Diversification of supply and demand for cobalt with a high proportion in China
To meet 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 proportion of 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 from Canadian mineral companies Electra, Avalon, and Snowlake. The signing ceremony held today in Toronto, Canada was attended by Minister of Trade, Industry and Energy 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 sulfate in North America, will supply 7000 tons of cobalt sulfate for three years from next year. Cobalt sulfate is a precursor that is a compound of cobalt, a raw material, and is a raw material before the production of cathode materials. 7000 tons of cobalt sulfate is enough to manufacture millions of electric vehicles. Chinese companies have diversified supply and demand for cobalt, which accounted for most of mining and smelting.
Lithium hydroxide, a key raw material for NCM (nickel cobalt manganese) batteries, is also imported. 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 contract. The company’s North American production capacity is expected to reach 255GWh per year following 2025, which corresponds to a mid- to long-term contract to operate it.
The IRA stipulates that from next year, electric vehicle subsidies (tax credits) of up to $7,500 (regarding 10 million won) will be paid per unit only when raw materials for batteries procured from countries that have signed free trade agreements (FTAs) with North America or the United States are used.
As a result, global automakers who want to produce electric vehicles in North America are pouring into LG Energy Solutions for ‘dedicated to 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, staff reporter khk@hankyung.com