This article is by Na Sang-hyeon and read by an artificial voice.

Korea's battery material makers struggled in the second quarter, but industry watchers say conditions are aligning for a rebound in the latter half of the year. Companies are betting on the spillover benefits of the Donald Trump administration's push to cut reliance on China, the growth of the energy storage system (ESS) market and a recovery in lithium prices.

LG Chem's advanced materials division posted 1.06 trillion won ($762 million) in consolidated revenue and 70.9 billion won in operating profit in the second quarter, down 34.6 percent and 50.3 percent, respectively, from a year earlier, according to industry insiders on Monday.

Posco Future M's operating profit plunged 71.7 percent on year to 800 million won, while L&F's operating loss widened to 121.2 billion won.

The only standout was EcoPro BM, which saw revenue edge down 3.7 percent on year to 779.7 billion won, but operating profit surge 1,159.1 percent to 49 billion won, helped by gains from its investment in a nickel smelter in Indonesia.

Shares of EcoPro, the parent company of EcoPro BM and listed on the Kosdaq index, soared 4.77 percent from the previous session to close at 57,100 won on Tuesday. EcoPro BM rose 0.6 percent to finish at 134,800 won.

Boost from U.S. policy, ESS

Analysts say U.S. policy changes could provide a tailwind. The recently enacted One Big Beautiful Bill Act excludes battery materials produced by prohibited foreign entities from the U.S. government's Advanced Manufacturing Production Credit if they account for more than 60 percent of goods from 2026. The threshold rises to 85 percent by 2030.

With Korea the only country besides China with large-scale cathode production capacity, demand for Korean cathode materials could rise sharply.

At the same time, the U.S. ESS market is expanding. LG Energy Solution recently announced a 5.94 trillion won supply contract for lithium iron phosphate (LFP) batteries, which watchers believe is for Tesla's ESS projects.

The growth could spill over to material suppliers. L&F recently signed a memorandum of understanding with SK On to supply cathode materials for ESS-use LFP batteries, while Posco Future M declared its full-scale entry into the ESS market.

"The United States levying high tariffs on Chinese ESS products could weaken Chinese goods' price competitiveness," said Chung Won-suk, an analyst at iM Investment & Securities. "Korean companies are likely to see rapid market share gains in the U.S. ESS sector."

Lithium prices, which spiked to 580 yuan per kilogram in 2022 before plunging to the 50-yuan ($81) range in June due to oversupply from China, have rebounded to around 70 yuan after Beijing ordered some mines to halt production.

Since cathode prices are linked to raw material costs, the rebound could help lift sales and profits at material makers.

Risks remain

However, headwinds persist. Unlike battery cell makers that operate plants in the United States, material producers lack local production, leaving them exposed to tariffs. The Trump administration's planned elimination of EV subsidies could also dampen U.S. demand.

In response, firms are accelerating expansion in North America, particularly in Canada, which faces a 35 percent U.S. tariff but can still benefit from duty exemptions under the United States-Mexico-Canada Agreement if requirements are met.

Posco Future M plans to start operations next year at Ultium CAM, a joint venture with General Motors in Bécancour, Quebec. EcoPro BM and Solus Advanced Materials are also building cathode and copper foil plants in Quebec.

"As the United States moves to exclude China from its battery supply chain, Korean material makers are well-positioned to capture the U.S. market," said an industry insider. "But the volatility of the Trump administration's policy keeps uncertainty high."

This article was originally written in Korean and translated by a bilingual reporter with the help of ...