Sluggish demand for electric vehicles has hurt the materials industry and exports. Exports of cathode materials, which had been on the rise this year, fell significantly last month to the level seen at the end of last year. Materials companies that had hoped their profitability would improve as cathode material prices rose were put on alert. As cathode material shipments decline, there is a growing sense of crisis that sluggish profitability may be prolonged.
According to the Korea International Trade Association and Hanwha Investment & Securities on the 26th, cathode material exports last month amounted to 14,480 tons, a decrease of 29% from the previous month (20,408 tons). Cathode material exports bottomed out at the end of last year and have been increasing since the beginning of this year. Cathode material exports amounted to about 18,000 tons in January, 19,000 tons in February, 18,000 tons in March, 22,000 tons in April, and 20,000 tons in May and June. However, as the increase slowed, it collapsed again and last month returned to the level of December last year (14,512 tons). This is the lowest export volume of the year.
The recovery of export volume is not expected to be smooth in the second half of this year. This is because imports of precursors, an important indicator of cathode material exports, are declining. Precursors are the basic materials needed to make cathode materials. As imports of precursors decline, cathode material production also declines. Last month, imports of cathode material amounted to 16,602 tons, down 23.3% from the previous month. Imports from January to July this year decreased by 14.1% from a year earlier.
The materials industry was full of expectations that profitability would improve as prices for cathode material products have recently shown a rebound. Last month, the export price of cathode materials was $28.6 per kg, up 1% from the previous month. The upward trend continues this month. However, as cathode material exports plummeted, the possibility of it acting as a drag on profitability increased. Hanwha Investment & Securities predicts that the export volume of cathode material companies in the third quarter of this year will decline by 7% for POSCO Future M, 30% for Ecopro BM, 30% for L&F and 20% for LG Chemical compared with the second quarter of this year. Lee Yong-wook, a researcher at Hanwha Investment & Securities, analyzed: “The improvement in profitability of cathode material companies is expected to be delayed due to the burden of fixed costs resulting from a sharp decline in cathode material shipments (lower operating rate). ”
The slump in demand for electric vehicles, a downstream industry, appears to be weighing down the performance of cathode material companies. Electric vehicle companies have begun to adjust their speed by withdrawing or reducing their existing production plans. In addition, electric car fires occurred around the world, affecting consumer confidence. A vicious circle is emerging: a slowdown in the finished car market leads to poor performance of battery companies, a key component, and a slowdown in battery companies leads to a decline in material companies such as anode and cathode materials. An industry official said: “Starting from the third quarter of this year, the dominoes of the downturn leading to electric vehicles, cells and materials will have a negative impact on performance seriously.”
Cathode material companies have also begun to adjust their production speeds. LG Chem announced that it will reduce its annual cathode material target from 280,000 tons to 200,000 tons in 2026. POSCO Future M reduced its cathode material production capacity target from 445,000 tons to 395,000 tons during the same period.
Reporter Hwang Min-hyuk okjs@kmib.co.kr
