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Korean 3 Battery Producers Gradually Shake off China Phobia
Battery Business Improved
Korean 3 Battery Producers Gradually Shake off China Phobia
  • By Jung Min-hee
  • August 1, 2017, 02:45
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South Korean battery manufacturers’ business performance is gradually improving as they are gradually escaping from “China Phobia”.
South Korean battery manufacturers’ business performance is gradually improving as they are gradually escaping from “China Phobia”.

 

South Korean battery manufacturers’ business performance is gradually improving. They have faced difficulties for a while due to China’s retaliatory measures over the THAAD deployment but they are gradually escaping from “China Phobia.”

Accorindg to industry sources on July 31, the nation’s three battery producers, including LG Chem, Samsung SDI and SK Innovation, all saw their battery business results improve in the second quarter this year. LG Chem, the leading battery maker in the industry, posted 1.61 trillion won (US$1.44 billion) in operating profit in the second quarter and its battery business division, which have shown a loss so far, also posted an operating profit of 7.5 billion won (US$6.69 million). SK Innovation said its information & electronics materials division recorded an operating profit of 31.1 billion won (US$27.76 million) in the first half of this year, boosted by strong showings at the business of lithium-ion battery separator (LiBS) that is used as a material for electric vehicle (EV) batteries. The figures is the 63 percent level of the last year’s results. Samsung SDI also saw its battery business significantly improve in profitability and post an operating profit of 5.5 billion won (US$4.91 million), turning from losses of 67.3 billion won (US$60.06 million) in the first quarter to profits.

The three battery makers were initially expected to have difficulties recovering from poor sales for a while due to the THAAD deployment. However, their business showings are better than expected. Accordingly, expectations are growing that their performance will improve further. An official from the industry said, “Their operating profits are not that large in size but we should pay attention to the fact that they have overcome “China risk” and are paving the way for reversal. Many say that the situation of battery companies hit the bottom as it can’t get any worse.”

Industry watchers believed that the surprising result was largely due to the fact that battery manufacturers have responded to the changing market flexibly and quickly. In particular, large EV batteries were fettered by the China risk but companies took note of the growing energy storage system (ESS) market and changed their main products. LG Chem expects that its ESS battery sales will reach 500 billion won (US$446.23 million) this year, up 80 percent from last year. Samsung SDI has also focused on ESS production and the operation rate of its Xian plant in China in the second quarter greatly improved.

Another factor for better performance is the three battery companies’ efforts to actively meet market demands through aggressive investment and productivity improvement. For instance, LG Chem has continuously expanded its production lines from last year when the company started facing difficulties in China. It established a large battery plant in Nanjing, China, in February this year and has decided to expand its second ESS line in March. SK Innovation is also expanding two LiBS production facilities and ceramic coating separator production facilities this year.

In addition, the three battery makers have diversified its sales areas and production areas from China to Europe and the United States. Samsung SDI completed its EV battery plant in Hungary in May, while LG Chem completed its battery plant in Poland and supplied its samples from last month.  SK Innovation will also begin construction of its battery plant in Europe by the end of this year.

An official from the industry said, “As demand of EV and ESS is rapidly growing in Europe and the U.S., domestic companies will have more opportunities.”