Posco Future M, Huayou Cobalt to invest $1.3 billion to build Pohang plants

Industry

Published: 03 May. 2023, 15:19 Updated: 03 May. 2023, 16:14

Posco Future M, Huayou Cobalt to invest $1.3 billion to build Pohang plants

Posco Future M President Kim Joon-hyeong, center and officials from Huayou Cobalt, the North Gyeongsang provincial government and the Pohang city government take a photo after signing an agreement of $1.3 billion investment in Pohang. [POSCO FUTURE M]

Posco Future M and Huayou Cobalt will together invest 1.7 trillion won ($1.3 billion) to build battery materials plants in Pohang, North Gyeongsang, in a move to reinforce the former's supply chain amid surging demand for electric vehicle batteries.

The Korean company said Wednesday it signed a memorandum of understanding (MOU) with Huayou Cobalt, the North Gyeongsang provincial government and the Pohang city government promising a precursor and nickel processing facility at a 267,702-square-meter site in the southeastern city.

Precursors are raw materials used to make cathodes and are produced by combining materials such as nickel, cobalt and manganese. They account for 70 percent of the cost of cathodes, the material that accounts for 40 percent of battery costs.

The plant will start operation in 2027.

The deal is Posco's latest effort to reduce its dependence on China to qualify for the $7,500 in tax credits the U.S. government offers for the purchase of electric vehicles assembled in North America under the Inflation Reduction Act.

Vehicles are eligible for half of those tax credits, or $3,750, if 40 percent of the critical-mineral value of the vehicle’s battery comes from the United States or countries with which the United States has signed FTAs.

But a vehicle will still be eligible for the credits if over 50 percent of the critical-mineral value of the electric vehicle comes from either extraction or processing of the critical minerals. That means that a vehicle can still receive the incentives if Posco can produce the precursor in Korea, even if the minerals themselves are from China.

Posco Future M hopes to increase its precursor capacity, which currently stands at 15,000 tons, to 440,000 tons by the end of 2030.

Posco Future M also said it will invest an additional 500 billion won to build an anode materials plant in Pohang. Anodes are a core material in batteries along with cathodes, separators and electrolytes, which handle batteries' lifespan, energy density and charging speed.

The factory will be situated on a 199,720-square-meter (655,249-square-feet) site and will start running in 2025.

"By being a company that produces both cathodes and anodes materials, the two key components in making batteries, Posco Future M will quickly respond to our clients' requests by strengthening our value chain from raw materials to final products," said Posco Future M President Kim Joon-hyeong.

On Wednesday, Posco Holdings announced a $441 million investment in building a nickel processing facility in Halmahera, Indonesia. Posco Holdings is the largest stakeholder of Posco Future M with 60 percent.

The plant will have nickel matte, an intermediate nickel product with a purity of 75 percent, with an annual capacity of 52,000 tons. That is enough to power 1 million electric vehicles.

Ground will be broken within the year, with the goal of finishing construction in 2025.

Indonesia has the world's biggest reserves of nickel, which is essential in making batteries. The country has an estimated 21 million tons of nickel.

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