$9 billion LG Energy Solution Indonesia deal takes shape

Industry

Published: 18 Apr. 2022, 18:28 Updated: 20 Apr. 2022, 06:33

$9 billion LG Energy Solution Indonesia deal takes shape

LG Energy Solution's battery plant in Poland [LG ENERGY SOLUTION]

LG Energy Solution and a number of Korean and Indonesian companies have tentatively agreed to work together on an electric vehicle (EV) battery mine-to-manufacturing project.

The venture, which comes as a major Chinese competitor signed a similar deal in Indonesia, will do everything from dig up the raw materials to produce the final product for use in electric vehicles.

According to press reports, the investment will total $9 billion, though the company would not confirm the amount.

On April 14, an LG Energy Solution-led consortium signed "a nonbinding framework agreement" with Antam, an Indonesian state-run mining company, and Indonesia Battery Corporation, also state run, LG Energy Solution said Monday.

The consortium includes LG Chem, LX International and Posco, though no breakdown on shareholdings was provided.

The project will develop an "end-to-end value chain for EV batteries, including procuring raw materials, producing key components, such as cathodes, and manufacturing battery cells," LG Energy Solution said in a statement.

The prices of battery materials, such as nickel and lithium, have been surging rapidly, especially after the start of the Russia-Ukraine war. Nickel is currently trading at around $33,000 per ton, up 200 percent from two years ago, according to data from the Korea Mineral Resource Information Service.

Indonesia is rich in natural resources essential to making EV batteries.

It has the world's largest nickel reserves, 21 million tons, according to U.S. Geological Survey data. The agency estimates Indonesia produced 760,000 tons of nickel in 2020.

Indonesia, which for the past decade has sold an average of 1 million cars per year, has been trying to switch to EVs. Under an ambitious goal of selling only EVs from 2050, its government has been attracting EV-related investment by offering generous incentives.

Shenzhen-listed Contemporary Amperex Technology (CATL) signed a similar deal with the Indonesian government. Investment will total $6 billion and production will begin in 2024.

CATL is the world's largest maker of EV batteries.

LG Energy Solution is currently building a battery cell plant in Karawang Regency, Indonesia, 65 kilometers (40.4 miles) southeast of the capital of Jakarta. The company is jointly investing 1.17 trillion won ($950 million) with a number of Korean companies, including Hyundai Motor, Kia and Hyundai Mobis.

The plant, which occupies a 330,000-square-meter (3.6 million-square-foot) plot of land, will have an annual production capacity of 10 gigawatt-hours, or enough for approximately 150,000 EVs. Construction will be completed by the end of 2023, with the goal of starting production in the first half of 2024.

LG Chem is currently building a cathode production facility in Gumi, North Gyeongsang, which will have an annual capacity of 60,000 tons. The company plans to expand the capacity to 260,000 tons by 2026.

BY SARAH CHEA [chea.sarah@joongang.co.kr]