LG Energy Solution sources battery materials in Canada

Industry

Published: 23 Sep. 2022, 16:45

LG Energy Solution sources battery materials in Canada

Representatives of the Canadian government, LG Energy Solution, Electra Battery Materials, Avalon Advanced Materials, and Snow Lake Lithium, pose for a photo after signing supply agreements in Toronto. [LG ENERGY SOLUTION]

LG Energy Solution signed agreements with three Canadian material companies to source lithium and cobalt, critical ingredients for making electric vehicle (EV) batteries.

The three companies are Electra Battery Materials, Avalon Advanced Materials and Snow Lake Lithium. Korean Industry Minister Lee Chang-yang and executives from the Korean battery maker and the Canadian companies signed the agreements Thursday in Toronto.

Under one agreement, LG Energy will source 7,000 tons of cobalt sulfates from Electra for three years starting in 2023. Electra is the only company that refines cobalt sulfates in North America.

Cobalt sulfate is a core ingredient in cathodes, which account for 40 percent of the production cost of an EV battery.

Avalon will supply 55,000 tons of lithium hydroxide for five years starting in 2025, and Snow Lake 200,000 tons for 10 years.

Lithium hydroxide is also a core material used to make cathodes. Rechargeable batteries usually contain either lithium hydroxide or lithium carbonate. While the latter is preferred for IT devices, lithium hydroxide is used in EV batteries as it helps batteries last longer.

On Thursday, Korea Mine Rehabilitation and Mineral Resources also signed a memorandum of understanding with Natural Resources Canada to share information about critical minerals and developing future technologies.

The partnerships with the Canadian companies came after a recently-passed U.S. EV subsidy rule restricts the use of Chinese-made materials.

Under the terms of the Inflation Reduction Act (IRA), buyers of EVs assembled in the United States are eligible for a $7,500 tax credit for vehicles purchased after Aug. 16, 2021.

After Jan. 1, 2023, content requirements for batteries begin to phase in over a number of years. In 2023, 40 percent of critical-mineral value will have to come from the United States or countries that the United States has signed free trade agreements with to qualify for $3,750 of the credit. That number increases 10 percentage points a year to 80 percent in 2027.

Fifty percent of battery-component value will have to come from the United States to qualify for another $3,750 of the tax credit. That number will increase 10 percentage points a year to 100 percent by 2029.

To qualify for the subsidy, a vehicle must be completely free of Chinese-made components from 2024 and free of Chinese critical minerals from 2025.

Canada is home to 530,000 tons of lithium, 2.8 million tons of nickel and 220,000 tons of cobalt. It is the world's fifth richest country in terms of nickel reserves and the third largest for cobalt.

"We will actively support cooperation between Korea and Canada including expansion of investments to build a supply chain for critical resources," said Industry minister Lee. "We plan to find specific ways to detail the cooperation by forming a channel to communicate with the Canadian government."

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