[Into the Stocks] Korea Zinc Forms Strategic Alliance with Hanwha... Stock Price Soars

[Asia Economy Reporter Kwon Jae-hee] As Korea Zinc restructures its business, which had experienced performance fluctuations due to international raw material prices, its stock price has soared. Korea Zinc, the largest non-ferrous metal smelting company in South Korea, primarily focuses on the production and sale of zinc and lead, inherently facing limitations where both performance and stock price are influenced by raw material prices. Korea Zinc has embarked on improving its business structure as a breakthrough. The recently announced strategic alliance with Hanwha, ranked 7th in the business world, is also interpreted as part of this effort.

According to the Korea Exchange on the 11th, Korea Zinc's stock price rose 14.90% over the past four trading days (August 5?10). On the morning of the 11th, it rose more than 3%, easily surpassing 580,000 won. Until now, Korea Zinc's stock price had steadily declined since reaching a peak of 661,000 won on April 20. This was due to the recent rise in U.S. benchmark interest rates and concerns over economic slowdown, which led to a drop in industrial metal prices. Korea Zinc, which earns fees by smelting zinc, sees profits decrease when zinc prices fall. The zinc futures price on the London Metal Exchange dropped from $4,497 per ton on April 19 to $3,571 on August 10. Consequently, despite second-quarter operating profit (381.4 billion won) exceeding market expectations, the stock price struggled to gain momentum amid securities firms’ reports forecasting a decline in Korea Zinc’s profits in the second half of the year.

The recent rise in Korea Zinc’s stock price is attributed to the successful strategic move by Vice Chairman Choi Yoon-beom, the third-generation successor. Vice Chairman Choi unveiled a blueprint to invest about 10 trillion won by 2030 to transform the business structure into secondary batteries, renewable energy, and resource circulation businesses. Korea Zinc has established a joint venture with LG Chem to produce precursors, a secondary battery material, acquired Australian renewable energy company Epuron, and purchased U.S. electronic waste recycling firm Ignio, accelerating efforts to secure new growth engines.

The recently announced alliance with Hanwha is also part of this strategy. To raise investment funds, Korea Zinc decided on a third-party allotment capital increase worth 471.7 billion won. The purchaser is Hanwha Impact’s U.S. subsidiary Hanwha H2 Energy USA. Through this capital increase, Hanwha will acquire a 5% stake in Korea Zinc. Korea Zinc plans to use the secured funds to expand secondary battery material (copper foil) production and to pay for capital increases in its renewable energy subsidiaries.

Park Hyun-wook, a researcher at Hyundai Motor Securities, analyzed, "Korea Zinc has secured resources for new growth investments through the recent third-party allotment capital increase and established a strategic partnership with the Hanwha Group. The cash reserves held by Korea Zinc and its accumulated smelting and metal recovery technologies from existing businesses are expected to create synergy in the secondary battery material business, which can enhance corporate value in the long term."