One Year After Shin Hak-cheol's Announcement... The Background Behind LG Chem's 'Secondary Battery Materials' Joining the 2 Trillion Won Sales Club

Entered the 1 Trillion Won Sales Club in Q1
Surpassed 2 Trillion Won in Sales in Q2
56% Increase Compared to Previous Year

Shin Hak-cheol, Vice Chairman of LG Chem. Photo by LG Chem

[Asia Economy Reporter Choi Seoyoon] "The most innovative change in LG Chem's history, which will elevate the company to a higher level, has already begun. Visible results will be confirmed starting from the second half of this year." (July 2021, Shin Hak-cheol, Vice Chairman of LG Chem)

The strategic move into 'secondary battery materials' initiated by Shin Hak-cheol, Vice Chairman of LG Chem, is showing performance results just one year later. The advanced materials business division, responsible for secondary battery materials, entered the 1 trillion KRW sales club in Q1 this year and surpassed 2 trillion KRW in sales in Q2. In July last year, Vice Chairman Shin announced plans to transform LG Chem, which had traditionally focused on petrochemicals, into the "world's number one comprehensive battery materials company." The move to aggressively invest around 6 trillion KRW and redefine its identity as a secondary battery materials company is expected to accelerate.

According to industry sources on the 2nd, among LG Chem's three major business divisions?petrochemicals, advanced materials, and life sciences?the advanced materials division's Q2 sales reached 2.018 trillion KRW, a 56% increase compared to the previous year. This is also a 29% increase compared to the record-high sales of 1.568 trillion KRW in Q1 this year.

The advanced materials division is divided into ▲ cathode materials and other secondary battery materials ▲ IT and semiconductor materials ▲ engineering materials ▲ others. The proportion of cathode materials in advanced materials sales was 57% in Q2 this year, nearly doubling in one year and leading the performance growth. The rise in prices and shipment volumes of cathode materials, a core secondary battery material, had a significant impact, but LG Chem's ability to meet the explosively increasing demand for cathode materials was possible because it had actively expanded cathode material production capacity for at least two years prior.

Kim Hyuntae, a researcher at BNK Investment & Securities, said, "Cathode material companies share future volume plans with battery cell manufacturers and expand cathode material production accordingly. Since it takes about two years to build production plants, investments should theoretically have started around 2020 to contribute to first-half 2022 performance."

In fact, LG Chem began commercial operations of its cathode material plant in Wuxi, China, in October 2020, and in December of the same year, started expanding its fourth cathode material plant in Cheongju, aiming for operation this year. Currently, one of the earlier constructed lines is partially operational.

In July last year, LG Chem acquired the Chemical & Electronic Materials (CEM) division, responsible for secondary battery separators, from LG Electronics for 525 billion KRW. As a result, LG Chem's cathode material production capacity increased from 40,000 tons in 2020 to 80,000 tons within a year, with targets of 90,000 tons this year and 260,000 tons by 2026.

There is also a significant benefit from having LG Energy Solution, the number one domestic battery company, as a subsidiary. Choi Kyuhun, a researcher at Shinhan Financial Investment, explained, "With the electric vehicle market on a growth trajectory, LG Chem already has a major customer in LG Energy Solution. By expanding customers externally, including the US's top automaker GM, it is delivering outstanding performance compared to competitors."

Supported by additional capacity expansions, LG Chem's secondary battery materials are expected to continue rapid growth. IBK Investment & Securities forecasted, "Sales of secondary battery materials within the advanced materials division are expected to reach 8.4 trillion KRW by 2026, maintaining an average annual growth rate in the 40% range over five years. Considering LG Chem's goal to defend its market share, further increases in cathode material production capacity are anticipated."

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