The world’s second largest power battery manufacturer has reached a purchase intention with a Canadian mining company, in order to meet the requirements of the US “Inflation Reduction Act” for localization of battery raw materials.
On September 23, South Korean power battery manufacturer LG New Energy signed cooperation agreements with three Canadian mining companies. Iit will source lithium hydroxide and cobalt sulfate from Electra, Snowlake and Avalon. The two items are key unrefined components for power battery creation.
According to the agreement, starting next year, LG New Energy will receive 7,000 tons of cobalt sulfate from Electra, the only cobalt sulfate supplier in North America, over the next three years.
Snowlake and Avalon will become LG New Energy’s lithium hydroxide suppliers. From 2025 to 2035, Snowlake plans to supply 200,000 tons of lithium hydroxide to LG New Energy, and Avalon will supply 55,000 tons of lithium hydroxide in the same period.
Youngsoo Kwon, CEO of LG New Energy, said that according to the company’s recently announced medium and long-term strategy, the fast-growing North American electric vehicle market has become the focus of LG New Energy’s development. The above cooperation will be a key step in stabilizing the local raw material supply.
LG New Energy’s current partners in battery upstream materials mainly come from countries such as China, Australia, Chile and Germany.
LG New Energy is the world’s second largest power battery manufacturer, second only to CATL (300750.SZ). LG New Energy plans to further expand its production scale and achieve a power battery capacity of 520 GWh in 2025.
In August this year, LG New Energy announced a joint venture with Honda to establish a power battery factory in the United States. The company has previously entered into similar joint ventures with General Motors and Stlantis.
In a statement released at the same time, LG New Energy said that the recently passed US Inflation Reduction Act emphasized that power battery raw materials should be manufactured in North America. This bill has promoted the importance of establishing a battery raw material supply chain in North America.
The U.S. “Inflation Reduction Act” stipulates that in order to obtain a tax deduction of $3,750 for each new energy vehicle, it must reach a specified proportion in the localization of power battery raw materials and battery assembly.
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The bill clarifies that by 2024, 40% of the raw materials for the power batteries carried by subsidized new energy vehicles must be mined and processed in the United States, or from 20 countries that have signed free trade agreements with the United States. The localization ratio of raw materials required by the Act will increase year by year and must reach 80% in 2027.
The “Korea Economic News” reported that battery companies including LG New Energy have difficulty meeting the requirements of the “Inflation Reduction Act” in the short term because the smelting facilities for core minerals such as lithium, cobalt, and graphite used in their battery products are concentrated. In China, the dependence of these minerals on China is 50%-70%.
The “Korea Financial News” likewise referenced that South Korean battery organizations, for example, LG New Energy are sitting tight for the arrival of the particular execution rules of the “Expansion Decrease Act”, and all the while, they are starting to sort out the raw substance stock network.They are searching for providers who can supplant Chinese organizations and affirm their accessibility, and so on.
The above-mentioned report pointed out that South Korean battery companies are expected to increase cooperation with companies in countries such as Canada, Australia and Chile, which have signed free trade agreements with the United States and have key raw materials such as lithium, cobalt and nickel to make batteries.
