Trump's China tariffs reshape US ESS market, offer boon for Korean batteries
Oregon-based Powin, once a top-three ESS integrator, filed for bankruptcy after tariff-driven costs on Chinese battery imports surged, exposing how vulnerable US firms are to foreign supply shocks.
The shift, driven by Donald Trump's push to curb Chinese dominance, is opening the door for Korean firms to ramp up local production and expand their US footprint.
Leading US ESS firm collapses
According to recent media reports, Powin, headquartered in Oregon, filed for Chapter 11 bankruptcy protection last month at a court in New Jersey after piling on more than $300 million in debt. The Chapter 11 filing will enable the company to operate under court supervision while restructuring its finances.
The main factor behind Powin's collapse was its inability to find alternative suppliers for battery cells outside of China. The company predominantly sourced lithium iron phosphate, or LFP, battery cells from Chinese battery-makers, including CATL, and integrated them into its ESS products.
Powin has reportedly suffered from project delays or even renegotiations with clients due to supply chain disruptions arising from its dependence on China-focused battery sourcing.
Last month, the company said in a statement that its 'significant financial challenge' was 'reflective of ongoing headwinds in the broader energy storage industry.'
Chinese-made ESS batteries imported into the US are currently subject to a 40.9 percent tariff, which is anticipated to rise to 58.4 percent next year.
LG leads market changes
Industry insiders indicate that while Trump's strategy to curb US reliance on the Chinese battery supply chain may come at the expense of domestic companies like Powin, it is likely to open doors for Korean battery-makers.
Notably, LG Energy Solution, the only company capable of manufacturing LFP ESS cells in the US at its Michigan facility, is moving fast to capitalize on this emerging market with no clear leader.
The company was recently reported to have secured a 6 trillion won ($4.3 billion) deal to supply LFP batteries for Tesla's ESS products. Tesla was considered a promising US company to start LFP cell manufacturing for its own ESS lineups, such as Megapack and Powerwall, at its Nevada facility. But its production capacity will apparently not be enough to meet market demand.
During its second-quarter earnings conference call, LG Energy Solution also hinted at the possibility of converting portions of the production lines at its joint venture facilities in the US with global automakers -- likely the second plant with General Motors in Tennessee -- from electric vehicle manufacturing to ESS. It aims to increase its capacity from a potential 17 gigawatt-hours by the end of this year to 30 gigawatt-hours by 2026.
The Tennessee plant, with an annual capacity of 50 gigawatt-hours, could potentially secure an additional 10 gigawatt-hours for LFP production. This is based on last year's 40 percent operational rate and the potential allocation of half its capacity to LFPs.
'Utilizing a joint venture facility with GM is an efficient move to streamline capital expenditures, while swiftly addressing the fast-growing demand for ESS,' said Lee Ho-geun, an automotive engineering professor at Daeduk University. 'This strategy could buy time for LG to prepare its third joint plant, acquired from GM, for ESS battery production.'
On Thursday, Samsung SDI announced that it will convert a portion of the EV production lines at its joint venture plant with Stellantis in Indiana into ESS lines, with large-scale production for nickel, cobalt and aluminum batteries set to start this year. It seeks to produce LFP ESS cells next year.
SK On is also gearing up for large-scale manufacturing of LFP cells and has signed a cathode supply deal with L&F Co. for the North American market.
Korean companies are looking to solidify their presence in the US with large-scale, containerized ESS, spurred by the rapid expansion of data centers and the increasing demand for reliable electricity supply solutions.
Among the ESS products, ranging from battery packs to containerized systems, containerized ESS is gaining momentum, driven by the rapid expansion of data centers and the increasing demand for reliable electricity supply solutions.
'Compared to small battery packs for residential applications, containerized ESS are more effective in boosting sales and profits because they are considered value-added products,' said an industry source familiar with the matter on condition of anonymity. 'These systems are equipped with various features, including safety mechanisms that control humidity and temperature to protect the battery systems within the container.'
Samsung SDI's flagship Samsung Battery Box 1.5, a fully equipped, ready-to-deploy product, is housed within a 20-foot container using nickel, cobalt and aluminum cells, with an energy capacity of approximately 5.26 megawatt-hours. LG Energy Solution's JF2S DC Link, similar in size to Samsung Battery Box 1.5, offers a capacity of approximately 5 MWhs. However, it is powered by more cost-effective LFP batteries.
hyejin2@heraldcorp.com
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