Challenges loom ahead for domestic companies that sell cathodes, made from materials like lithium and nickel, to battery manufacturers.
Companies that held a strong foothold with nickel, cobalt, and manganese, essential for ternary batteries, are now under threat as the competition for low-priced electric vehicle batteries intensifies. Consequently, cheaper lithium iron phosphate (LFP) batteries are gaining traction.
According to industry reports from Oct. 18, four out of every 10 electric vehicles sold globally are produced by Chinese companies.
In response to Europe implementing punitive tariffs and restructuring subsidies to curb the rise of Chinese electric vehicles, China has countered by pressuring their EV companies to use only domestic components and restructuring their supply chain to be more China-centric.
Lithium iron phosphate (LFP) batteries, key to Chinese electric vehicles, have improved from their earlier shortcomings of limited range and heaviness. Now, they are 30-40% cheaper than the nickel-cobalt-manganese (NCM) ternary batteries on which domestic companies had primarily focused.
The production capacities of major domestic cathode companies like LG Chem, POSCO FUTURE M, and ECOPROBM are expected to exceed 900 gigawatts by 2025, with most being NCM series cathodes. This year, our cathode companies have a production capacity that is over 140% of next year’s global demand, a trend that’s expected to continue for the next three years.
LFP’s share in the global battery cathode market is expected to rise to half this year.
Adding to the concerns, the prices of key minerals like lithium and nickel have fallen, leading to a drop in cathode sales prices. ECOPROBM’s Q3 operating profit has plunged nearly 70% compared to last year, and POSCO POSCO FUTURE M’s earnings are expected to fall below projections.