[Bojo, Battery] This Year’s Anode Materials at a Crossroads of 'Negative Growth'... "Defense Line at $41,000 per Ton"

Shipment Volume Grows This Year Too
But Price Drop Raises Concerns of 'Negative Growth'

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Domestic cathode material companies, which have grown alongside the demand for electric vehicles, are expected to experience negative growth for the first time. This is because while production volume growth is not significant, prices continue to decline. It is the first time in eight years since 2016, when the electric vehicle era began in earnest, that the cathode material industry's sales have decreased.

According to the battery industry on the 31st, EcoPro BM, the largest domestic cathode material company, announced its export guidance for this year at 120,000 tons. Although this is an increase of 13,000 tons, or 12.1%, compared to last year's export volume of 107,000 tons, the significant price drop makes it highly likely that sales will actually decrease.

According to the Korea Customs Service export-import trade statistics, the average export price of NCM (Nickel-Cobalt-Manganese) and NCA (Nickel-Cobalt-Aluminum) cathode materials last year was $46,484 per ton (approximately 62.12 million KRW). Considering EcoPro BM's export volume of 107,000 tons last year, for the company to maintain the same sales scale (based on exports) this year, the cathode material price must exceed $41,448 per ton (approximately 55.39 million KRW).

However, export prices have not reached this level. Last year, cathode material export prices exceeded $50,000 per ton (approximately 66.82 million KRW), but they declined from the second half of the year when the decrease in electric vehicle demand became evident. As of the 20th of this month, the average price dropped to $34,625 per ton (approximately 46.27 million KRW). Export weight, which indicates export volume, also fell significantly. In August last year, exports exceeded 26,000 tons, but last month, they dropped to about 13,964 tons. However, January exports this year are estimated to have slightly recovered to 16,416 tons.

If the current trend of cathode material price decline continues, companies are likely to record unprecedented 'negative growth' this year. This negative growth is even more painful considering that the domestic cathode material 'Big 3'?EcoPro BM, LG Chem, and POSCO Future M?have all been on a growth trajectory for the past 6 to 8 years. LG Chem's Advanced Materials division has never experienced a decrease in annual sales since acquiring GS EM's cathode material business in October 2016, and EcoPro BM has continuously increased sales since its spin-off from EcoPro in 2016. POSCO Future M has not seen a sales decline since merging with POSCO EMS, which was engaged in the cathode material business, in 2018.

The industry expects the downward trend in cathode material prices and export volumes to continue through the first half of this year. Cathode material prices lag raw material prices such as lithium by 3 to 4 months, and raw material prices have been falling since September last year. Lithium prices, for example, dropped from 581,000 yuan per ton (approximately 109.7 million KRW) in November 2022 to about 86,500 yuan per ton (approximately 16.07 million KRW) currently.

There is also potential for a turnaround. The key factor is the recovery of electric vehicle demand, which serves as a barometer for battery prices. Most new cars released this year are electric vehicles or hybrid vehicles equipped with batteries. The decline in battery prices and sales volume was caused by reduced electric vehicle demand amid the global high-interest rate environment and economic downturn. If interest rates are lowered and the economy recovers, a turnaround in the battery market is only a matter of time. With electric vehicle penetration exceeding 16%, targeting the North American market?where full-scale electric vehicle sales are taking place?could be the opportunity to overcome negative growth, compared to the European market, which is experiencing a 'chasm' (temporary stagnation in a growth industry).

Professor Lee Ho-geun of Daeduk College's Department of Automotive Engineering said, "Currently, due to the impact of overproduction of batteries from China, prices of batteries and materials continue to decline. Domestic companies need to continuously discover stable sales channels and establish long-term supply contracts."