Battery Industry Day held Thursday
'ESS boom, European growth lift cell makers' earnings'
'Materials sector needs more time to recover'
'Association to work directly with government, Assembly on support'
'Posco Future M expects 2.7 million tons in cathode orders this year'
The chairman of the Korea Battery Industry Association said Thursday that while domestic battery cell makers have begun to recover, more time is needed before the improvement spreads to materials and components suppliers. Eom Ki-cheon also called on the government to introduce direct support measures for loss-making companies that cannot immediately benefit from the production tax credit it is pursuing.
Eom made the remarks at a press briefing held ahead of the sixth Battery Industry Day ceremony at Josun Palace Hotel in Gangnam-gu, Seoul, where he assessed the current state of the domestic battery industry and the outlook for next year.
"Cell makers have been turning a profit since the second and third quarters of this year, but materials and components suppliers are still in the red — it is hard to say the battery industry has fully recovered," Eom said.
Even as growth in the energy storage system (ESS) market and a rebound in European electric vehicle demand have lifted earnings at some battery manufacturers, the warmth has yet to spread across the broader materials and components supply chain, Eom said.
Third-quarter results from domestic battery makers illustrate the divide. LG Energy Solution posted operating profit of 756 billion won ($566 million), and Samsung SDI recorded 407.8 billion won, while SK On reported an operating loss of 80.5 billion won.
Profitability at materials firms is expected to remain weak. Securities analysts forecast third-quarter operating profit of 16.1 billion won for Ecopro BM and 19.8 billion won for Posco Future M — each roughly 70 percent below the year-earlier level. L&F is projected to post an operating loss in the range of 11.6 billion won to 44.7 billion won.
Eom said the surge in ESS demand driven by expanding AI data center investment has had a positive effect on the domestic battery industry, even as the US electric vehicle market works through a chasm of temporary demand stagnation. Growth in the European market has also contributed to improved profitability at cell makers, Eom added.
"Once the three cell makers start turning a profit, it takes time for that effect to spread to suppliers of materials and components," Eom said, expressing confidence that earnings improvement would eventually extend across the battery industry ecosystem.
Eom identified shipment volume and factory utilization rates as the key indicators for gauging the industry's recovery. "In manufacturing, shipments and utilization rates will be the measures of a company's profitability," Eom said. "Over the longer term, we need to watch order backlogs, which translate into earnings two to three years down the line."
On the government's planned domestic production incentive tax scheme, Eom offered a broadly positive assessment while stressing the need for supplementary measures for companies still running at a loss.
The scheme would provide tax benefits to companies producing strategic industrial goods such as batteries in South Korea. Because the incentive works as a deduction from corporate tax liability, however, companies with no taxable income — those still in the red — cannot immediately feel its effect, a limitation that has drawn criticism from the industry.
"Many association members, including smaller firms, are still in the red," Eom said. "Companies that cannot benefit from the tax credit need practical support, such as direct cash refunds."
"The association will take the lead, working with the National Assembly and the Ministry of Trade, Industry and Energy, to secure direct support for loss-making companies," Eom added.
The government plans to discuss ways to strengthen the effectiveness of the domestic production incentive scheme with the industry and to finalize a package of battery competitiveness measures before the end of the year.
Eom also expressed optimism about Posco Future M's future performance. "Most automaker projects were suspended or put on hold two to three years ago because of the EV chasm, but they began restarting in the second half of last year," Eom said. "Posco Future M has signed cathode material supply contracts totaling about 1.5 million tons from the second half of last year through now."
"If we close two or three more deals by year-end and secure an additional roughly 1.2 million tons, total orders are expected to reach about 2.7 million tons," Eom added.
"Order volumes are typically delivered two to three years out, but some of the contracted supply could begin as early as the second half of next year," Eom said. "We expect shipment volumes and utilization rates to rise from the second half of next year, with sales and utilization picking up in earnest from 2028."
Eom also addressed a recent controversy over the association's internal governance.
"I take it very seriously as chairman, and I believe the association must reinvent itself for the sake of its members," Eom said. "We are currently about two to three months into an organizational review being conducted by an independent third party."
"We will accept all findings from the review, carry out an organizational restructuring, and handle any wrongdoing fairly and by the book," Eom said. "We will emerge as a new association that truly serves its members."
"We expect comprehensive results around next month," Eom said, adding that the matter had been raised during the national audit and that the Ministry of Trade, Industry and Energy was also conducting its own inspection. "There will be an opportunity to present a full account once everything is compiled," Eom added.
kwater@heraldcorp.com
