Rechargeable battery shares slump to lowest level in a year

Rechargeable battery shares in Korea are continuing their slide, hit by global supply shortages. In addition to the companies that produce completed batteries, core materials shares also took a downturn. 

SLUMPING BY 13 PERCENT MONTH ON MONTH

On Monday, LG Chem Ltd., slid 5.88 percent to finish the day’s trading at 656,000 won ($550.43,) the lowest figure in the last year. The other two household battery producers, SK Innovation Co., Ltd. and Samsung SDI Co., Ltd. also slid 5.22 and 3.82 percent respectively. 

By percentage, LG Chem plummeted 13.46 percent in a month; Samsung SDI by 13.61 percent in the same period. 

The raw material’s value chain is also unstable. In the last month, L&F Corp., Chunbo Fine Chem Co., Ltd., EcoPro BM Co., Ltd., SKC Co., Ltd, ILJIN Materials Co., Ltd., and POSCO Chemical Co. have all slid between 3 to 20 percent. 

The downward trend is led by foreign sell-offs. Foreign investors sold 168 billion won worth of LG Chem, 123.9 billion won worth of SK Innovation, 68.8 billion won worth of POSCO Chemical Co., and 33.8 billion won worth of Samsung SDI. 

The Global X Lithium & Battery Tech ETF (LIT,) which encompasses mostly US and Chinese rechargeable energy stocks, fell 10.32 percent in the past month. In the same period, China’s Contemporary Amperex Technology Co., Limited (CATL), a global giant in lithium-ion battery development and manufacturing, also fell 9.50 percent. 

MULTIPLE FACTORS DAMPENING INVESTOR SENTIMENT

As the chip shortage continues long term, automakers that produce electric vehicles will not be able to meet the market demand.

At the same time, automakers are speeding up their in-house production of batteries. Tesla Inc., Rivian Automotive, Inc., Volkswagen AG, and Toyota Motor Corp. are just a few of the several auto giants pursuing in-house production of rechargeable batteries. 

Early next year, Volkswagen is slated to announce the opening of battery-producing factories in Spain and Eastern Europe. Toyota decided recently that it will invest $1.29 billion into launching a lithium-ion battery factory in North Carolina, US. GM, for its part, has formed a joint venture with POSCO Chemical to process the cathode active materials that are needed in rechargeable battery production. 

Rising raw material prices are also keeping share prices down. 

Hana Financial Investment Co., Ltd. says the prices of lithium and cobalt have been increasing for 21 and 10 straight weeks, respectively. Graphite, necessary in producing anode materials, is facing a supply shortage in China, which produces 70 percent of the world's supplies. 

It is customary for car manufacturers to foot the bill on the increase in materials cost. If it keeps rising, however, it would be hard for automakers to continue to do so. 

Last week, the US Federal Reserve announced it is accelerating its removal of monetary support for the economy due to rising inflation. In a move to cool growth, Washington officials have said they expect to hike interest rates three times next year. 

The rise in interest rates will negatively affect rechargeable battery shares, which typically have high price-to-earnings ratios.

SUPPLY WOES IN KOREA TO EXTEND THROUGH FEBRUARY

In Korea, concerns over supplies will likely rise over LG Energy Solution, Ltd.’s upcoming IPO and year-end taxations on major shareholders. 

HI Investment & Securities Co. Ltd. analyst Jung Won-seok cautioned investors that this may not be the bottom. “Fund managers and institutional buyers must balance their investments ahead of LG Energy Solution’s listing as its market capitalization reaches 70 trillion won,” he advised.

Write to Ko Yun-Sang at kys@hankyung.com
Jee Abbey Lee edited this article.