[Bojo, Battery] Next Year's Battery Production Cut? South Korea's Anode Material Exports Halved in Four Months

This Month's Exports Worst Since Introduction of HS Code for Secondary Batteries
Export Weight in August Plummeted from 26,000t to 13,000t

"Decline in Material Exports an Early Sign of Battery Production Issues"
Possible Continuation to Battery Production Cuts Next Year

Exports of cathode materials, one of the core components of battery materials, have significantly decreased since the beginning of this month. Most of the domestic cathode material exports are supplied to the overseas facilities of our battery cell companies, and this volume has sharply declined. Amid a gloomy outlook for the battery market next year due to a slowdown in electric vehicle demand, there is speculation that the timing of production cuts at K-battery companies' overseas factories may be earlier than expected.

Cathode Material Export Volume Halved in Four Months

According to customs export-import trade statistics as of the 20th, the average export price of NCM (Nickel-Cobalt-Manganese) and NCA (Nickel-Cobalt-Aluminum) cathode materials recorded $37,489 per ton (approximately 48.81 million KRW), the lowest in 1 year and 9 months since March last year. Both total export weight and export value are expected to be the lowest since the introduction of the customs export-import code (HS code) for secondary batteries in January last year.

Although cathode material exports have generally been declining, the downward trend has been close to a 'plunge' as the year-end approaches. Domestic cathode material export weight has consistently exceeded 20,000 tons since May last year. In August this year, it even reached an all-time high of 26,586 tons. However, the decline accelerated after the third quarter, dropping below 20,000 tons in October, the fourth quarter, and the estimated figure for this month is only about 13,000 tons. The export volume has halved in four months compared to August. The average daily export weight until the 20th of this month was 433 tons, about 40% lower than last year.

If this trend continues, the total export weight is estimated to fall by about 39.6% compared to the same period last year to 13,422 tons, and the total export value is expected to remain at around $505.92 million (approximately 658.9 billion KRW), down about 51.2% from the same period. A battery industry official stated, "This is the result of a combination of factors including the depletion of electric vehicle subsidies in various countries, weak electric vehicle demand, and inventory depletion by companies."

The sharp changes in export volume and sales prices are also expected to directly affect the fourth-quarter performance of cathode material companies. The fourth-quarter performance forecasts for cathode material companies this year are ▲ LG Chem Advanced Materials Division sales of 1.883 trillion KRW, operating profit of 18 billion KRW, operating profit margin of 0.95% (Eugene Investment & Securities) ▲ EcoPro BM sales of 1.569 trillion KRW, operating profit of 31 billion KRW, operating profit margin of 1.9% (Hi Investment & Securities) ▲ POSCO Future M sales of 781 billion KRW, operating profit of 3 billion KRW, operating profit margin of 0.4% (Eugene Investment & Securities).

Battery Production Cuts Expected Next Year

With cathode material exports significantly decreasing after the fourth quarter, battery cell companies are also increasingly likely to reduce production next year. If there is a surplus of battery cell inventory due to decreased electric vehicle demand, there is no reason to rush to import cathode materials. Considering that cathode materials account for 40% of battery costs and are key materials affecting driving range and energy density, the current export decline is seen as an indicator of next year’s battery cell factory operations. Professor Park Cheol-wan of the Automotive Department at Seojeong University said, "(At the battery cell unit level) any problems or early signs of problems in factory operations are immediately reflected in material exports," adding, "The rise of LFP (Lithium Iron Phosphate) batteries, centered in China, has attracted market attention, which is also related to the contraction of the ternary cathode material market mainly produced by domestic battery companies."

Battery cell companies’ operating rates have already been declining. LG Energy Solution’s cumulative operating rate for the third quarter this year was 72.9%, down 2.5 percentage points from 75.4% in the same period last year. After peaking at 77.7% in the first quarter, it has steadily decreased. SK On’s operating rate also slightly dropped from 96.1% in the first quarter to 94.9% in the third quarter. Samsung SDI showed an overall operating rate of 84% last year (Energy Solutions division), but this year recorded 73% in the first quarter, 75% in the second quarter, and 77% in the third quarter.

To reverse the decline in cathode material sales prices and the deterioration of companies’ profitability, it is pointed out that the short-term drop in the price of lithium, the main raw material, must stop. Cathode material prices reflect the mineral prices at the time of sale, so if the mineral prices purchased in advance are high, companies incur losses. According to the Korea Mineral Information Service (KOMIS), as of the 22nd, the price of lithium carbonate was 88 yuan per kilogram, the lowest since August 2021. Compared to the price on December 22 last year (510.5 yuan), it has dropped to about one-sixth. Professor Park Cheol-wan said, "We need to watch changes in the electric vehicle market, such as GM’s new car launches in the first half of next year, but the market situation is not easy," and added, "We must accept that the domestic battery market is looking downward."