As Korea's stock market swung on the fallout from the Middle East conflict, secondary battery stocks, long weighed down by slowing electric vehicle demand, rebounded. The gains appear to reflect expectations of benefits as the war highlighted the importance of energy security and energy storage systems (ESS) are being reappraised as core infrastructure in the age of artificial intelligence (AI).
According to the Korea Exchange (KRX) on Apr. 13, from immediately after the war broke out through now (Mar. 3–Apr. 10), Samsung SDI shares jumped 17.9%. Over the same period, LG Energy Solution rose 4.8%.
Shares of secondary battery materials corporations also climbed. During the same period, L&F, a cathode materials specialist, rose from 112,400 won to 186,800 won, up 66.2%, while Fino surged 80.8%.
Until recently, shares related to secondary batteries had not escaped a downtrend. As the global electric vehicle market experienced a "chasm" (temporary demand stagnation) starting in the second half of 2023 and EV demand declined, battery production volumes also fell.
Secondary battery stocks, which had failed to gain a price momentum for gains, entered a new phase with the war. As the importance of strengthening energy security grew on the back of potential closures of the Strait of Hormuz, they found an opportunity to rebound.
Jung Hyun-jong, an analyst at Korea Investment & Securities Co., said, "The Middle East conflict was a risk event that reminded the world of the global economy's high dependence on oil and the importance of energy security," and "at the same time, it serves as a catalyst for change to diversify energy sources and energy supply chains."
Rising demand for energy storage systems (ESS) driven by increased renewable energy installations and the spread of AI data centers also provided an opportunity for secondary battery shares to recover.
An ESS is a power device that stores electricity produced and allows it to be used when needed.
Electric vehicle (EV) demand, the key to improving conditions for the secondary battery sector, is also improving, centered on Europe. According to global market research firm EV Volumes, EV sales in Europe in Feb. this year were 335,000 units, up 25% from a year earlier.
With the recent announcement of the IAA (Industrial Acceleration Act) by the European Union (EU), analysis suggests EV sales in the EU are expected to increase going forward, raising hopes for improved earnings by Korean companies.
The IAA applies a "manufactured within the region" requirement to public procurement and subsidies in strategic industries such as automobiles and steel, as well as in eco-friendly industries, potentially benefiting domestic corporations that have production bases within the EU.
Kim Hyun-su, an analyst at Hana Securities, said, "Given the policy direction of strengthening regional supply chains, Korean battery corporations with local production capacity (CAPA) are expected to benefit," adding, "All three Korean cell makers have production bases in Europe."
Lee Yong-wook, an analyst at Hanwha Investment & Securities, also said, "With the U.S. battery energy storage system (BESS) market opening in the second half of last year and Europe's policy benefits such as the IAA, the visibility of a recovery has increased," and "if only the EV market's rebound elasticity strengthens depending on the U.S. political landscape going forward, a full-fledged rebound phase will unfold."