S.Korea’s battery material exports double to $10 bn

South Korea’s battery material exports more than doubled to exceed overseas sales of electric vehicle cells last year, helping the country’s major producers such as EcoPro BM Co. and POSCO Chemical Co. enjoy strong earnings.

Exports of cathode materials, key ingredients for lithium-ion batteries, surged to a record high of $10.2 billion in 2022 from $4.4 billion in the previous year, according to customs data on Thursday.

On the other hand, exports of lithium-ion batteries for EVs rose 14.4% to $6.6 billion. The batteries’ exports have been reporting double-digit growth since 2019 thanks to the rapid growth in the eco-friendly vehicles.

The strong exports of the materials came as POSCO Chemical signed a 13 trillion won ($10.5 billion) supply deal with General Motors Co. in July last year. In 2021, EcoPro BM, the world’s No. 2 cathode maker, inked a 10 trillion won contract with South Korean SK On Co., the world’s fifth-largest battery maker in 2021.

South Korea’s cathode makers are likely to win more deals this year as global automakers and battery makers are trying to stably procure cell materials to secure competitiveness in the global EV market.

The trend is expected to provide those material suppliers with negotiation power when they deal with EV and battery makers for supply contracts, industry sources said.

“The dominance in the material industry will allow producers in the sectors to control the competitiveness of the overall battery value chain,” said one of the sources in Seoul.

Global battery demand was forecast at 916 gigawatt-hours (GWh) this year, far outpacing an estimated supply of 776 GWh, according to market research firm SNE Research.

CAPACITY EXPANSIONS

South Korean battery materials makers are expanding facilities to raise capacity at home and abroad, especially in North America where the global EV industry is rushing to set up plants to benefit from tax credits in the US, the world’s third-largest market of the eco-friendly automobiles.

POSCO Chemical and GM August last year already broke ground for a cathode factory in Canada, while EcoPro BM is set to build a plant there in a partnership with the carmaker and SK On.

The Biden administration will require a certain percentage of critical minerals used in EV batteries in the US or from its free trade partners to be eligible for the EV tax credit of up to $7,500 per unit, according to the Inflation Reduction Act. The government will also provide the credits only to EVs equipped with batteries whose parts are made in North America.

South Korea’s battery makers – LG Energy Solution Ltd., SK On and Samsung SDI Co. – are poised to ramp up production with their combined output expected to surge to 442 GWh by 2025 from 39 GWh in 2021. Their total market share in the US was forecast to more than double to 69% by 2025 from 26.5% last year, according to Yuanta Securities Korea.

Such a boom is predicted to ramp up the profits of both battery and material makers. The total operating profits of the country’s three largest battery material manufacturers – EcoPro BM, POCO Chemical and L&F Co. –, as well as the top three cell makers, are forecast to jump by more than 100% to 6.5 trillion won this year from an estimated 3.2 trillion won in 2022, according to analysts.

MADE IN KOREA

South Korean cathode makers have been producing all of the material, which makes up about a half of total battery costs, in South Korea. EcoPro BM is manufacturing 180,000 tons of cathode a year in South Korea and EcoPro EM, its joint venture with Samsung SDI, is making 54,000 tons. POSCO Chemical is producing 105,000 tons.

They import minerals for cathodes, such as lithium and nickel, to produce the cell ingredient and supply it to overseas plants of battery producers including LG Energy, the world’s No. 2 player, and Samsung SDI.

Cathode sales to Hungary and Poland accounted for 19.2% and 19% of total overseas sales of the battery material last year, respectively, although China, the leading global EV market, was the top customer of South Korean cathode, making up 41.4%, according to customs data.

LG Energy is producing batteries in Poland, while Samsung SDI is operating a plant in Hungary.

Write to Kyung-Min Kang at kkm1926@hankyung.com
Jongwoo Cheon edited this article.