The lithium-ion battery separator (LiBS) utilization rate at SKIET, a subsidiary of SK Innovation specializing in display and battery materials, has been slow to recover, with the operation rate at the Jeungpyeong plant in South Korea hovering around 50% as of Q1 2023. This follows a year when the plant’s utilization rate averaged only around 40%.
Yet, due to improved utilization rates at other global plants, the company’s separator business logged an operating profit of $1.35 million in Q1, marking a return to surplus. SKIET’s company-wide performance for the period noted $107 million in sales and an operating loss of $2.8 million, improving by 6.5% and 51.9% respectively, year on year.
In stark contrast to the Jeungpyeong plant, the company’s facilities in Changzhou, China, and Slask, Poland, reported utilization rates of 95% and over 70% respectively. Approximately 90% of all separators produced are destined for electric vehicle batteries, with the remaining 10% utilized in smaller batteries for devices such as smartphones, tablets, and laptops.
To expand separator supply, SKIET needs to increase its volume of EV battery customers. As part of this strategy, the company is exploring local supply options for a major Chinese client planning to expand into Europe. SKIET recently signed a Memorandum of Understanding (MOU) with China’s Xinwangda to bolster cooperation on battery separator supply, with deliveries expected to commence as early as H1 2023, or in Q3 at the latest.
The company is also considering investment in North American separator production facilities in response to the US Inflation Reduction Act (IRA). Under the Act, from 2027, 80% (rising to 90% in 2028) of separators used in electric vehicles eligible for subsidies must be manufactured in the US. SKIET will make a decision on North American entry by 2024, with the potential to begin local separator production by 2027.
Consequently, SKIET’s overall separator production capacity is set to rise. By 2025, the company aims to produce 4.02 billion square metres of separators, a significant increase from its initial target of 2.73 billion square metres in 2024. For 2023, it plans a production capacity of 1.87 billion square metres.
SKIET is also focusing on improving production speed alongside increasing the production line. The company will first enhance the production speed of the Polish plant by 20-30%. For a potential new North American plant, SKIET is considering a method to increase both the width of the separator and production speed, targeting to produce 200 million square metres of separator per production line. Through the adoption of smart factories, the company also aims to reduce on-site manpower by 30 to 50%.
In terms of capital expenditure, SKIET plans to maintain a conservative approach this year, particularly after its original plan of $750 million was not fully executed last year, reaching about $585 million. This year’s capital expenditure is projected to be between $450 million and $525 million, focusing on expansion at the Polish plant. The company does not anticipate further investment until confirmation of the North American plant.