South Korean battery material manufacturers are starting join hands with Chinese businesses in order to grab upper hands of world’s biggest secondary battery markets. While reducing financial burden from investments, South Korean businesses can easily secure business network within China. Chinese businesses are also preferring to work with South Korean businesses as they can overcome limitations of their low technical skills in a short period of time.
POSCO recently signed a contract with China’s biggest cobalt manufacturer called Huayou Cobalt regarding construction of production corporates for precursors and cathode materials in Zhejiang. It is looking to directly manufacture and sell cathode materials in China and receive stable raw materials and precursors while strengthening position in Chinese markets.
COSMO AM&T is going to operate its plants in China in July at the earliest. It established a joint-corporate called Shangdong New Power COSMO AM&T with a Chinese business back in 2016 and it has been constructing production lines. LANDF, which is another South Korean cathode material manufacturer, signed a MOU (Memorandum of Understanding) with a Chinese secondary manufacturer called Jinhe last year and it has been sharing business network and production facilities with Jinhe. Ecopro, which is another cathode material manufacturer, is pushing to establish a joint-corporate with China’s biggest metal recycling business and a cathode material manufacturer called GEM. Ecopro is looking to finish establishment and investment for its joint-corporate by end of March.
Foosung switched its joint-partner that holds 49% of its subsidiary called Foosung Technologies (Nantong) from BASF to a Chinese business while announcing its plan of extension of Foosung Technologies (Nantong) in 2017. CIS, which is a secondary battery equipment manufacturer, established a joint-corporate with Haoneng Industries and it has strengthened its marketing on Chinese secondary battery manufacturers. Because there are many South Korean businesses that are looking to establish joint-corporates with Chinese businesses, it is likely that more joint-corporates will be established one after the other in 2018.
Although there are many reasons why South Korean businesses and Chinese businesses are looking to establish joint-corporates, biggest reason is Chinese markets that are the biggest secondary battery markets in the world. According to Benchmark Mineral Intelligence, output of Chinese lithium-ion batteries in 2020 is estimated to be 108GWh which will account for 62% of entire market shares in the world.
Fact that South Korean businesses can secure stable customers through their Chinese partners is another advantage. They can reduce production cost and strengthen their competitive edge in supply and demand of raw materials.
“Because it is burdensome to just strengthen production capabilities thoughtlessly by looking at Chinese markets, we have decided to obtain funds through our Chinese partners and utilize their business network in China.” said a representative for a joint-corporate on reasons to increase in number of partnership.
However a disadvantage of these partnership is that gap between technologies of Chinese and South Korean businesses will begin to become narrower as they continue to be active in sharing their technologies through joint-corporates. Reason why joint-corporates are mostly focused on material manufacturers is because Chinese businesses are looking to secure technologies in materials where they lack technical skills.
“Chinese businesses think that they can secure knowhows by operating joint-corporates.” said a representative for a different joint-corporate. “It is necessary for South Korean businesses to provide their technologies by utilizing their strengths as much as possible and to obtain profitable sources such as raw materials since it will be a matter of time when Chinese businesses will surpass South Korean businesses in relevant technologies.”
Staff Reporter Jung, Hyeonjung | iam@etnews.com