Secondary Battery Stocks Rest While Motor Stocks Surge... Retail Investors Prepare for Rare Earth Weaponization

EG, Samhwa Electronics, Union, and Others' Stock Prices Surge
Attention on Ferrite-Related Stocks Amid Expectations for Rare Earth Magnet Alternatives

Shares of secondary battery material companies, including EcoPro BM, L&F, Cheonbo, and Daejoo Electronic Materials, are showing signs of correction. Meanwhile, a new theme is emerging. As China shows signs of weaponizing rare earth resources, related stocks have continued their upward march.

Rare earth mines in China.

According to the Korea Exchange, on the 25th, EcoPro BM closed at 253,500 KRW, down 6.46% from the previous day. L&F fell 5.4%, and Cheonbo dropped 14.9%. Overall, as secondary battery companies showed weakness, the KOSDAQ index also fell by nearly 2%.

The KOSDAQ index declined for four consecutive trading days starting from the 20th. Amid the sluggish KOSDAQ market, EG's stock price surged to the upper price limit. EG supplies iron oxide to ferrite companies. With the expansion of the electric vehicle market, expectations that ferrite demand will increase and thus iron oxide sales will rise appear to have influenced the stock price. Most buy and sell orders were executed through Kiwoom Securities, which is mainly used by individual investors.

Ferrite magnets are materials whose magnetic properties do not easily change according to the direction and strength of the magnetic field and are generally known as permanent magnets. They refer to ceramic products mainly composed of iron oxide. They are commonly used in motors for home appliances as well as motors that improve convenience, safety, driving performance, and fuel efficiency in automobiles.

As President Yoon Suk-yeol embarked on a state visit to the United States, China expressed discomfort. Mao Ning, spokesperson for the Chinese Ministry of Foreign Affairs, said in a briefing, "We urge relevant governments and companies to distinguish right from wrong, jointly safeguard the multilateral trade system, and maintain the stability of global industrial and supply chains."

The Chinese government is reportedly considering weaponizing rare earth resources necessary for advanced industries such as semiconductors and electric vehicles. The dependence on China for artificial graphite, lithium hydroxide, nickel, cobalt, manganese hydroxide, and other materials needed to manufacture secondary batteries exceeds 90%. Permanent magnets, which determine the performance of electric vehicle motors, are also imported from China.

The government has set plans to foster the rare earth recycling industry and replace materials with relatively lower dependence to prepare for China's "resource weaponization" moves. The goal is to create an eco-friendly and stable rare earth supply chain and diversify the supply chain that is heavily reliant on China.

Electric vehicle manufacturers are considering ferrite as an alternative material to rare earths used in motors. It is gaining attention as a substitute for rare earth magnets. On this day, Samhwa Electronics, Union, and Union Material, which surged sharply in the domestic stock market, are classified as ferrite-related companies. The stock prices of listed companies included in the rare earth theme, such as Hankook Refractories and Dongkuk R&S, also rose.

A financial investment industry official said, "Currently, as the government gets closer to the United States, Japan, and others, it is unclear how China will retaliate," but added, "However, although the rare earth theme has been rampant in the past, it remains to be seen whether the related companies' actual performance has improved."