From Ternary to LFP... ESS Boom Drives Major Shift in K-Battery Strategy

Three battery makers expand LFP production for ESS
Materials companies also restructure businesses, strengthening LFP supply chains
POSCO Future M and L&F sign a series of supply contracts

As the energy storage system (ESS) market grows rapidly, the center of gravity in South Korea's battery industry is shifting from conventional ternary (NCM) batteries to lithium iron phosphate (LFP) batteries. As the three battery makers expand LFP production for ESS, large-scale supply contracts with cathode material companies are following one after another, accelerating a broad restructuring of the battery industry's business structure.

A view of POSCO Future M's cathode material plant in Industrial Complex 4 at Yeongil Bay, Pohang, North Gyeongsang Province. POSCO Future M

According to industry sources on October 18, battery manufacturers are working to expand product lines tailored to ESS. Samsung SDI signed an LFP cathode material supply contract worth approximately KRW 1.6 trillion with L&F in March, followed by a long-term supply contract worth approximately KRW 6 trillion with POSCO Future M on October 6. LG Energy Solution and L&F are in talks on supplying LFP cathode materials, but the timing and scale of any contract have not yet been finalized. Last month, SK On also signed separate ESS LFP cathode material supply contracts worth approximately KRW 1.1 trillion with POSCO Future M and KRW 160 billion with L&F.

The biggest reason LFP batteries are attracting attention is the growth of the ESS market. Demand for ESS is rising amid increasing power consumption driven by the spread of artificial intelligence (AI) data centers and the wider adoption of renewable energy. This is drawing attention to LFP batteries, which offer competitive pricing and a long service life. Although their energy density is lower than that of NCM batteries, they cost less and experience relatively little performance degradation even after repeated charging and discharging, making them suitable for ESS, where weight and volume constraints are less significant.

Materials companies, too, have begun a sweeping restructuring of their businesses, including converting some NCM cathode material production lines to LFP production.

POSCO Future M recently converted part of its high-nickel cathode material production line at its Pohang plant to produce LFP cathode materials and plans to begin supplying them in volume from the end of this year. Separately, it is building a dedicated LFP cathode material plant with annual capacity of up to 50,000 tons at Industrial Complex 4 at Yeongil Bay in Pohang. It is converting existing production lines and expanding new facilities, with mass production targeted for next year.

L&F has also moved to expand LFP supply, moving beyond its existing business structure centered on ternary cathode materials. It recently filed a trademark application for a new corporate identity and broadly listed products and services related to secondary batteries, including cathode active materials, LFP and LFP carbon composites, lithium manganese iron phosphate (LMFP) and LMFP carbon composites, as designated goods and services.

EcoPro BM, by contrast, is focusing on strengthening the competitiveness of its existing core business in high-nickel ternary cathode materials. It recently announced plans to invest a total of KRW 1.5 trillion in a nickel smelter project in Indonesia. Its strategy is to respond to the expansion of the LFP market while maintaining the competitiveness of ternary cathode materials over the medium to long term, taking margins and energy density into account.

Industry analysts say companies are likely to continue taking a strategic approach that maintains the competitiveness of existing NCM batteries while capturing ESS demand, given the cost of new investments and intense price competition.

"Price competition with Chinese companies is fierce, and investing in new production facilities and converting existing plants also entail costs," an industry official said. "The strategy is closer to diversifying business portfolios while maintaining the competitiveness of existing ternary batteries."

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