Get updated on the latest POSCO news with our free subscription.
Start your day with a comprehensive myFT Daily Digest email that covers all the recent developments regarding POSCO.
Posco, a Korean conglomerate, is spearheading the relocation of battery materials production from China to South Korea. This move comes as companies worldwide adjust their operations to qualify for lucrative US tax incentives that are shaping the global electric vehicle (EV) supply chain.
The Inflation Reduction Act (Ira), President Joe Biden’s flagship climate legislation, offers substantial subsidies to EV manufacturers and battery makers that source components from the US and its free trade partners rather than China.
However, Korean producers of EV battery anodes and cathodes, such as LG Energy Solution and Samsung SDI, still rely on Chinese partners for the sourcing and refining of critical minerals. China currently dominates the supply chain for numerous minerals used in clean technologies, accounting for around 90% of the world’s rare earth elements production.
In recent months, South Korean companies have formed joint ventures with Chinese counterparts to establish domestic facilities and produce materials that comply with Ira standards.
Posco, a steel producer aggressively expanding into the battery industry, aims to tap into the thriving US EV market. The company is actively building a supply chain for Ira-compliant materials that accomplishes a complete avoidance of production or sourcing from China. Posco will source the necessary nickel from Australia and carry out the smelting process at a Korean facility.
Nevertheless, Chinese companies will continue to play a significant role in the supply chain due to their expertise in areas like nickel and graphite processing.
In May, Posco’s battery materials subsidiary signed a comprehensive memorandum of understanding (MOU) with Zhejiang Huayou Cobalt of China to co-produce materials for cathodes and anodes used in lithium-ion batteries.
In June, Posco announced joint ventures worth $1.2bn with CNGR Advanced Material, also a Chinese company, to produce materials for high-nickel cathodes on the Korean peninsula’s southeastern coast. The two companies also operate a battery recycling plant in Korea alongside GS Group, a Korean conglomerate.
Posco’s Head of Battery Materials Business, Lee Kyung Sub, admitted that achieving complete independence from China is highly challenging and costly.
Posco’s strategy is shared by other major players in the Korean battery industry. SK On, a Korean battery maker, and EcoPro, a materials producer, have formed a partnership with China’s GME Resources to produce batteries at a plant in Saemangeum, situated in the southwest of South Korea. LG Chem, the second-largest battery producer LG Energy Solution, has also partnered with Zhejiang Huayou Cobalt.
According to Tim Bush, a Seoul-based battery analyst at UBS, Korean battery companies have always collaborated with Chinese counterparts. The difference now is that these joint ventures are being moved from China to Korea.
Bush pointed out that the US government has not provided clear guidelines on the level of Chinese ownership permissible in joint ventures producing components destined for the US market.
Tim Bush believes that while US officials might tolerate some degree of Chinese participation in these joint ventures, it is highly unlikely that any Chinese majority-owned entity worldwide will be considered compliant with the Inflation Reduction Act.
As one of the world’s top ten steelmakers, Posco’s market capitalization has more than tripled in the past three years due to investor interest in Korean battery-related stocks.
The conglomerate is placing a significant emphasis on the battery industry as the main driver of its future growth. Posco plans to allocate 43.6% of its capital expenditure during 2023-2025 to its battery materials business, surpassing its investment in steel. This is a substantial increase from the 13.6% allocated between 2016 and 2018.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
