Korean membrane developers may benefit from Yunnan Energy’s capex cut in U.S.

[Courtesy of SEMCORP]

Yunnan Energy New Material Co., the world’s top membrane manufacturer based in China, has decided to scale down its investment plans for its U.S. factory by 70 percent due to the impact of the U.S. Inflation Reduction Act (IRA), which may benefit South Korean membrane companies like SK ie technology Co. (SKIET) and WCP, market watchers said.

According to sources on Monday, Yunnan Energy New Material recently disclosed a revised investment amount of $276 million for its US membrane factory. This marks a 70 percent cut from the previously set investment of $916 million in May of last year. The production capacity of the factory was initially planned to produce 1 to 1.2 billion square meters. However, the company has now scaled down the scope to produce only 700 million square meters of coated membrane.

The sharp reduction in Yunnan Energy New Material’s U.S. investment plans is interpreted as being influenced by the foreign equity of concern (FEOC) provisions under the IRA. Core components of batteries, such as electrolytes and membranes, are excluded from electric vehicle subsidies in the U.S. if products from Chinese companies are used, starting this year.

According to the U.S. Department of Energy, electric vehicles like the Blazer and Equinox, which use batteries from Ultium Cells, a joint venture between LG Energy Solution Ltd. and General Motors Co., are not eligible for EV subsidies. Ultium Cells utilizes electrolytes from the Chinese company Capchem and membranes from Yunnan Energy New Material.

“There is a high possibility that the membrane and electrolyte value chain of Ultium Cells will transition from China to Korea and Japan in the future,” said Kim Chul-joong, an analyst at Mirae Asset Securities.

With the easing of Chinese membrane companies’ market penetration into the U.S., Korean and Japanese membrane companies are expected to benefit. SKIET, aiming for operation by 2028, plans to announce the establishment of a membrane factory in North America in the first quarter of next year.

WCP is also considering the construction of a membrane production base in North America.