As prices for lithium, a key mineral used in electric-vehicle battery manufacturing, have recently strengthened, expectations are growing for improved profitability among Korea's battery makers. That's because lithium purchased when prices were low helps reduce costs.
According to the Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) Korea Mineral Resources Information Service (KOMIS) on the 21st, lithium traded at $16.66 per kg on the 14th, the most recent date, marking the highest level since then since Apr. 2024. Lithium prices moved below the $10 level until Nov. 10 last year, but have since been on an upward trend.
Lithium prices were weak for about two years starting in 2023. Demand fell as the electric-vehicle chasm (temporary demand slowdown) persisted and downstream industries suffered a slump.
However, prices began to rebound in the second half of last year as mining at some lithium mines was halted and inventories declined. China's CATL, the world's largest battery maker, halted mining in Aug. last year at a Jiangxi province mine that accounts for 8% of China's lithium production.
Rising demand for lithium driven by the expansion of the energy storage system (ESS) market also pushed up prices. Industry outlet Argus Media reported, "Demand for ESS to stabilize power grids is surging as solar and wind installations expand," adding, "The lithium market is entering a new growth cycle."
On top of that, the Chinese government's announcement that it will abolish export subsidies paid to domestic battery companies starting in Apr. is cited as another factor lifting lithium prices. As Chinese battery makers move to maximize product output before subsidies are cut off, demand for lithium, a materials and supplies input, is seen to have increased.
Rising lithium prices are seen as a boon for battery-related companies. Because they secured lithium at low prices, they can expect a "lagging effect." The lagging effect refers to gaining profits by selling products made with materials and supplies purchased cheaply when raw-material prices later rise.
Battery materials companies such as LG Chem, POSCO FUTURE M, and EcoPro BM can produce cathode materials using lithium bought at low prices and sell them at prevailing market rates. Battery manufacturers including LG Energy Solution, Samsung SDI, and SK On are also expected to benefit from the lagging effect because they receive lithium at set prices from producers in Chile and Australia.
A battery industry official said, "Battery manufacturers are reflecting the prices of key minerals used in production in their product selling prices," adding, "For this reason, battery-related stocks often rise when lithium prices go up."