The domestic cathode material (key secondary battery material) industry, which has been facing prolonged sluggishness, is showing signs of recovery driven by demand for de-China supply chains and the expansion of the North American ESS (energy storage system) market. Domestic companies plan to launch a full-scale turnaround by also targeting the LFP (lithium iron phosphate) market, which has been led by China.
According to relevant industry sources on the 15th, LG Chem mentioned the possibility of turning its cathode material business profitable in the fourth quarter during a recent investor presentation held for European investors. The company explained that while profitability had weakened due to a sharp drop in operating rates recently, performance has shown signs of improvement since the third quarter.
The reason LG Chem is confident about improving its cathode material business results lies in the expected increase in shipment volumes in the second half of the year. Industry sources project that LG Chem's cathode material shipments will total less than 10,000 tons in the first half but rise to approximately 28,000 tons in the second half. In particular, supplies recently started for Toyota Japan are expected to be fully reflected in results. Previously, LG Chem signed a 2.86 trillion won cathode material supply contract with Toyota in October 2023.
In particular, it appears that LG Chem's order competitiveness has increased due to the strengthening de-China supply chain trend centered on the United States. Cathode materials are produced by mixing lithium into precursors combined with nickel, cobalt, and manganese (NCM). It is known that LG Chem applies precursors produced by Korea Precursor (KPC), a joint venture with Korea Zinc, for cathode materials supplied to Toyota. This structure allows it to meet the non-China requirements of the U.S. Inflation Reduction Act (IRA) by building a supply chain with reduced reliance on Chinese materials, enabling Toyota to also receive the Advanced Manufacturing Production Tax Credit (AMPTC).
This is not just LG Chem's story. As of the second quarter this year, major domestic cathode material companies including L&F, EcoPro BM, and POSCO Future M also recorded profits one after another. Even with a slow recovery in electric vehicle demand, profitability improved as de-China supply chain demand grew and lithium prices rose. Since cathode material prices are linked to the price of lithium, a key raw material, fluctuations in lithium prices directly impact the results of cathode material companies.
The domestic cathode material industry is not stopping there but is expanding its business scope into the LFP market, which has been led by Chinese companies. This move comes as demand for LFP expands centered on the North American ESS market. First, L&F launched a market offensive with its subsidiary L&F Plus, which specializes in LFP business. L&F Plus, which has secured a production capacity of 30,000 tons, is scheduled to begin full-scale operations at the end of this month. It is also planning to expand by securing an additional 30,000 tons of production capacity by the first half of next year.
POSCO Future M also officially launched its LFP cathode material business last month by agreeing to a large-scale LFP supply deal. As a contract to proactively respond to North American ESS demand, POSCO Future M agreed to supply more than 190,000 tons of LFP cathode materials over six years from next year until 2032. LG Chem has indicated that the start of its LFP Yangsan plant will be in 2027-2028. An industry official stated, "Domestic cathode material companies are seeking a recovery not just by relying on the recovery of electric vehicle demand, but by reshaping supply chains centered on North America and securing new demand sources such as ESS."
in INDUSTRY
