to build an anode materials plant in Pohang by 2025, although the company said that nothing has been decided yet.

The capacity utilization rate of its existing anode materials plant has also fallen to 40 percent this year from 50 percent in 2023, 60 percent in 2022 and 70 percent in 2021, according to the Korea Institute for Industrial Economics & Trade.

Additionally, POSCO Future M adjusted its estimated volume of cathode materials sales this year to 67,000 tons from 72,000 tons, as it decided to reduce its capital expenditures to 2.1 trillion won from 2.8 trillion won.

The battery materials firm's shrinking investments are seen as contradicting POSCO Group Chairman Chang In-hwa, who has denied speculation that he will shift the group's focus to the flagship steelmaking business from battery materials production, which had been touted as the group's new growth engine.

"The group will not reduce its investments in the battery materials business, as it is necessary to transition to EVs," Chang said in May, when he visited POSCO Future M's R&D facility and anode materials plant.