[Asia Economy Reporter Jang Hyowon] Enchem, a company producing electrolyte, a secondary battery material, is reportedly planning a large-scale expansion of its production facilities. Accordingly, an analysis predicts significant performance growth this year as well.
Enchem is a company that produces electrolyte, one of the four major battery materials. Since hydrofluoric acid, a hazardous substance, is used during the process, factory licensing procedures are stringent, creating high entry barriers. However, Enchem holds a large idle site of about 330,000 pyeong in the U.S. with completed permits, enabling the most aggressive expansion compared to competitors.
Researcher Kim Kwangjin of Yuanta Securities said, “As demand in the U.S. continues to increase, Enchem’s expansion plan for 2025 is expected to be raised from 225,000 tons to 305,000 tons,” adding, “From 2025, the BlueOvalSK plant will be sequentially operational, and Enchem is the sole electrolyte supplier for the F150 Lightning. Considering the idle site, it is highly likely to maintain its main vendor status.”
Researcher Kim explained, “Even conservatively assuming the current market share of 70%, a total production capacity of 120,000 tons is required,” and “Adding LG Energy Solution’s 20,000 tons, it totals 140,000 tons. Considering the possibility of expanding market share within LG Energy Solution and adding new customers, this is a conservative estimate.”
Along with the expansion of production scale, the internalization of raw materials has also begun to shine. Enchem is pursuing the production of LiPF6, a key raw material for electrolyte, by establishing a joint venture (JV) and signing long-term supply contracts to ensure stable procurement and internalization. In the context of continued spot price increases for LiPF6, long-term contracts and internalization are important for securing margins.
He forecasted, “As of Q4 last year, Enchem procured over 80% of LiPF6 through long-term contracts, and from the second half of this year, it will be possible to procure almost entirely through long-term contracts,” adding, “Direct production through the JV is expected to be possible from 2023, which will further improve the cost structure.”
Accordingly, Enchem’s performance is expected to grow significantly this year. According to an analysis by Eugene Investment & Securities, Enchem’s sales are expected to reach 357.2 billion KRW and operating profit 32.2 billion KRW this year, increasing by 47.5% and 136.6% respectively compared to the previous year.
Researcher Park Jongseon of Eugene Investment & Securities said, “The global secondary battery investment expansion, stable market share maintenance among major customers, and continuous expansion of production facilities to supply new customers are positive factors,” adding, “In particular, with IPO public offering funds, two additional factories will be expanded in China in 2022, which will gradually increase sales to new customers.”
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