The domestic battery materials industry is aiming to recover its profitability, mainly focused on cathode materials, but concerns about profitability are growing as global lithium prices increase. Concerns about tariffs and a slowdown in electric vehicle demand persist.
According to the Shanghai Futures Exchange on the 13th (local time), the price of lithium carbonate futures has fallen to 65,633 yuan per ton, about a 17% decline from February (79,000 yuan). This represents a decrease to approximately one-ninth of the price that neared 600,000 yuan per ton in November 2022.
The decline in lithium prices has deepened the concerns of the battery materials industry. Companies producing cathode materials using lithium typically sign supply contracts linked to lithium prices. Even if they purchased lithium at higher prices in the past, they are currently selling cathode materials at lower prices based on the current market price, leading to a decline in revenue.
The slowdown in electric vehicle demand is lasting longer than expected, leading to a surplus in lithium supply. Despite the acceleration of lithium mine development worldwide amid the growing electric vehicle market, current demand is failing to keep pace with supply. Global investment bank UBS has projected that this situation could persist until 2027.
In the first quarter of this year, battery material companies returned to profitability compared to the previous quarter, but they are still performing poorly compared to last year. ECOPRO BM reported an operating profit of 2.3 billion won in the first quarter, a decrease of about 66% from 6.7 billion won last year. POSCO FUTURE M recorded an operating profit of 17.2 billion won, a 55% decrease from the same period last year. L&F continued to report an operating loss of 140.3 billion won.
Uncertainties surrounding U.S. tariff policies, delays in new vehicle launches, and risks from aggressive low-cost imports from China are likely to persist for a while. The potential direct impact on material companies due to tariff imposition is limited, but there are concerns about long-term disadvantages resulting from rising electric vehicle prices.