Battery Material Industry Faces Growing Uncertainty, Actively Working on Countermeasures

The prevailing opinion is that the price of lithium, a key raw material for electric vehicle batteries, is unlikely to rise significantly this year. With the decline in raw material prices, there are increasing expectations that the outlook for battery material companies will also remain bleak. In response, battery material companies are focusing on strengthening their superior technology and stable supply capabilities to overcome the decline in profitability caused by falling mineral prices. According to Korea Resources Information Service (KOMIS) on the 13th, the price of lithium was 72 yuan per kilogram as of the 9th. Lithium prices began to decline in the fourth quarter of 2022 due to a slowdown in global electric vehicle demand. The price had risen to 581.5 yuan per kilogram in November 2022, but it has been falling due to supply oversupply from China and the electric vehicle demand stagnation period, known as the "electric vehicle chasm." There is growing concern that the inauguration of Donald Trump's second administration could put pressure on lithium prices. Since President-elect Trump is not particularly favorable toward electric vehicles, there are speculations that the recovery of the electric vehicle industry during his term may not be clear, which could impact the demand for lithium. As a result, securities analysts are predicting that domestic battery material companies such as EcoPro BM, L&F, and POSCO Future M will report poor results in the fourth quarter. The main cause is identified as the "lagging effect" due to falling raw material prices. The lagging effect refers to the situation where products made with expensive raw materials are sold at relatively lower prices. According to earnings estimates from financial information provider F&Guide, EcoPro BM is expected to record annual sales of 2.8692 trillion KRW and an operating loss of 38.9 billion KRW for the previous year. After posting a total of 10.6 billion KRW in profits in the first and second quarters of last year, EcoPro BM incurred an operating loss of 41.2 billion KRW in the third quarter. It is expected that the company will see a smaller loss in the fourth quarter, and an annual loss is anticipated to continue. L&F recorded a cumulative operating loss of 360.4 billion KRW for the first to third quarters, surpassing its expected annual operating loss of 220.1 billion KRW for 2023. The company is forecasted to incur an operating loss of 94.2 billion KRW in the fourth quarter. There is widespread consensus that POSCO Future M will also face losses. The company is expected to record an operating loss of 4 billion KRW in the fourth quarter. Battery material companies are actively seeking cost reduction measures, as price reductions in electric vehicles are considered a crucial factor for boosting sales volume. The strategy to secure operating profit margins ultimately points to the need for cost reduction through the diversification of raw material supply chains. Additionally, the industry plans to focus on reducing equipment investment and securing financial strength. This is seen as an effort to maintain stable management in an uncertain market environment. EcoPro aims to stabilize mineral prices by establishing an integrated production joint venture in Indonesia, a resource-rich country, in collaboration with China's GEM. The venture will cover the processes of refining, precursor production, and cathode materials. EcoPro BM is reportedly reducing its equipment investment scale from 15 trillion KRW to around 10 trillion KRW and postponing the completion schedule for its cathode material factory. POSCO Future M plans to focus on improving its financial structure by halting investments in joint ventures and selling some of its assets. Additionally, the industry sees resolving the uncertainty surrounding North American market policies as a key factor for long-term growth. The degree of recovery in EV demand and the potential for gradual recovery in raw material prices are considered prerequisites for long-term growth. An industry insider stated, "Battery material companies are undergoing restructuring through the withdrawal from lithium businesses and reduction of staff, but lithium prices are still on a downward trend." They added, "It is expected that battery material companies will generally record losses in the fourth quarter as well." He continued, "Nonetheless, there will be certain points within the electric vehicle battery value chain where downward rigidity exists." He added, "The potential of the electric vehicle market remains large, and once the current chasm is overcome, the market will grow and enter a maturation phase." ChatGPT를 사용하여 번역한 기사입니다.