[SMM Analysis] POSCO Holdings Completes Phase 2 Upstream Process in Argentina

• Completion scope: Both Phase 1 and Phase 2 are divided into upstream and downstream segments. What was completed this time is the upstream process segment of Phase 2, covering brine extraction, evaporation and concentration through to the intermediate product stage.
• Investment and capacity: Total investment for Phase 2 is approximately $954 million, with a designed annual capacity of 23,000 mt of lithium carbonate. Phase 1 has an annual capacity of 25,000 mt (on an LCE basis), completed in 2024 and in commercial production. Combined, POSCO's commercial capacity in Argentina is 48,000 mt/year.
• Downstream integration: Phase 1 product is converted into lithium hydroxide at the General Güemes industrial park processing line in Salta Province. That plant, which began operations in October 2024 with an investment of approximately $302 million, is Argentina's first commercial lithium hydroxide plant. Lithium carbonate produced from Phase 2 is planned to be shipped to the Yulchon Industrial Park in South Jeolla Province, South Korea, where it will be converted into approximately 25,000 mt/year of battery-grade lithium hydroxide at a downstream line scheduled for completion in 2027. On a molecular weight basis, 23,000 mt of lithium carbonate corresponds to approximately 25,000 mt of lithium hydroxide monohydrate, and the two are stoichiometrically consistent. Once this line comes online, POSCO will have a total salt lake-based lithium hydroxide capacity system of approximately 50,000 mt/year.
• POSCO's plans extend further: the company intends to build Phase 3 and Phase 4, each with 25,000 mt of lithium carbonate capacity, targeting a 100,000 mt/year salt lake lithium production system by 2033, with products positioned to serve the energy storage (ESS) and LFP battery markets. On the day of completion, POSCO Argentina signed a memorandum of understanding with the provincial governments of Salta and Catamarca, under which the two provinces will provide cooperation in administrative support and permitting.

I. Resource Endowment and Process Route
Resource conditions. The average lithium content of brine at the Hombre Muerto salt lake is approximately 921 mg/L, which public sources describe as the highest concentration among existing salt lakes in Argentina, though lower than Chile's Atacama salt lake globally. Deep brine extraction depths are reported at 450 to 700 meters depending on the source. POSCO first acquired mining rights in 2018 and expanded its mining rights area in 2023, with cumulative controlled area of approximately 287 square kilometers and evaporation ponds covering approximately 8.92 square kilometers. Resource definitions require clarification. The company discloses approximately 15 million mt of lithium carbonate equivalent (LCE), equivalent to roughly 2.8–3 million mt of lithium metal. Resources and recoverable reserves are different concepts, and assessments should be based on public technical reports (NI 43-101 or JORC standards).

Differences in process routes. Phase 1 uses Posco's proprietary electrodialysis selective lithium extraction technology, developed in-house since 2010: it selectively extracts lithium, phosphoric acid and sulphuric acid can be recovered and recycled, sodium hydroxide consumption is relatively low, and it first produces a lithium phosphate intermediate product, which is then converted to lithium hydroxide at General Güemes. If Phase 2 does adopt a more mature commercial process, the reasonable explanation is that a high-altitude, remote site demands higher operational reliability: employees at the site work on rotating shifts of one to two weeks, daily evaporation in winter is about half that of summer, and full shutdowns are required when wind speeds exceed 100 km per hour. Under these conditions, the contribution of process maturity to the certainty of reaching full production may outweigh that of technological advancement itself. In addition, Posco is adding a fourth backup line alongside the existing three production lines to mitigate the decline in concentration efficiency during winter.

II. Financing and institutional arrangements
In 2026, the project underwent two changes on the capital side:

RIGI (Large Investment Incentive Scheme). Before the South Korea–Argentina summit in July, Posco Argentina became the first South Korean enterprise approved for Argentina's RIGI. Public documents show that the Phase 2 lithium carbonate project has a computable investment amount of approximately $207.9 million, and the scheme includes total tax benefits exceeding $900 million over 30 years, covering corporate income tax reductions and tariff exemptions.

IDB Invest financing. In August, an arrangement of up to $700 million was approved, comprising a $250 million Class A loan, with plans to mobilise up to $450 million from international financial institutions and commercial capital, explicitly earmarked for the development, start-up, and capacity ramp-up of the two plants. The institution estimates that the two plants will have annual exports of approximately 48,000 mt after reaching full production.

The significance of these two arrangements lies on two levels: first, Argentina's long-standing macro and foreign exchange fluctuation risks are partially hedged through long-term institutional arrangements, helping to reduce the project's cost of capital; second, the fact that multilateral financial institutions are providing funding at the "start-up and ramp-up" stage rather than the exploration or construction stage indicates that their risk assessment framework already treats this project as operational-phase asset management.

III. Conclusion
This marks a period milestone in the construction of Posco Argentina's Phase II upstream capacity, rather than a production realization milestone. The 48,000 mt/year figure represents designed capacity, and the realization of its economic value will depend on the actual operating rate, unit cost, and product qualification rate during subsequent operations.

It is recommended to track and verify progress against the following four indicators:

• Progress of evaporation pond filling for Phase II (continuously observable through publicly available satellite imagery, serving as an externally verifiable indicator);
• Production volume, purity, and unit energy consumption data for the first batch of Phase II products, with particular attention to actual yield after the nine-month concentration cycle;
• Whether Lvchuan's downstream production lines can be completed on schedule by 2027 and take on Phase II intermediate products;
• Changes in revenue and operating profit of the Argentina lithium business in the company's periodic reports, to observe the disclosure basis for unit costs.

Until the above indicators become publicly available, a relatively wide confidence interval should be maintained for both project progress and economic viability: it is neither appropriate to linearly extrapolate production from the completion milestone, nor to dismiss the project's feasibility based on delays in pond filling progress—the continuous operating record of Phase I and policy support from both countries remain substantive grounds supporting its eventual attainment of full production.