Increased demand for AI data center ESS, changes in supply conditions due to the US policy of leaving China, 63% increase in battery foil sales in the second quarter… Negotiated additional price increase in 2027
Solus Advanced Materials (336370) increased the sales price of battery foil by more than 50% to major global customers. As demand for energy storage systems (ESS) for artificial intelligence (AI) data centers increases and the US supply chain policy to move away from China is strengthened, the price negotiation power of the battery foil market is changing. Solus Advanced Materials, which has been in the red despite increased sales, plans to use this price increase as an opportunity to turn a profit next year.
Solus Advanced Materials announced on the 19th that it increased the average selling price of battery foil in the fourth quarter of this year by more than 50% compared to the previous quarter. Battery foil is a thin copper film that collects current from the battery cathode and is used in electric vehicles and ESS batteries.
#### Increase in demand for ESS and rise in battery foil prices due to China exodus policy
The background to this price increase is a change in global battery demand. As demand for battery foil, which was centered on electric vehicles, expands to ESS for AI data centers, new supply sources are increasing.
U.S. regulations on the supply chain of Chinese battery materials are also having an impact. As securing a supply chain to replace Chinese companies becomes more important, price negotiation conditions are improving for battery foil companies with production facilities in North America and Europe.
Major domestic competitors are also pursuing price increases for some customers. Movements to normalize prices, including increases in battery foil processing costs, appear to be spreading throughout the industry.
Solus Advanced Materials has production bases in Hungary, Europe, and Canada, North America. In particular, the Canadian plant is considered a key production facility for establishing a local battery foil supply chain in North America.
#### Loss despite 63% increase in sales… Promoting surplus by 2027
Solus Advanced Materials' battery foil sales in the second quarter of this year were KRW 75 billion, up 63% from the same period last year. Increased supply to major North American customers and securing new customers led to sales growth.
Total sales on a consolidated basis were KRW 101.9 billion, up 31% from the same period last year. However, operating loss recorded 21.3 billion won. Due to continued burdens such as rising power costs and raw material prices, the increase in sales did not immediately lead to surplus.
Production facility utilization rates are steadily increasing. According to Eugene Investment & Securities, the operation rate of the battery foil plant in Hungary increased from 47% in the first quarter of this year to 67% in the second quarter. Securities firms predicted that the operation rate in the second half of the year would rise to 80%.
Previously, Byeong-Hwa Han, a researcher at Eugene Investment & Securities, evaluated in a report on July 27 that conditions for price negotiations are improving due to the diversification of client companies. The price increase negotiations that were ongoing at the time led to a more than 50% increase in the selling price in the fourth quarter.
Starting in the fourth quarter, the effect of the sales price increase will be reflected in performance. The company expects that the speed of improvement in profitability will accelerate as the fixed cost burden is eased due to increased production and increased operation rate.
Solus Advanced Materials is also discussing additional price increases for 2027 supply with major global customers. The company expects its battery foil business to turn into a quarterly operating profit before amortization (EBITDA) surplus early next year, and has set a goal of achieving a quarterly operating profit surplus within the year.
The battery foil industry has had difficulty securing profitability due to the slowing growth of the electric vehicle market and the burden of investment in production facilities. Recently, sales outlets are diversifying due to expanding demand for ESS and reorganization of the North American supply chain.
This price increase by Solus Advanced Materials is meaningful in that it adds to the price increase effect in the performance improvement trend that was dependent on sales volume expansion. Starting with the fourth quarter performance, changes in the profitability of the battery foil business are expected to be confirmed in concrete numbers.
Company officials evaluated this price increase as an important opportunity to improve the profitability of the battery foil business. Negotiations on additional price increases for next year's supply are also underway, and they expect to see an operating profit surplus within the year following an EBITDA surplus in early 2027.
