[Why&Next] "Waste is a Huge Opportunity"... Samsung, Hyundai Motor, and SK Join the 600 Trillion Won Spent Battery War

Strict Environmental Regulations Raise Entry Barriers, Forming a Monopoly Market Structure
Chinese Government and Companies Quickly Move to Dominate the Market by Focusing on the Used Battery Industry
Domestic Large and Medium-Sized Enterprises Actively Acquire and Invest in Shares of Used Battery-Related Companies

Among the hottest companies in the recent mergers and acquisitions (M&A) market are those in the secondary battery sector, especially companies related to spent battery recycling. As the electric vehicle era fully unfolds, companies with specialized spent battery recycling technologies and local governments have recognized the necessity of establishing systematic battery collection and recycling systems. However, only a very small number of companies in South Korea are engaged in spent battery recycling businesses. This is because the spent battery regeneration business faces high entry barriers due to strict environmental regulations, resulting in a monopolistic market structure.

China Has Been Cultivating Specialized Spent Battery Companies in Each Province for Over 10 Years

To operate in this business, one must secure not only spent battery recycling technology but also numerous environmental permits. Entry itself is not easy. Moreover, Chinese companies, which focused on the spent battery industry long before the battery ecosystem became active, have acquired many small domestic spent battery companies. An industry insider said, "While we had not yet paid attention to the spent battery sector, China, under government leadership, has been nurturing specialized spent battery companies in each province for over 10 years, reaching an unapproachable level today, and has absorbed our companies to acquire related technologies."

As the battery ecosystem becomes more structured, domestic companies are moving urgently. Recognizing the importance of spent battery technology, major domestic electric vehicle and battery companies are swiftly acquiring overseas companies or actively investing in remaining domestic companies to prevent absorption by China.

Spent batteries that have reached the end of their life undergo recycling processes either by remanufacturing battery cells for different purposes during disposal or by extracting rare metals. Reuse mainly involves collecting medium- and large-sized batteries for electric vehicles, inspecting their remaining life and safety, selecting spent batteries above a certain grade, and repurposing them for energy storage systems (ESS), uninterruptible power supplies (UPS), and other uses. Spent batteries that cannot be reused are dismantled and melted to extract raw materials such as cobalt and nickel. These materials are then recycled by being fed back into the cathode material production stage to manufacture new batteries.

Rising Prices of Key Raw Materials and Fierce Competition for Supply Chain Securing

By reusing spent batteries for different purposes or extracting metals from them for new battery production, the battery industry value chain is establishing a virtuous cycle system from production to consumption and disposal. Especially with the spread of electric vehicles, the volume of spent batteries is inevitably increasing, drawing more attention to the spent battery utilization industry. Furthermore, as prices of key raw materials such as lithium, cobalt, and nickel rise and competition to secure supply chains intensifies, the recycling industry is gaining more prominence.

Cases of acquiring companies or purchasing shares related to this sector are also increasing. According to the investment banking (IB) industry, IS Dongseo recently acquired a 78.2% stake in Slovakian battery recycling company BTS Technology for about 37.5 billion KRW. Through the acquisition of BTS Technology, IS Dongseo has laid the foundation for building a global value chain and localization of the spent battery business not only domestically but also internationally. At the same time, it has established a base to proactively respond to the European Critical Raw Materials Act (CRMA) policy alongside European battery manufacturers and electric vehicle makers. Founded in 2016, BTS Technology is a battery recycling specialist with four subsidiaries in Slovakia, Poland, and Hungary. It is currently constructing a dedicated spent battery cell-module pretreatment plant in the Oswa region of Poland, scheduled for completion and operation within the year. It will be capable of processing 12,000 tons of spent batteries annually, equivalent to about 50,000 electric vehicles.

Earlier this year, KPS, a KOSDAQ-listed company, acquired 100% of the shares of spent battery recycling specialist Segiritec from Eumko. Large and medium-sized companies such as Youngpoong Group, SM Group, and Pungjeon Nonferrous Metals participated in the acquisition battle. After fierce competition until the final stages, KPS secured Segiritec. Established in 2010, Segiritec is a spent battery recycling company with a monopolistic profit structure. It is headquartered and operates a factory in Yeongcheon, Gyeongsangbuk-do. The company recycles various spent batteries and waste lead to produce battery raw materials (ingots), essential for the automotive industry, supplying them to renowned domestic and international battery manufacturers.

Not only medium-sized companies but also battery cell companies and large domestic corporations, recognizing the business potential of spent batteries, are increasingly joining the competition. Samsung SDI, in partnership with Samsung C&T and Samsung Venture Fund, has invested in Seongil Hightech, a leading domestic spent battery market company. SK Innovation, with its subsidiary SK On, has also expanded its reach into the spent battery business in various ways. It is building a spent battery value chain with group affiliates such as SK On and SKC (the parent company of SK Nexilis, the world's No.1 copper foil manufacturer) and has established a joint venture (JV) with Seongil Hightech.

Hyundai Motor Group and LG Group are also reportedly exploring M&A opportunities in spent battery recycling companies. Hyundai Glovis plans to operate a formally established spent battery task force (TF) team within the group starting in the second half of this year. It is said to be scouting for companies suitable for M&A to secure post-processing and diagnostic technologies that dismantle collected batteries into individual raw materials. LG Energy Solution has recruited M&A experts from the IB sector, interpreted as an effort to secure talent for equity investments and M&A in promising new business areas such as spent battery recycling.

POSCO and GS Group have declared direct entry into the spent battery market. POSCO HY Clean Metal is conducting its spent battery business by purchasing battery scrap from LG Energy Solution's plant in Poland. Enerma, a subsidiary of GS Construction, has taken its first step into this market by securing recalled battery volumes, such as those from Hyundai's recalled Kona electric vehicle batteries.

A domestic IB industry insider said, "Although the M&A market has recently been sluggish, if we were to pick promising sectors, it would be secondary batteries and related companies," adding, "We are continuously looking for opportunities." Another insider said, "The volume of spent batteries pouring out from electric vehicles will be enormous in the future," and "This spent battery market, once called waste disposal, is expected to create significant opportunities."

Spent Battery Companies Segmented into Total Recyclers and Crushers

Recently, the spent battery market has expanded further as companies have been segmented into total recyclers, which produce recycled materials, and crushers, which only perform physical crushing and shredding. The industry forecasts that the global spent battery market will grow to about 12 trillion KRW by 2030 and up to 600 trillion KRW by 2050. Lee Kang-myeong, CEO of Seongil Hightech, confidently stated, "Green materials, which extract new resources from renewable energy and waste, will become the 'twin engine' of our industry."