[Company Insight] Cosmo Chemical Accelerates Growth in Used Battery Recycling... Rights Offering Just a Side Note

Raising Capital for Facility Investment through Paid and Free Capital Increases
Securing Future Growth Engines through Used Battery Recycling

[Asia Economy Reporter Hyungsoo Park] Cosmo Chemical is a company that manufactures and sells titanium dioxide, a representative white pigment, and cobalt sulfate, a key raw material for cathode materials in secondary batteries. Titanium dioxide is used in plastics, paints, rubber, and paper industries. It has a wide range of applications including chemical fiber delustering agents, wear resistance enhancers, electronic materials, glass, and welding rod coatings by utilizing its electronic properties. The company also operates a business that recovers cobalt by purchasing cobalt hydroxide and waste battery scrap. It sells cobalt sulfate to domestic and international secondary battery precursor manufacturers.

The raw material for titanium dioxide is titanium ore, and titanium dioxide is produced by chemically reacting ilmenite (FeTiO3), one of the titanium ores, with sulfuric acid. The main raw material, titanium ore, is mainly imported from India, Vietnam, Australia, and other regions. About 95% of the world's titanium ore is used to produce titanium dioxide. The price of titanium ore is mainly determined by reflecting the price fluctuations of titanium dioxide. Recently, as demand for high-grade titanium dioxide ore has surged, raw material prices have been on the rise.

According to market research firm Market Research Future, the global titanium dioxide market size is expected to grow at a compound annual growth rate (CAGR) of 8.92%, from $21.4 billion in 2020 to $34.5 billion in 2028. Cosmo Chemical holds about 70% of the domestic market for anatase-type titanium dioxide used in paint, rubber, paper, plastics, and textiles.

Based on its manufacturing experience with cobalt sulfate, Cosmo Chemical has developed technology for recycling waste batteries. Waste battery recycling refers to extracting valuable rare metals such as cobalt, nickel, and manganese from cathode active materials of waste batteries. Since the fourth quarter of 2020, the company has been promoting a nickel-cobalt-manganese (NCM) battery scrap recycling business. It is currently producing prototypes and invested 30 billion KRW since August last year to establish waste battery recycling facilities.

The company plans to increase sales based on the advantage of using various raw materials compared to competitors. However, if competition intensifies, it may face difficulties securing waste battery scrap. There is a concern that if existing battery companies directly engage in recycling, sales may fall short of plans. Cosmo Chemical plans to produce 4,000 tons of nickel, 2,000 tons of cobalt, and 1,000 tons of lithium through waste battery recycling by 2024. Considering the precursor investment of its subsidiary Cosmo New Materials, it will complete vertical integration from waste battery recycling to precursor and cathode material production.

On April 12, the board of directors resolved to conduct a paid-in capital increase and a bonus issue. Through a rights offering, it secured funds for facility investment related to waste battery recycling. After completing the paid-in capital increase, it also conducted a bonus issue allocating 0.12 new shares per existing share.

Cape Investment & Securities analyzed that the waste battery recycling market is now in its early stages of growth for Cosmo Chemical. They explained that the company has secured core technology through years of cobalt sulfate business and has a definite demand source in Cosmo New Materials, which is investing in precursor facilities.

The stock price has risen sharply this year as the company pursued a paid-in capital increase to raise funds for the rapidly growing new business and simultaneously conducted a bonus issue to activate stock trading. The rights offering was so popular that the subscription rate by existing shareholders exceeded 100%. The largest shareholder, Cosmo & Company, participated with 120% of the allocated shares during the subscription, encouraging existing shareholders to subscribe and expressing confidence in the new business. After the ex-rights date for the bonus issue, the stock price rose about 40%.

Shinhan Investment Corp. estimates that Cosmo Chemical will record sales of 678.4 billion KRW and operating profit of 58.5 billion KRW this year, increases of 32.3% and 92.0% respectively compared to last year. Next year, reflecting the effect of capacity expansion, sales are expected to increase by more than 40%. Despite concerns about inflation and rising expected interest rates leading to a gloomy economic outlook, growth is expected to continue.

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