[Exclusive] LG Chem and POSCO Chemical Sign Battery Material Supply Contract Worth Over 2 Trillion Won

[Asia Economy Reporter Hwang Yoon-joo] LG Chem is set to sign a battery key material supply contract worth up to 2 trillion KRW with POSCO Chemical. Following its previous supply agreement with Umicore, a global leader in battery cathode materials based in Belgium, LG Chem has secured POSCO Chemical as a mid- to long-term customer, thereby ensuring a stable supply of battery raw materials to target the rapidly growing electric vehicle markets in Europe and Asia.

According to industry sources on the 20th, LG Chem will officially announce the cathode material supply contract with POSCO Chemical within this week. The contract volume is reported to be around 125,000 tons, similar to that with Umicore. This volume is sufficient to produce batteries for over one million high-performance electric vehicles capable of driving more than 380 km on a single charge. The contract value is said to be up to 2 trillion KRW. ▶Related article on page 12

The cathode materials supplied by POSCO Chemical will initially be used for domestic batteries produced at LG Chem’s Ochang plant, with plans to export to Asian regions such as China and Southeast Asia depending on future volume adjustments.

The contract period between the two companies is three years. Considering that battery companies typically sign material supply contracts for less than one year, this is viewed by the industry as an unusual mid- to long-term agreement.

LG Chem’s consecutive mid- to long-term supply contracts with battery material suppliers come as orders for batteries, a core component, are flooding in due to the rapid growth of the electric vehicle market. Cathode materials are a key component that determines the capacity and output of electric vehicle batteries and account for about 30% of the cost of electric vehicle batteries.

An industry senior official said, "This contract will enable a more stable supply of cathode materials, which are key battery materials," adding, "As electric vehicle demand increases, battery supply has become most important for automakers, and material supply is critical for battery companies."