Battery Industry Eyes H2 Rebound After Q1 Bottoming Out

South Korea's battery industry anticipates a rebound in the second half, having navigated the bottom of its performance slump in the first quarter. Driven by slowing electric vehicle (EV) demand and automakers' inventory adjustments, the first-quarter results for domestic battery material companies saw a general contraction. Notably, major cathode material manufacturers like POSCO Future M, EcoPro BM, and LG Chem's Advanced Materials division experienced reduced sales or operating losses. However, L&F, a key supplier to Tesla, reported relatively robust performance.

The surge in international oil prices and potential shifts in U.S. government policy have emerged as new variables. Rising oil prices stemming from geopolitical risks in the Middle East have highlighted the economic competitiveness of EVs and Energy Storage Systems (ESS). In March, EV sales and registrations in Europe increased by 37% year-on-year to 540,000 units. Regions with significant energy price hikes, such as Australia, New Zealand, Vietnam, and Thailand, saw EV sales grow by 79%.

The U.S. Department of Commerce issued preliminary anti-dumping and countervailing duties of up to 160% on graphite anode materials from China. However, the International Trade Commission (ITC) later invalidated this decision. China accounts for over 90% of the global anode material market. The trend of decoupling from China, centered around the Inflation Reduction Act (IRA), is maintained. Regulations requiring a phased reduction in the proportion of Foreign Critical Minerals (FCMs) and battery components from Foreign Critical Origin Entities (FCOEs) are driving increased demand for non-Chinese materials.

The battery industry is currently entering a phase where a complex interplay of variables, including expectations of demand recovery, oil prices, raw material costs, and supply chain restructuring speed, is at play. While there is consensus that the industry has passed its trough, the speed and strength of the rebound hinge on external factors, requiring the market to monitor trends for the time being. With new EV projects set to ramp up from next year, this year's key challenges are defending profitability, diversifying customers, and expanding ESS orders.