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| Lotte Aluminium manufacturing plant in Ansan, Gyeonggi Province / Korea Times file |
Lotte Aluminium, the battery foil manufacturing affiliate of Lotte Group, is coming under criticism for using unauthorized equipment for years to make the key component supplied to the country's leading battery makers, according to industry officials, Thursday.
Whether the latest scandal will deal a blow to its expansion drive in the U.S. and Hungary remains to be seen. Lotte Aluminium and Lotte Chemical, another Lotte subsidiary, jointly invested 330 billion won ($251 million) to establish LOTTE Aluminium Materials USA in January. The battery foil manufacturing facility is expected to have an annual production capacity of 36,000 tons by 2025. Lotte Aluminium has a manufacturing facility in Hungary with an annual production capacity of 18,000 tons. The firm said last year that it will double the figures after investing 110 billion won.
Lotte Aluminium maintains that the quality of the final products was not compromised, stressing that the products in question account for only 35 percent of the total.
However, the move downplaying the gravity of the irregularity concerns has been met by criticism that the broken trust between business partners will not be easy to restore.
Some say Korea's reputation as a global battery manufacturing powerhouse will be undermined. Batteries produced by LG Energy Solution, Samsung SDI and SK On, the battery manufacturing affiliates of LG Group, Samsung Group and SK Group, respectively, accounted for about 25 percent as of the first half of last year, down significantly from around 50 percent in 2020.
"We are looking into the situation," said an official at a major battery maker. "It is too early to say conclusively what course of action we would pursue, other than that we are monitoring the situation closely."
Another industry official said buyers were caught off guard, essentially being kept in the dark for years.
"We are the victim in this case," the official said on condition of anonymity. "We have shipped back orders that were problematic. More will be decided upon findings of ongoing investigations."
He said the broken trust will become an issue in future business dealings, adding that all possibilities are open including legal actions and terminating contracts.
"How were we supposed to know when the paperwork indicated no irregularities?" he said. "The issue should be treated in the context of unfulfilled responsibility of the supplier."
Lotte Aluminium was the third-largest player in the local battery foil manufacturing market with a share of 19 percent as of 2020, according to a report by Kyobo Securities.
Lotte Aluminium was unavailable for comment.
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