Lithium-ion Market
Once recognized as a profitable commodity, secondary batteries recorded their first-ever trade deficit this year.
The deficit can be attributed to the Korean battery industry’s expanded overseas investment in response to new trade environments like the U.S. Inflation Reduction Act (IRA) and the sharp increase in demand for vehicle batteries amid the substantial growth of the domestic electric vehicle market.
According to statistics from the Korea International Trade Association (KITA) on May 21, the export value of secondary batteries, classified as lithium-ion batteries (based on the HS 6-digit standard), was US$2.5 billion from January to April this year. In contrast, the import value reached US$2.98 billion, resulting in a deficit of US$480 million. This marks the first deficit since the initiation of relevant item statistics in 2012.
The trade surplus of secondary batteries peaked at US$3.43 billion in 2019, up from US$1.6 billion in 2012. Despite the decreasing trend, it managed to generate a surplus of US$1.65 billion last year. However, this year it has shifted to a deficit.
From January to April, the growth rate of secondary battery imports was 104.8%, significantly outpacing the export growth rate of 19.4%. This shift is largely related to Korean battery companies aggressively expanding their overseas production share in response to changes in international supply chain orders, like the IRA.
Korean companies are boosting their overseas battery finished product factories, causing a slowdown in the growth rate of Korean-made battery exports. Concurrently, reverse imports of K-batteries produced in overseas factories in countries like China are rapidly growing. As domestic demand for electric car batteries has surged recently, imports of batteries produced in China have also increased, a considerable portion of which are made by Korean companies.
LG Energy Solution currently supplies batteries manufactured at its Nanjing factory in China to various global vehicle manufacturers, including Tesla. SK on operates battery factories in three locations in China: Changzhou, Huizhou, and Yancheng.
Approximately 95% (US$2.83 billion) of secondary battery imports from January to April were imported from China. The Ministry of Trade, Industry and Energy assumes that over half of the recently imported secondary batteries are produced overseas by Korean companies and shipped to domestic customers.
The rapid growth in domestic electric vehicle battery demand and the increasing usage of batteries in domestic cars from CATL, the world’s leading company in market share, are also contributing to the surge in finished battery imports. Hyundai Motor Group has been extending the models equipped with CATL batteries, starting with the Kia EV6 last year, and now including the Kona, Niro, and others.
Nevertheless, it is argued that the potential of the entire secondary battery value chain as a future source of Korean exports remains unchanged. The export of cathode materials, a key component of secondary batteries, outstripped the export of finished secondary battery products last month, reaching US$1.33 billion.