South Korea's copper foil trio eyes return to profit next year as EV slump eases

Copper foil produced by SK Nexilis. [SKC]

South Korea's three major copper foil makers — Lotte Energy Materials, SKC and Solus Advanced Materials — are narrowing their losses after being hit hard by a prolonged slump in electric vehicle demand. New business lines are gaining traction, and the EV market itself is showing signs of emerging from its downturn. If the positive momentum holds, all three companies are expected to return to profitability next year.

According to securities industry estimates, Lotte Energy Materials is forecast to post an operating loss of 17.6 billion won ($12.1 million) for the second quarter of this year, a 43.5% improvement from the 31.1 billion won loss in the same period last year. SKC, which has already reported its results, posted a loss of 14.4 billion won — an improvement of 79% from the 68.5 billion won loss a year earlier. Solus Advanced Materials recorded an operating loss of 21.3 billion won, roughly in line with its 20.8 billion won loss in the second quarter of last year.

The improvement across all three companies reflects strong contributions from new business areas. As the EV slump dragged on, SKC and Solus Advanced Materials shifted focus toward copper foil for energy storage system (ESS) batteries, while Lotte Energy Materials invested in circuit foil — a type of copper foil used in AI semiconductors. With AI-driven demand pushing up appetite for both ESS and semiconductors, sales of ESS battery copper foil and circuit foil rose accordingly.

A recovery in the European EV market also contributed to the improved results. Electric vehicle sales in Europe reached about 2.45 million units in the first half of this year, up 31% from the same period last year, while battery installations over the same period rose 29% to 131 gigawatt-hours. Renewed purchase subsidy programs in several European countries helped drive the growth. Riding that momentum, copper foil makers began to see a gradual pickup in EV-related sales. Most notably, SKC's second-quarter sales of copper foil for electric vehicles rose 28% quarter-on-quarter.

Factory utilization rates at all three companies have also started to climb. Solus Advanced Materials' Hungary plant ran at 73% capacity in the second quarter, up from 53% in the first quarter. As of the first quarter, utilization rates at SKC's copper foil subsidiary SK Nexilis and at Lotte Energy Materials stood at 69.6% and 66.6%, respectively — up 10.5 and 12.7 percentage points from a year earlier.

An exterior view of Lotte Energy Materials' No. 2 factory in Iksan. [Lotte Energy Materials]

If the EV market continues to recover in the second half of the year, the three companies' losses are expected to narrow further. The outlook is broadly positive. Solus Advanced Materials projected in its earnings materials that European EV sales in the second half of this year would reach about 2.98 million units and battery installations would hit 160 gigawatt-hours — both up 36% from the same period last year. North American EV sales are also expected to grow 5% over the same period.

However, a return to profit this year still appears out of reach for all three. "It takes time for a recovery in upstream industries like EVs to fully flow through to downstream suppliers," an industry official said. Securities analysts expect SKC, Lotte Energy Materials and Solus Advanced Materials to remain in the red this year, with projected full-year operating losses of 63.2 billion won, 38.7 billion won and 75.4 billion won, respectively.

Solus Advanced Materials' battery foil factory in Hungary. [Solus Advanced Materials]

Industry watchers expect all three companies to turn profitable next year, as the EV market is seen fully returning to a normal growth trajectory and demand for ESS battery copper foil and circuit foil shows no sign of cooling. A return to profit would mark the end of a prolonged losing streak — four years for Lotte Energy Materials, five for SKC and six for Solus Advanced Materials.

SKC said at its second-quarter earnings conference call on Monday that it is "operating with the goal of returning to profitability next year."

yeongdai@heraldcorp.com