Ecopro BM bets W765b on nickel, targeting 20% margins

Ecopro BM is positioning itself to become a nickel company. Despite shareholder dilution concerns stemming from a 1.2 trillion won ($845 million) rights offering, the cathode material maker is pressing ahead with a major bet on nickel smelting — aiming to prove the investment's worth through margins in the 20% range, roughly four times higher than those of its cathode business, which currently accounts for more than 99% of sales.

An analysis of Ecopro BM's medium- to long-term financial targets released Tuesday shows the company expects its nickel smelting business to generate sales of 2.5 trillion won by around 2030, with operating profit reaching 530 billion won — an operating margin of 21.2%.

By comparison, the cathode business targets sales of 9 trillion won and operating profit of 490 billion won over the same period, implying a margin of just 5.4% — about a quarter of the nickel unit's projected profitability. If both targets are met, the nickel smelting business would account for 52% of the company's total operating profit of 1.02 trillion won.

The push into nickel comes as competition in the cathode material market intensifies. The fast-growing lithium iron phosphate, or LFP, segment in particular is dominated by Chinese manufacturers whose overwhelming price competitiveness makes it difficult for Korean producers to secure adequate margins.

Ecopro BM is developing LFP cathode materials for ESS applications, but has left related revenue out of its 2030 projections, concluding that achieving profitability in that segment will be difficult.

Nickel smelting, by contrast, offers both lower raw material procurement costs and direct smelting profits — a combination the company expects to support high margins. Nickel already accounts for more than 50% of the manufacturing cost of Ecopro BM's high-nickel cathode materials.

Overseas precedents support the case for strong profitability. Indonesian nickel smelter Harita Nickel posted an operating margin of 42.8% in 2022, when nickel prices surged, and maintained high margins even as mineral prices fell — 29.4% in 2023, 26.5% in 2024, and 28.3% last year.

Whether Ecopro BM can raise the full 1.2 trillion won it originally planned remains uncertain, however, as its share price has fallen sharply. The company set a planned issue price of 121,200 won per share to raise approximately 1.2 trillion won, but the stock — which had been trading around 150,000 won before the large-scale rights offering was announced — at one point dropped to around 80,000 won. If the final issue price comes in below the planned level, the actual proceeds will fall short as well, with the total potentially slipping below 1 trillion won.

Should proceeds fall short of expectations, Ecopro BM said it will prioritize investment in the Indonesian nickel smelter and cover any shortfall in facility investment and operating funds through internal resources.

Nickel price trends are another variable that will shape long-term profitability. Nickel prices fell roughly 40% from around $26 per kilogram in 2022 to around $15 last year before rebounding this year. A sustained price recovery would boost both sales and margins in the smelting business. Analysts project a gradual medium- to long-term price recovery, citing supply constraints such as tighter mining quota management in Indonesia.

Meanwhile, Ecopro BM filed a voluntary amendment to its rights offering disclosure with the Financial Supervisory Service on Friday. The company plans to direct 765 billion won — 64% of the total proceeds — to the BNSI nickel smelter in Indonesia, with 150 billion won each earmarked for its factory in Hungary and domestic facility investment, and 135 billion won set aside for operating funds.

BNSI is a smelter under construction in Sulawesi, Indonesia, with an annual production capacity of 90,000 tons. Total investment in the project stands at approximately $1.84 billion, and the Ecopro group plans to secure a 39% stake, making it the largest shareholder. As of the end of last month, construction was 39.2% complete. The first reactor is scheduled for a trial run in December, with construction set to wrap up in March next year.

"Securing nickel from the smelting stage — the largest cost component in cathode material production — could significantly strengthen cost competitiveness," said Lee Won-jae, a researcher at the Korea Investor Relations Association. "This will also be an important competitive advantage in future global cathode material contract competitions."