[Weekend Money] What Will Be the Key Variable for Secondary Battery Stocks in the Second Half?

The key variable for the secondary battery industry in the second half of this year is expected to be the utilization rate. Although energy storage systems (ESS) are projected to continue their strong growth, it will likely be difficult for this to offset the sluggish performance of electric vehicle (EV) batteries.

According to SK Securities, secondary battery stocks rebounded in the first half of this year on the back of ESS momentum and expectations of turning a profit, but have shown weakness again since this month. Hyungwoo Park, a researcher at SK Securities, explained, "The rebound in results driven by ESS remains uncertain compared to IT companies, and despite rising oil prices, EV purchases in North America have been sluggish. The rebound in lithium and metal prices is also putting margin pressure across the entire value chain, as cell makers find it difficult to pass on price increases. The impact of the discontinuation of U.S. EV purchase subsidies is also ongoing." The combined global market share of the three major Korean cell manufacturers fell from 19% in the first quarter of last year to 15% in the first quarter of this year.

Looking ahead to the second half of the year, the utilization rate is forecast to be the key variable for the industry. Park noted, "The combined production capacity (CAPA) of the three domestic cell makers will decrease by 18 gigawatt-hours (GWh) year-on-year, while shipments are expected to increase by 10 GWh due to the impact of ESS. Although the degree of oversupply will ease, the majority of peer companies are expected to see their utilization rates remain in the high 40% to high 70% range in the second half. Companies with a greater rebound in utilization rates are promising, and aluminum foil and copper foil are the most preferred materials."

While ESS is expected to record high growth, analysis indicates that it will be difficult to fully compensate for weak EV demand. Park commented, "ESS battery demand is expected to show a compound annual growth rate (CAGR) of about 27% from 2024 to 2026, and is projected to maintain a global CAGR of about 20% and about 25% in the United States from 2026 to 2030. However, the projected demand for EV batteries in 2026 has been revised down by approximately 400 GWh, whereas the upward revision for ESS is only about 100 GWh. This makes it clear that ESS growth alone cannot offset the sluggishness in EVs." He added, "ESS profitability is also not assured. Considering the potential for domestic cell makers to convert EV cell CAPA to ESS and the additional utilization of idle CAPA, price competition among the three major cell makers could intensify. Additionally, ESS customers' demands for sharing the Advanced Manufacturing Production Credit (AMPC) are also putting pressure on profitability."

The gap with China is expanding beyond market share into the realm of technology. In 2024, China's market share in the global EV battery market was in the high 60% range, but it has now risen to the high 70% range. The presence of Korean companies within their major customers is shrinking accordingly. Park pointed out, "While China's CALT is aiming to equip the first vehicle with a mass-produced sodium battery in the second half of this year, the mass production timing for sodium batteries by domestic cell makers such as LG Energy Solution is still several years away, with at least a three- to four-year gap. If the pattern of being late to the market, as seen with lithium iron phosphate (LFP) batteries, is repeated with sodium batteries, the gap may solidify not only at the level of market share but also in battery chemistry itself."

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