Tobacco Packaging and Tuna Can Manufacturer's Major Transformation... 'Aluminum Foil' Soars with Secondary Battery Boom [Battery Mastery] (26)

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Lotte Aluminum passed an agenda item titled 'Approval of Spin-Off Plan' to separate certain business divisions at its regular general shareholders' meeting on February 23. Lotte Aluminum plans to establish two new companies, Lotte Aluminum BM and Lotte Aluminum PM, through a spin-off on April 1.

Lotte Aluminum BM will oversee the cathode foil and general foil business divisions, while Lotte Aluminum PM will handle business divisions including cans, flexible packaging, corrugated cardboard, daily necessities, and PET bottles.

Lotte Aluminum, a subsidiary of Hotel Lotte, initially specialized in producing snack packaging paper and beverage cans. However, as the secondary battery market grew rapidly, its cathode foil business emerged as a new growth engine. Through its spin-off, Lotte Aluminum is expected to aggressively expand its secondary battery cathode foil business. The industry anticipates that Lotte Aluminum will push for an initial public offering (IPO) after the spin-off.

Aluminum: The Versatile Material, Perfect for Cathode Foil

Cathode foil refers to a thin metal foil used as the current collector in the cathode of secondary batteries. The current collector not only serves as a support for the cathode and anode, but also facilitates efficient electron movement. In lithium-ion batteries, copper is primarily used for the anode current collector, while aluminum is mainly used for the cathode current collector.

Current collectors must have excellent conductivity and stable electrochemical properties. To increase the energy density of secondary batteries, they need to be lightweight and capable of being made into very thin sheets. The thinner the current collector, the more active material can be applied, thus increasing energy capacity. Additionally, sufficient flexibility is required so that performance is maintained without deformation during battery manufacturing processes such as winding or stacking.

Packaging materials produced by Lotte Aluminum. Photo by Lotte Aluminum

Aluminum (Al) best meets these requirements. Aluminum has good conductivity (about 60% of that of copper) and is lightweight. Pure aluminum has a density of about 2.7g/cm³, roughly a third that of iron (7.9g/cm³) or copper (8.9g/cm³). This makes it ideal for lightweight batteries and extending the driving range of electric vehicles. Moreover, aluminum exhibits high ductility, so it can be easily processed through methods like extrusion and rolling.

Aluminum is an abundant and easily obtainable metal, and its price is low. Aluminum is the third most abundant element in the Earth’s composition after oxygen and silicon, and the most widely distributed metallic element. It accounts for approximately 8% of the Earth's elemental mass.

Thanks to its low price, aluminum accounts for a small portion of the cost despite being a key material in secondary batteries. For example, copper foil used in the anode makes up about 5% of a battery's cost, whereas aluminum foil accounts for just around 1.8%. In sodium-ion batteries, aluminum is even used instead of copper in the anode to further reduce manufacturing costs.

Aluminum coil. Image source=Joil Aluminum

Aluminum is also noted for its excellent corrosion and wear resistance, and is non-toxic. When exposed to air, aluminum forms a dense oxide layer on its surface through reaction with oxygen. This oxide layer protects the inner aluminum from further oxidation. Thanks to these advantages, aluminum has long been widely used for food packaging, tableware, transportation materials such as automotive and aerospace applications, and construction materials.

The aluminum foil market had remained stagnant for years due to a limited range of applications. Domestic aluminum foil demand held steady at around 90,000 tons annually from 2012 to 2019. However, demand for cathode foil for secondary batteries has recently surged, rising from 104,000 tons in 2020 to 117,000 tons in 2022.

Demand for aluminum foil is expected to continue increasing. According to market research firm SNE Research, global demand for cathode foil grew from 92,000 tons in 2020 to 130,500 tons in 2021 and is projected to reach 475,000 tons by 2025. This represents an impressive average annual growth rate of 38.9% over five years.

All Raw Materials Imported... Rolling Market Oligopoly

The aluminum market involves three stages: extracting aluminum from ore in mines by electrolytic reduction to produce ingots (metal blocks), rolling the ingots into 3mm-thick strips (thin plates), and further processing these strips into even thinner coils.

Because there are no aluminum mines or refining industries in Korea, domestic aluminum rolling companies process imported aluminum ingots or scrap metal.

Aluminum Industry Value Chain (Source: Kyobo Securities Research Center)

In Korea, the aluminum strip market is oligopolized by three companies: Novelis Korea, Joil Aluminum, and Daeho AL. Strips are made by melting aluminum raw material and processing it through hot rolling, cold rolling, slitting, and packaging. Products in strip form are then supplied to aluminum foil processing companies to become cathode foils for secondary batteries.

The technology for aluminum foil lies in making it thinner, wider, and longer. To prevent battery short circuits, the surface of the foil must also be extremely uniform. Achieving this requires high-performance rolling machines, which process metal materials by passing them between two rotating rolls.

German manufacturer Achenbach monopolizes rolling equipment. Each unit is estimated to cost between KRW 35 billion and 40 billion. Recently, with heavy orders from multiple cathode foil producers, delivery times have lengthened.

Aluminum foil used in electric vehicles is 10–11 micrometers (㎛; 1 ㎛ = one-millionth of a meter) thick, which is thicker than copper foil (6–8 ㎛). Unlike copper foil, which is produced by electroplating, aluminum foil is made through rolling, making it more difficult to reduce thickness.

Aluminum foil rolling machine of Aachenbach Company in Germany. Photo by Sam-A Aluminum

Five Domestic Companies Compete

Domestic aluminum foil manufacturers competing in Korea include Sam-A Aluminum, Lotte Aluminum, DI Dongil (Dongil Aluminum), Dongwon Systems, and Korea Aluminum. As the secondary battery market expands, cathode foil companies are rapidly increasing their production capacity.

Sam-A Aluminum, established in 1969, is Korea’s leading aluminum foil manufacturer. It was listed on KOSDAQ in 1980. Since its founding, the company has continuously produced cigarette packaging paper. In 1981, it developed Korea’s first 4.5㎛ ultra-thin aluminum foil.

In 2012, Sam-A Aluminum was the world’s first company to develop 10㎛ thick lithium-ion battery cathode foil material, and now supplies aluminum foil to the three major battery companies: LG Energy Solution, SK On, and Samsung SDI. It is estimated that the company supplies more than 90% of the aluminum foil for SK On. Sam-A Aluminum also produces aluminum film for pouch-type batteries.

Aluminum foil for cathode current collectors. Image source=Sam-A Aluminum

The largest shareholder of Sam-A Aluminum is Toyo Aluminum of Japan, which holds a 33.4% stake. Toyo Aluminum, established in 1931, produces aluminum foil and aluminum sheets, among other products.

Dongil Aluminum, established in 1989, is owned 90.4% by DI Dongil, a textile specialist best known for clothing brands such as Lacoste, Carte Blanche, and Arnold Palmer. Toyo Aluminum also supplies aluminum foil to Korea’s three major battery companies.

Aluminum Foil Manufacturing Process. Image Source=Lotte Aluminum

Lotte Aluminum, a comprehensive packaging company under Lotte Group, traces its origin to Dongbang Aluminum Industry Co., Ltd., established in 1966. The company changed its name to Lotte Aluminum in 1980. In 2020, the company expanded its business by adding a secondary battery cathode foil production line at its Ansan Plant No. 1.

Dongwon Systems, an affiliate of Dongwon Group focusing on comprehensive packaging and advanced materials, is rooted in Orion Optical, founded in 1977. Dongwon Systems was listed on KOSPI in 1994. In 2020, it expanded into the secondary battery materials and components business by adding a cathode foil production line for secondary batteries in Asan, Chungnam.

In 2021, Dongwon Systems also acquired MKC, a company supplying battery cans to domestic battery manufacturers. The company produces 2170-type cylindrical battery cans and has also secured technology for 4680 batteries, building a mass production system.

References

Kyobo Securities, "Aluminum Foil: The Unexpected Key Player," Aug 27, 2021
Hana Financial Investment, "It All Starts Here: The Core Material of Secondary Battery Cathode Foil," Sep 1, 2021
Korea IR Association, "Sam-A Aluminum: Re-rating as a Secondary Battery Aluminum Foil Supplier for EVs," Feb 6, 2023
Chosun Biz, "Cathode Foil Market Expands... Aluminum Foil Companies Ramp Up Production," Jun 2, 2023
Edaily, "Lotte Aluminum Seeks Fundraising After Spin-off... Accelerating Cathode Foil Business," Feb 26, 2024

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