EV battery market to recover from 2H 2024: Samsung SDI

South Korean battery firm Samsung SDI expects the electric vehicle (EV) battery market to gradually recover from the second half of 2024 after weak sales and operating profits in October-December.

Samsung SDI's fourth-quarter battery revenue fell by 6.4pc both from a quarter and a year earlier to around 5 trillion won ($3.8bn). Its battery segment's operating profit tumbled by 45pc on the quarter and 37pc on the year to W226bn. Battery sales for EVs were supported because of a sustained expansion, while energy storage system (ESS) battery sales fell owing to declining utility sales, said the firm. Sharp falls in operating profit were because of the "tentative profitability effect by raw materials price decrease".

Its total revenue in 2023 came in 13pc higher at W22.7 trillion, with battery segment revenue 16pc higher at W20.4 trillion. But operating profit was down by 9.7pc to around W1.6 trillion.

Fellow battery maker LG Energy Solution (LGES) similarly booked lower sales of W8 trillion in October-December, down by 6.3pc on the year and 2.7pc on the quarter. Declining prices of battery metals and EV makers' conservative inventory management dragged down sales, said LGES' parent company LG Chem. Operating profit rose by 43pc on the year to W338bn, but fell by more than 50pc on the quarter.

An environment of prolonged elevated interest rates and global recession is expected to weigh on the EV battery market this year, estimated to be a $185bn market in 2024, said Samsung SDI in its latest quarterly activities report. But a gradual recovery will likely kick in during the second half of the year, when benefits from lower interest rates start being realised. The EV battery market will still dwarf the ESS market, estimated at $26bn this year, with the latter propped up by continued growth from the North America, EU and China markets alongside new demand from South Korea and South America.

The US Federal Reserve kept its target interest rate unchanged at 5.25-5.5pc this week, a 23-year high, and said a shift to rate cutting requires "greater confidence" that inflation is on a sustainable course of slowing. Chances of the Fed maintaining the current rate at the next meeting on 20 March is much larger at 64.5pc than an estimated 35.5pc of a rate cut, with 91.6pc chance of rate cuts happening at the subsequent meeting on 1 May, according to CME's FedWatch tool, which tracks Fed funds futures trading.

Bank of Korea (BoK) held its interest rates steady at 3.5pc in January for the eighth consecutive time, despite improving domestic economic growth, because of persistent high inflation and a shaky outlook. BoK's board on 11 January said it will maintain a restrictive policy stance for a sufficiently long period of time until it is confident of inflation converging to the target level.

By Joseph Ho