Korea copper foil makers on bull run amid demand hopes

South Korean stocks related to secondary batteries, especially shares in cathode and anode materials producers, have rallied on strong growth in the global electric vehicle (EV) markets, reflecting expectations on healthy earnings in the next two to three years.

Copper foil makers’ stocks are expected to outperform even these other materials makers' next year as copper foil supply for secondary batteries is sure to fall short of demand, analysts said. Those shares are also likely to reflect the planned increases in output on capacity expansions from 2024, they added.

SKC Co.’s share on Nov. 19 rose 7.2% on-day to 194,500 won ($164.2) on the main Kospi, the highest since Sept. 29 when it hit a record high of 201,000 won.

The stock already ended up 7.1% on Nov. 18 before the company announced a plan to build a copper foil factory for 900 billion won in Poland, its first European plant to produce the core electric vehicle battery material.

SKC and its battery copper foil-making subsidiary SK Nexilis Co. signed an investment deal with local authorities in Poland to set up the production facility there with an annual capacity of 50,000 tons in the government-led industrial complex in the southeastern city of Stalowa Wola.

The company is scheduled to start construction in the first half of 2022 with a target of commercial operations to begin from 2024. It also plans to expand capacity to 100,000 tons a year.

ILJIN MATERIALS, SOLUS ADVANCED MATERIALS HIT RECORD HIGHS

SKC’s expansion plan boosted other copper foil makers’ stocks Friday as Iljin Materials gained 1.9% to an all-time high of 132,000 won. The day earlier on Nov. 18 its shares surged 13.1% on hopes that Iljin may benefit more from the industry’s growth since it mainly focuses on copper foil. That compares to SKC, the chemical materials maker of the country’s No. 3 conglomerate SK Group, whose business portfolio is diversified. The stock found further support after Morgan Stanley Capital International added it to the MSCI Korea Index.

IlJin has announced that it planned to raise its copper foil capacity by 120,000 tons by 2023, but it has yet to unveil a blueprint for the medium term. But SKC’s aggressive expansion plan may spur Iljin to further increase its capacity, analysts said.

Another copper foil maker Solus Advanced Materials touched a record high of 124,000 won on Nov. 18. Its stock has risen more than 15% since Oct. 15 when HI Investment & Securities said it will supply copper foil to the world’s top EV manufacturer, stoking speculation that the buyer would be Tesla Inc.

SUPPLIERS TO RULE MARKETS IN THE NEXT FIVE YEARS

Copper foil producers are expected to rule the global market in the next five years at least, given surging demand.

Global copper foil for secondary battery demand is forecast to more than triple to 1.59 million tons in 2025 from 450,000 tons this year, according to HI Investment & Securities. Even if the three South Korean producers fully operate at their expanded capacities, they are unlikely to meet half of the total expected demand.


Concerns over competition with Chinese producers are easing as South Korean makers have better technologies. Customers often require thin, large and long copper foil with precise physical specifications. South Korean players are the only ones who can stably supply a massive amount of this kind of specialized product, analysts said.

Capacity expansion is expected to accelerate by 2025, brightening the outlook of South Korean copper foil makers’ stocks. Growth in their capacity increases is forecast to advance to 65% in 2024 from 46% in 2023, while growth in major cathode materials producers’ capacity expansion is predicted to slow to 34% in 2024 from 61% in 2023.

“Copper foil capacity expansion growth in 2024, which will determine their share prices, will accelerate on-year,” said HI Investment & Securities analyst Jung Won-seok. “They are more likely to announce further expansion plans, considering demand in 2025.”

Copper foil makers' valuations are also lower than other battery materials stocks. SKC was seen as the most undervalued since its stock was trading at about mid-to-high 20s times 12-month forward. That compared with shares in cathode and anode materials makers trading at over 70 times. Iljin’s stock topped 50 times on Nov. 18, while Solus Advanced Materials has been trading at around 60 times.

Write to Yun-Sang Ko and Jeong Min Nam at kys@hankyung.com
Jongwoo Cheon edited this article.