[NEWS IN FOCUS] Korean battery makers work to counter China's materials dominance

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[NEWS IN FOCUS] Korean battery makers work to counter China's materials dominance

Published: 08 May. 2023, 16:17 Updated: 08 May. 2023, 18:08

[SHUTTERSTOCK]

As Korean battery makers sell more batteries, Chinese companies pocket more money.

Korea imported a total of $2.16 billion worth of lithium hydroxide in the first quarter, a 490.3 percent year-on-year increase, according to the Korea International Trade Association (KITA). Of that, $1.82 billion, or 84.2 percent, was from China.

Lithium hydroxide, in a powder form, is extracted from lithium and is a feedstock for cathodes for nickel, manganese and cobalt batteries. Korea currently doesn't produce lithium hydroxide on its own and relies on imports.

China is home to four of the world's five biggest lithium processing companies, including Ganfeng Lithium in Jiangxi Province.

In 2022, Korea's imports of lithium hydroxide stood at $3.68 billion, 88 percent from China.

Korea is highly dependent on China for various other materials for battery making.

A Posco Holdings demo plant manufacturing lithium hydroxide near the Hombre Muerto salt lake in Argentina [POSCO HOLDINGS]

Around 72.8 percent of cobalt used by Korean battery makers last year was from China, from 64 percent from the previous year.

Korea imported a total of $130 million of natural graphite last year, 94 percent of it from China. Graphite is a raw material used in the making of anodes, one of the four critical components of a battery.

Korean companies are scrambling to find alternative sources of lithium, especially after the passing of the U.S. Inflation Reduction Act (IRA), which restricts the use of Chinese-made materials.

Posco Holdings is the frontrunner in the industry, with the company acquiring mining rights for the Hombre Muerto salt lake in Argentina. It discovered that the lake has 13.5 million tons of lithium reserves, or six times the amount projected. Argentina ranks fourth in the world in terms of lithium reserves and third in production volume.

Posco Holdings has been building a lithium carbonate plant there. It will be finished in 2024. Once completed, the produced lithium carbonate will be shipped to plants in Korea to make lithium hydroxide.

The Korean company will have an annual capacity of 25,000 tons of lithium hydroxide, which will be enough to power 600,000 electric vehicles.

LG Energy Solution, the country's largest battery maker, signed supply deals with various companies, including Canada's Snow Lake Resources and Sigma Lithium, Chile's SQM and Australia's Liontown Resources to source about 1.6 million lithium, which is enough to power 12 million EVs.

SK On inked deals with SQM and Australia's Global Lithium Resources for lithium and secured enough lithium to power 6 million EVs.

Samsung SDI owns 0.8 percent of Ganfeng Lithium.

"Korea currently heavily relies on China for lithium hydroxide, but the situation will likely change in the near future as Korean companies like Posco have made investments timely according to the IRA rules," Kim Kyung-hoon, a researcher of supply chain management at KITA, said.

The northern area of the Salar del Hombre Muerto salt lake in Argentina, where Posco Holdings owns lithium mining rights [POSCO HOLDINGS]

The IRA grants up to $7,500 in tax credits to buyers of EVs assembled in North America.

In order to qualify for $3,750 of the credit, 40 percent of the critical-mineral value of the vehicle battery has to come from the United States or a country with a U.S. FTA. For the other $3,750, 50 percent of the battery-component value will have to come from North America.

According to the latest notice of proposed rulemaking, a vehicle will qualify for a $3,750 tax credit when over 50 percent of the critical-mineral value of the EV comes from either extraction or processing of the critical minerals.

That means that a vehicle can still qualify for tax breaks if the critical minerals in its battery are extracted in countries that have not signed an FTA with the United States, as long as the processing is done in the FTA partner countries.

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