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Copper foil products manufactured by SK Nexilis. (Photo: SK Nexilis) |
[Alpha Biz= Kim Jisun] As of May 19, industry sources report that Lotte Energy Materials posted consolidated revenue of KRW 158 billion and an operating loss of KRW 46 billion for the first quarter of 2024. Compared to the same period last year, revenue fell by 34.6%, and the company swung to an operating loss. Copper foil—only about one-thirtieth the thickness of a human hair at roughly 10 micrometers—is a key raw material used in anodes for lithium-ion batteries.
SKC’s copper foil subsidiary SK Nexilis also struggled, recording Q1 revenue of KRW 98.7 billion and an operating loss of KRW 34.6 billion. Similarly, Solus Advanced Materials reported an operating loss of KRW 15.3 billion, extending its loss-making streak to 14 consecutive quarters.
These losses reflect sluggish electric vehicle (EV) sales, a key downstream industry. Battery makers—customers of copper foil producers—have responded to the EV slowdown by focusing on inventory reduction. The situation has been exacerbated by aggressive pricing from Chinese manufacturers, who benefit from lower electricity costs, worsening the business environment for Korean firms. In 2023, Lotte Energy Materials and SK Nexilis operated at factory utilization rates of just 34.3% and 64.7%, respectively. High fixed costs for overseas plants added further strain.
Electricity cost is the most critical factor in copper foil production. To mitigate this, Korean firms have built plants in countries like Malaysia and Hungary, where electricity rates are more than 30% lower than in Korea.
Amid these challenges, protectionist trade policies under a potential second Trump administration could serve as a lifeline. Tariffs on Chinese copper foil—a major competitor—have risen sharply. The U.S. recently increased its tariff rate from 26% to 46%. In contrast, copper foil from Korea remains tariff-free, while Malaysian copper foil faces only a 1% tariff.
Profitability may improve in the second half of the year as overseas plant utilization rates rise. SKC’s Malaysian plant, for example, has increased its utilization rate from the 30% range last year to 50% currently. Lotte Energy Materials expects its domestic and overseas factory utilization rate to climb from the mid-40% range in Q1 to over 80% after Q3.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
