LG Energy Solution reconsidering Arizona battery investment

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LG Energy Solution reconsidering Arizona battery investment

Published: 29 Jun. 2022, 18:50 Updated: 29 Jun. 2022, 19:20

LG Energy Solution logo at the company's headquarters at Yeouido, western Seoul [NEWS1]

LG Energy Solution is “reassessing” its 1.7-trillion-won ($1.3-billion) Arizona battery plant project, the company said Wednesday.

The battery maker cited the unfavorable business conditions for the decision, including increasing costs driven by the rising inflation.

“We are closely reassessing the timing, amount, transactions and other details of the investment, but nothing has been decided yet,” an LG Energy Solution spokesperson said.

LG Energy Solution announced in March that it will invest 1.7 trillion won to build an 11-gigawatt-hour production facility for cylindrical batteries in Queen Creek, Arizona. The initial plan was to start construction in the second quarter and begin operation by the latter half of 2024.

The company acquired a 650-acre site in Queen Creek in April, winning the bid at $84.4 million.

No other Korean battery maker has built an American factory for cylindrical batteries, which are used in Tesla vehicles and a few EV startups.

Cylindrical batteries are cheaper to produce and have better temperature control, which reduces the risk of fire.

The project may not be scrapped completely, as the company already purchased the land.

Due to soaring inflation worldwide and fall of the local currency, the 1.7 trillion won would likely have been revised upward.

Consumer prices in the United States rose 8.6 percent year-on-year in May, the largest annual increase in more than 40 years.

The won hit 1,302.8 won to the dollar on June 23, a 13-year high. The won closed at 1,299.0 against the dollar on Wednesday, up 107.2 from the beginning of this year.

LG Energy Solution’s joint construction projects in the U.S. with General Motors will not be delayed, according to local media reports.

The company established a joint venture named NewtStar Energy with Stellantis to build 2.5-trillion-won production facilities in Canada.

The company plans to expand battery production at its Ochang plant in North Chungcheng, with a budget of 730 billion won.

Following the latest update, the company’s share plunged 4.63 percent, or 19,000 won, to trade at 391,500 won on Wednesday.

SKC, a chemical company 40.6 percent owned by SK Inc., said in an electronic disclosure that it will review its funding plan for investment in a semiconductor glass substrate plant in Georgia, citing high inflation and resulting increase in the construction costs.

The chemical company made its first investment of $80 million after the announcement last October, but the second-stage investment of $22 million was delayed as its local partner is reconsidering the plan.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]