LG Ensol avoids US IRA regulations … Battery raw material contract with Canadian company

Diversification of supply and demand for cobalt with a high share in China
Comply with electric vehicle subsidy regulations

LG Energy Solutions signed a contract with three Canadian mineral companies to avoid the raw material regulation of the US Inflation Reduction Act (IRA). By diversifying the cobalt supplier, which had a high share from China, to Canada, it was able to meet the ‘electric vehicle subsidy regulations’.

LG Energy Solutions announced on the 23rd that it will be supplied with cobalt sulfate and lithium hydroxide by Canadian mineral companies Electra, Avalon, and Snowlake. The signing ceremony held today in Toronto, Canada was attended by Trade, Industry and Energy Minister Lee Chang-yang, Manitoba Governor Heather Stephenson, LG Energy Solutions Executive Director Kim Dong-soo, and the CEO of a mineral company.

Electra, the only company that refines cobalt sulphate in North America, will supply 7000 tonnes of cobalt sulphate for three years from next year. Cobalt sulfate is a precursor composed of cobalt, which is a raw material, and is a raw material before the production of cathode materials. 7000 tonnes of cobalt sulphate is enough to produce millions of electric vehicles. Chinese companies have diversified supply and demand for cobalt, which accounted for most mining and smelting.

It also imports lithium hydroxide, a key raw material for NCM (nickel cobalt manganese) batteries. Avalon plans to supply 55,000 tons for 5 years from 2025, and Snow Lake plans to supply 200,000 tons for 10 years from 2025. After discussing details with these companies, LG Energy Solutions decided to sign this agreement. The company’s North American production capacity is expected to reach 255GWh per year after 2025, which corresponds to a medium to long-term contract to be implemented.

The IRA states that from next year, electric vehicle subsidies (tax credits) of up to $7,500 (about 10 million won) will be paid per unit only when raw materials for batteries acquired from countries that have signed free trade agreements (FTAs) with the North. America or the United States is used.

As a result, global automakers that want to produce electric vehicles in North America are pouring into LG Energy Solutions for ‘dedicated supply’. Canada is a key region that can respond to IRAs as it ranks 5th in nickel reserves and 3rd in refining cobalt producers.

“This is a meaningful contract to establish a stable raw material supply chain in the North American market,” said Kwon Young-soo, vice chairman of LG Energy Solutions.

By Kim Hyung-gyu, khk@hankyung.com staff reporter

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