[Complete Battery Mastery]⑩ China Controls 85%, No K-Battery Without Precursor Self-Reliance

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Expectations are rising ahead of the listing of Ecopro Materials on the 17th. Ecopro Materials, a subsidiary of Ecopro, one of Korea's leading battery material companies, specializes in producing precursors. The company's final public offering price was set at 36,200 KRW. The expected market capitalization after listing is approximately 2.5 trillion KRW.

The four key components of secondary batteries are cathode materials, anode materials, electrolytes, and separators. Precursors refer to the substances that serve as raw materials for cathode materials. When lithium-ion-containing substances (lithium oxides) are added to precursors, cathode materials are produced. Ecopro Materials manufactures precursors and supplies them to Ecopro BM, a cathode material specialist within the same group.

Until now, domestic companies have imported most of their precursors to secure price competitiveness in the global market. According to market research firm QY Research Korea, the domestic self-sufficiency rate for precursors was only 26% as of 2021. Most imports come from China. According to the Korea International Trade Association, China accounted for 97.5% of precursor imports from January to May 2023. The trade deficit for precursors in the first half of 2023 was $2.17 billion, with 97% of that deficit occurring with China.

The situation is expected to change going forward. Due to the implementation of the U.S. Inflation Reduction Act (IRA) and the spotlight on battery supply chain issues, internalizing precursor production has emerged as an important task. Investments in precursors by domestic companies other than Ecopro Materials are also surging.

Precursors Precede Cathode Materials

Precursors are unfamiliar terms to the general public. The English word 'Precursor' combines the prefix 'pre,' meaning 'before,' with 'curs,' meaning 'to run,' and the suffix 'or,' meaning 'person.' Originally meaning 'forerunner,' in technical terms it refers to a substance that precedes the creation of another substance in a chemical reaction. The Sino-Korean term 전구체 (前驅體) literally means 'a substance that runs ahead,' directly translating the English 'precursor' into Chinese characters. Precursors are used not only in chemistry but also in semiconductor and bio fields. For example, 'the precursor of protein is amino acid.'

In secondary batteries, cathode materials mainly influence battery capacity and average voltage. Cathode materials are core materials accounting for about 40% of the cost of lithium-ion batteries. Precursors make up 60-80% of the cost of cathode materials. Consequently, precursors account for about 30% of the battery cost.

Cathode materials are made by adding metals such as nickel, cobalt, and manganese to lithium oxides that contain lithium ions. The compound mixing these raw materials is the precursor. In other words, the substance before adding lithium is called the precursor.

Screenshot of Eco & Dream homepage

For ternary (NCM, NCA, etc.) lithium-ion batteries, which domestic companies mainly focus on, precursors are made by mixing nickel, cobalt, manganese, aluminum, and others. Nickel mainly affects energy density, cobalt and manganese affect stability, and aluminum influences output. For LFP (lithium iron phosphate) batteries, which Chinese companies mainly produce, precursors consist of phosphates and iron.

The most commonly used method to produce precursors is co-precipitation. Co-precipitation refers to the phenomenon where one substance precipitates together with another during precipitation.

Taking NCM (nickel, cobalt, manganese) cathode precursor as an example, first, key metals such as nickel, cobalt, and manganese are dissolved to create a metal solution. Then, complexing agents and regulators are added to the metal solution, the pH is adjusted, and the mixture is stirred. During this process, precipitation occurs through reaction and agglomeration. The precipitated material is filtered, washed, and dried to produce the precursor.

Cathode material companies take these precursors and manufacture cathode materials. The manufacturing process varies by company. The diagram below shows the NCA cathode material manufacturing process: first, a precursor composed of nickel (Ni) and cobalt (Co) is coated with aluminum (Al), then lithium hydroxide (LiOH) is added to produce NCA cathode material.

The second method adds lithium hydroxide to a precursor initially composed of nickel, cobalt, and aluminum to make NCA cathode material. The third method shows manufacturing NCA cathode material by adding aluminum oxide and lithium hydroxide to a nickel and cobalt precursor.

How companies coat and heat-treat to produce high-performance cathode materials is their technological capability and competitive edge.

Precursors are classified by particle size into large particle size and small particle size. Large particle size refers to particles measuring 10-20 micrometers (μm), and small particle size refers to particles 5 μm or smaller. Smaller particles can store more energy and have increased contact area between particles, enabling faster electrochemical reactions. Usually, a mixture of cheaper large and small particles is used, with small particles filling the gaps between large particles.

Precursors are also divided into single crystal and polycrystalline types. Single crystal precursors are preferred for producing high-capacity, high-performance batteries. Polycrystalline precursors tend to break during rolling (roll pressing) in the battery production process and have many internal pores, reducing density. The single crystal structure prevents cracking during repeated charging and discharging, which can extend battery life.

Recently, technologies to produce cathode materials directly without precursors are also being researched. This can reduce harmful substances generated during precursor manufacturing and lower production costs.

Korean Companies Moving Toward Self-Reliance

As the battery market rapidly expands, the precursor market is growing alongside it. According to market research firm Credit Solutions, global precursor demand is expected to grow from 1.418 million tons in 2023 to 5.263 million tons in 2027, with an average annual growth rate of 30%. Business Insight Research forecasts the global precursor market size to grow from $5.1896 billion (about 6.7983 trillion KRW) in 2021 to $48.33984 billion (63.3251 trillion KRW) by 2031.

Currently, China dominates the global market. The battery industry estimates that China occupies over 80% of the global precursor market. Market research firm 24 Chemical Research analyzed that China produces 85% of the world's precursors, followed by Korea (9%) and Japan (6%).

Regarding high-nickel precursors, which domestic companies focus on, the global number one precursor company in 2022 was China's CNGR (Zhongwei), with an annual production capacity of 160,000 tons and a 19.8% market share. Following are China's GEM (Greenmei, 110,000 tons, 13.6%) and Brunp, a subsidiary of China's CATL (90,000 tons, 11.1%), sweeping the top three spots. Additionally, BASF-Toda, a joint venture between Germany's BASF and Japan's Toda (74,000 tons, 9.2%), and China's Huayou Cobalt (70,000 tons, 8.7%) are in the top five. Ecopro Materials produces 28,000 tons annually, holding a 3.5% market share and ranking eighth.

Other domestic companies include POSCO Future M, L&F, Cosmo Advanced Materials, Eco & Dream, and LG Chem, while Belgium's Umicore and Japan's Tanaka Chemical are also active.

Korean companies have relied heavily on imports for precursors but are now expanding production as the battery market grows. Especially, the U.S. IRA excludes electric vehicles using Chinese materials from subsidies, making precursor internalization a critical issue.

Ecopro Materials, which is going public this time, aims to become the world's fifth-largest precursor company with a 7.5% market share by securing a production capacity of 210,000 tons by 2027. POSCO Future M had a production capacity of 15,000 tons in 2023 and plans to expand it to 440,000 tons by 2030 to increase internalization rates.

LS Group has started construction of a precursor manufacturing plant in a national industrial complex with L&F. The investment scale is 1.8402 trillion KRW. LS Group plans to begin mass production of precursors at this plant between 2025 and 2026 and increase production to 120,000 tons by 2029.

LG Chem plans to invest 1.2 trillion KRW by 2028 to build a precursor plant in the Saemangeum National Industrial Complex in partnership with China's Huayou Cobalt. SK On, Ecopro Materials, and China's GEM will jointly invest 1.21 trillion KRW to build a 50,000-ton precursor plant in the Saemangeum National Industrial Complex. POSCO Future M signed a joint venture agreement with China's CNGR in June 2023 for precursor production. Analysts suggest that Chinese companies cooperating with Korean firms is a strategy to circumvent U.S. IRA regulations.

QY Research Korea forecasts that considering the rapidly increasing domestic cathode material production scale, the domestic precursor market size will reach 20 trillion KRW by 2030. The precursor self-sufficiency rate is expected to reach 46% in 2025 and 56% by 2030.

SK Research Center, The Value of Internalizing Cathode Material Precursors, 2021.10.8
LG Energy Solution Battery Inside, The Core Precursor in Cathode Material Manufacturing, 2022.3.30
POSCO Future M Newsroom, Why Internalizing Precursors is Essential for the Development of the K-Battery Industry, 2023.6.19
Segye Ilbo, Active Localization of Secondary Battery Cathode Material Core 'Precursor,' 2023.8.6
Yonhap News, Money Earned from Korea's Cathode Material Exports Flows Back to China as Raw Materials, 2023.9.5