[2023 Battery Outlook] US Expansion Accelerates... "Intensifying Market Share Competition with China"

Expansion of 'K-Battery' Production Capacity Continues
US IRA Implementation... Accelerating De-China Movement

[Asia Economy Reporters Oh Hyung-gil and Jung Dong-hoon] Battery and materials companies are expected to accelerate their expansion into overseas markets next year. They will increase production capacity by operating local factories not only in the United States, which will implement the Inflation Reduction Act starting next month, but also in the European market.

Although competition with China over the global market will intensify, the prevailing view is that Korean companies will relatively benefit amid the US-China tensions.

◆ New Facilities Start Operation... Strong Performance Realized = Next year, domestic and overseas battery and materials production facilities will begin operations one after another. LG Energy Solution’s joint venture with automaker General Motors (GM), Ultium Cells, will start operating its Tennessee Plant 1 (45GWh) in the third quarter. Plant 2 (50GWh) is expected to begin trial operations around the fourth quarter.

SK On will operate its Georgia Plant 2 (12GWh), which, together with Plant 1 (9.8GWh), will serve as a forward base for its entry into the US market. Samsung SDI is expected to continuously increase shipments in the European market by partially operating equipment at its G?d Plant 2 (70GWh) in Hungary.

Among battery materials companies, POSCO Chemical is expected to increase its cathode material production capacity from 45,000 tons this year to 130,000 tons next year by operating Gwangyang Plants 3 and 4. Additionally, Plant 5 in Pohang is expected to be completed by the end of next year and start production from 2024. EcoPro BM and L&F will also increase cathode material production capacity by securing new plants next year.

The industry expects that if the operating rates of new plants are raised early amid a shortage of battery supply, it will be reflected immediately in corporate performance.

◆ Securing the US Market... Benefits from IRA = The variable that will determine the battery industry outlook next year is still the supply chain.

Korean companies’ move away from China is expected to accelerate further with the implementation of the US IRA. Domestic companies are pursuing diversification of import countries through equity investments in mines in Indonesia, including Australia, and long-term purchase contracts.

The issue is speed. Byung-hwa Han, a researcher at Eugene Investment & Securities, pointed out, "Considering the potential environmental pollution caused during battery mineral mining or refining processes, it may take considerable time to expand production facilities outside China."

However, this situation is the same for companies in other countries. It is an undeniable fact that Korea, which has free trade agreements (FTA) with the US, has secured a relatively advantageous position.

For example, Tesla needs to secure new raw materials used by its battery supplier, Japan’s Panasonic, but Japanese material companies’ entry into the US market is slow. Japan has not signed an FTA with the US, and major facilities of Sumitomo Metal Mining, a key cathode material supplier to Panasonic, are located in Japan. Since Tesla must secure new suppliers to meet IRA requirements, there is significant potential for expanded collaboration with Korean companies.

◆ Intensified Competition for Market Share Between Korea and China = China, which holds the number one global battery market share, is expected to show even greater growth next year. According to SNE Research, the combined global market share of Korea’s three battery companies was 24.8% as of the end of October, down 6.9 percentage points from the same period last year.

LG Energy Solution maintained second place with battery usage increasing 16.1% year-on-year to 53.7GWh, but its market share decreased from 20.8% to 13.8%.

Meanwhile, China’s top company CATL nearly doubled its growth, increasing its market share by 4 percentage points, and battery usage of companies ranked in the top 10 such as BYD and CALB rose by triple digits compared to last year.

Next year, these companies are expected to accelerate overseas expansion based on the Chinese domestic market. Professor Park Cheol-wan of Seojeong University said, "Some Chinese manufacturers, including companies listed in Hong Kong, are expanding overseas. They may try to enter the US market by utilizing IRA exceptions, so our companies need to grow while narrowing the gap with Chinese battery companies."

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