Posco starts construction of nickel processing facility in Gwangyang

Industry

Published: 14 Oct. 2022, 12:29 Updated: 14 Oct. 2022, 15:09

Posco starts construction of nickel processing facility in Gwangyang

Posco employees, including Lee Ju-tae, center, head of purchasing and investment division, break ground during a ceremony for the construction of a nickel processing facility in Gwangyang, South Jeolla, Friday. [POSCO]

Posco has started construction of a high-nickel processing facility in Gwangyang, South Jeolla, in a major effort to secure a stable supply chain in the rapidly growing battery market.

The plant will have 20,000 tons of annual capacity, which is enough to be used to make 500,000 electric vehicles (EVs). Posco is investing 230 billion won ($160 million) in the facility, with the goal of completing construction in the second half of 2023.

The Gwangyang plant will process nickel matte to high-nickel. Nickel matte is an intermediate nickel product with a purity of 75 percent, which needs to be processed to high-nickel to make EV batteries.

The nickel products will be sold to battery material companies including Posco Chemical.

The investment comes as a part of efforts to reduce its dependency on China after the U.S. government passed the new EV tax rule.

Under the terms of the Inflation Reduction Act (IRA), 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 to qualify for a $3,750 tax 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 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.

But around 70 percent of the world's mineral processing facilities are located in China. Raw materials like nickel and lithium are mined in various countries including Chile, Indonesia and Argentina, but they have to be shipped to China for processing in order to make them suitable to be used in EV batteries.

"With the latest investment, Posco will be able to have the entire supply chain from mining the minerals and processing them," said Lee Ju-tae, head of purchasing and investment division at Posco.

The global EV market will grow to 59 million units in 2030, according to data from SNE Research, while the demand for high-nickel will rise at an annual rate of 20 percent. The research firm predicts that the world would face shortages of high nickel starting in 2025.

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