Hanhwa Investment & Securities "COVID-19 lockdown reduces secondary battery supply... Recommend LG Energy Solution and POSCO Chemical"

[Asia Economy Reporter Minji Lee] Korea Investment & Securities on the 3rd forecasted that although the supply of secondary batteries decreased last month due to the impact of China's COVID-19 lockdown, an improvement trend is expected in the future. The promising investment stocks suggested were LG Energy Solution and POSCO Chemical.

According to SNE Research on the 3rd, the supply volume of the global top 10 secondary battery companies in April was 27.1GWh, an increase of 52.3% compared to the previous year. Compared to the previous month, it decreased by 35%, as demand and supply disruptions in China due to COVID-19 affected performance. In April, CATL still ranked first (8GWh), and LG Energy Solution was second (3.5GWh).

The combined sales volume of BEV (Battery Electric Vehicle) and PHEV (Plug-in Hybrid Electric Vehicle) of the global top 20 electric vehicle OEMs in April was 570,000 units, an increase of 37% compared to the previous year, but a decrease of 33.2% compared to the previous month. Tesla's sales dropped by 57.5% compared to March, largely due to the Shanghai factory shutdown. Tesla's sales decreased by 67.5% compared to March, which was significantly impacted by the Shanghai factory shutdown. Sales of major Greater China companies except BYD also sharply declined. Tesla's market share fell sharply from 19.8% in March to 9.6% in April, dropping to second place. BYD rose to first place with 18.7%, up 6.3 percentage points from the previous month. Chulhee Cho, a researcher at Korea Investment & Securities, explained, "Although Tesla and the entire supply process's supply and sales volume were sluggish, this is a temporary effect caused by COVID-19," adding, "Tesla's competitiveness still holds an advantage over other OEMs."

The prices of major secondary battery materials in May remained similar to those at the end of April. Prices of cathode materials, including key raw materials such as lithium and precursors, were similar to or slightly lower than the previous month. As the rise in material selling prices has stopped, further increases in secondary battery cell prices are expected to be limited. Researcher Cho analyzed, "The spot price of LiPF6 at the end of May fell by 27% compared to the end of the previous month, reaching the level of long-term supply contract prices, so price stabilization is expected from June."

The stocks with high investment attractiveness are LG Energy Solution and POSCO Chemical. Tesla's Shanghai factory resumed operations in May, and Tesla used the Shanghai lockdown period as an opportunity to accumulate battery inventory. After production resumed, production focused on exports, so the impact on LG Energy Solution's second-quarter performance is expected to be minimal. POSCO Chemical established a JV for cathode materials with GM in North America and signed a supply contract for the volume of Ultium Cells' second plant. Additional supply contracts for Ultium Cells' third and fourth plants are expected in the future, and by securing a cathode material production base in North America, it is predicted to benefit from the high growth rate of the U.S. secondary battery market.

This content was produced with the assistance of AI translation services.