Tobacco Packaging and Tuna Can Manufacturer's Major Transformation... 'Aluminum Foil' Soars with Secondary Battery Boom [Battery Mastery] (26)

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On February 23, Lotte Aluminum passed the "Approval of Physical Spin-off Plan" at its regular shareholders' meeting, which involves physically splitting certain business sectors. Lotte Aluminum plans to establish Lotte Aluminum BM and Lotte Aluminum PM through the physical spin-off on April 1.

Lotte Aluminum BM will oversee the anode foil and general foil business sectors, while Lotte Aluminum PM will manage the business sectors including cans, flexible packaging, corrugated cardboard, household goods, and PET bottles.

Lotte Aluminum, a subsidiary of Hotel Lotte, was originally a company mainly producing snack packaging paper and beverage cans. However, as the secondary battery market rapidly grew, the anode foil business emerged as a new growth industry. Lotte Aluminum is expected to pursue the secondary battery anode foil business more aggressively through the physical spin-off. Industry insiders anticipate that Lotte Aluminum will pursue an initial public offering (IPO) after the spin-off.

Versatile Aluminum, Perfect for Anode Foil

Anode foil refers to the thin metal foil that acts as the current collector in the cathode of secondary batteries. The current collector serves as a support for the cathode and anode while facilitating smooth electron movement. In lithium-ion batteries, copper is mainly used as the anode current collector, and aluminum is primarily used as the cathode current collector.

The current collector must have good conductivity and electrochemical stability. To increase the energy density of secondary batteries, it must be lightweight and capable of being made thin. The thinner the current collector, the more active material can be coated, thereby increasing energy capacity. It must also be sufficiently flexible to prevent deformation during manufacturing processes such as winding or stacking, maintaining performance.

Packaging materials produced by Lotte Aluminum. Photo by Lotte Aluminum

Aluminum (Al) best satisfies these conditions. Aluminum has good conductivity (about 60% that of copper) and is lightweight. The specific gravity of pure aluminum is about 2.7 g/cm³, roughly one-third that of iron (7.9 g/cm³) or copper (8.9 g/cm³). It is ideal for lightweighting batteries and extending the driving range of electric vehicles. Aluminum also has excellent ductility, meaning it can be stretched without breaking, making it suitable for processing methods like extrusion and rolling.

Aluminum is abundant, easily obtainable, and inexpensive. It is the third most abundant element in the Earth's composition after oxygen and silicon and is the most widely distributed metal element. It accounts for about 8% of the Earth's elemental mass.

Thanks to its low price, aluminum accounts for a small portion of the cost despite being a key material in secondary batteries. Copper foil for the anode accounts for about 5% of the secondary battery cost, whereas aluminum foil accounts for only about 1.8%. In sodium-ion batteries, aluminum is used instead of copper in the anode to reduce manufacturing costs.

Aluminum coil. Image source=Joil Aluminum

Aluminum also has strong corrosion and wear resistance and is non-toxic. It reacts with oxygen in the air to form a dense oxide layer on its surface. This oxide layer prevents further oxidation of the aluminum beneath. Due to these advantages, aluminum has been widely used for a long time in food packaging materials, tableware, automotive and aerospace materials, and construction materials.

The aluminum foil market has been stagnant because its applications were fixed. Domestic demand for aluminum foil remained at about 90,000 tons annually from 2012 to 2019. However, with the recent increase in demand for secondary battery anode foil, it rapidly grew from 104,000 tons in 2020 to 117,000 tons in 2022.

Aluminum foil demand is expected to continue increasing. According to market research firm SNE Research, global anode foil demand rose from 92,000 tons in 2020 to 130,500 tons in 2021 and is projected to reach 475,000 tons by 2025. The compound annual growth rate over five years is 38.9%.

All Raw Materials Imported... Rolling is an Oligopoly

The aluminum market involves three stages: extracting aluminum from mines by electrolysis to produce ingots (metal blocks), rolling ingots into 3mm thick strips (thin plates), and producing thinner coils from the strips.

Since there are no aluminum mines or refining industries domestically, Korean aluminum rolling companies process aluminum using imported aluminum ingots or scrap.

Aluminum Industry Value Chain (Source: Kyobo Securities Research Center)

The domestic aluminum strip market is dominated by three companies: Novelis Korea, Joil Aluminum, and Daeho AL. Strips are produced by melting aluminum raw materials and undergoing processes such as hot rolling, cold rolling, cutting, and packaging. Strip products are then supplied to aluminum foil processing companies to manufacture secondary battery anode foil.

Producing aluminum foil involves making it thin, wide, and long, which requires advanced technology. To prevent battery shorts, the foil surface must be uniform. The performance of rolling mills (machines that process metal materials by passing them between two rotating rolls) is crucial for uniform thickness.

Rolling equipment is monopolized by the German company Achenbach. The price per unit is estimated at 35 to 40 billion KRW. Recently, orders from various anode foil manufacturers have surged, leading to longer delivery times.

The thickness of aluminum foil used in electric vehicles is 10 to 11 micrometers (μm; 1 μm is one-millionth of a meter), which is thicker than copper foil (6 to 8 μm). Unlike copper foil produced by electroplating, aluminum foil is produced by rolling, making it difficult to reduce thickness.

Aluminum foil rolling machine of Aachenbach Company in Germany. Photo by Sam-A Aluminum

Five Domestic Companies Compete

Five domestic aluminum foil companies?Sama Aluminum, Lotte Aluminum, DI Dongil (Dongil Aluminum), Dongwon Systems, and Korea Aluminum?are competing. As the secondary battery market expands, anode foil companies are continuously expanding their production capacity.

Sama Aluminum, established in 1969, is a leading domestic aluminum foil company. It was listed on the KOSDAQ market in 1980. Since its founding, it has produced cigarette packaging paper. In 1981, it developed Korea's first 4.5 μm ultra-thin aluminum foil.

In 2012, it developed the world's first 10 μm thick lithium-ion battery anode foil material and supplies aluminum foil to the three major battery companies: LG Energy Solution, SK On, and Samsung SDI. It is understood that Sama Aluminum supplies over 90% of SK On's aluminum foil. Sama Aluminum also produces aluminum film used in pouch-type batteries.

Aluminum foil for cathode current collectors. Image source=Sam-A Aluminum

Sama Aluminum's major shareholder is Japan's Toyo Aluminum, holding a 33.4% stake. Toyo Aluminum, established in 1931, produces aluminum foil and aluminum plates.

Dongil Aluminum, established in 1989, is 90.4% owned by DI Dongil, a textile product specialist company. DI Dongil is famous for clothing brands such as Lacoste, Carte Blanche, and Arnold Palmer. Toyo Aluminum also supplies aluminum foil to the three domestic battery companies.

Aluminum Foil Manufacturing Process. Image Source=Lotte Aluminum

Lotte Aluminum is a comprehensive packaging company under the Lotte Group, tracing its origins back to Dongbang Aluminum Industry, established in 1966. The company changed its name to Lotte Aluminum in 1980. In 2020, it expanded its anode foil production line for secondary batteries at its Ansan Plant 1, actively expanding its anode foil business.

Dongwon Systems is a packaging and advanced materials affiliate of the Dongwon Group, originating from Orion Optical, established in 1977. It was listed on KOSPI in 1994. In 2020, it expanded its secondary battery anode foil production line in Asan, Chungnam, officially starting its secondary battery materials and components business.

In 2021, Dongwon Systems acquired Amkec (MKC), which had supplied cans to domestic battery companies. It produces and supplies 2170 cylindrical battery cans and has secured 4680 battery technology and established mass production systems.

References

Kyobo Securities, Aluminum Foil, The Real Insider, 2021.8.27
Hana Financial Investment, The Core Material of Secondary Battery Anode Foil Starts Here, 2021.9.1
Korea IR Council, Sama Aluminum, Re-rating as an Electric Vehicle Secondary Battery Aluminum Foil Material Company, 2023.2.6
Chosun Biz, Anode Foil Market Expands... Aluminum Foil Companies' Continuous Expansion, 2023.6.2
Edaily, Lotte Aluminum to Raise Funds After Physical Spin-off... Accelerating Anode Foil Business, 2024.2.26