POSCO Chemical Soars 51% in 45 Days... "13 Trillion Won Mega Order & IRA Benefits"

GM's 13 Trillion KRW Order Contract Over 3 Years
'Inflation Reduction Act' Beneficiary
Driving North American Business After Establishing US Corporation

[Asia Economy Reporter Hwang Yoon-joo] POSCO Chemical's stock price has risen 51% in 45 days. Following a contract worth approximately 13 trillion KRW with GM last month, it is gaining attention as a beneficiary of the 'Inflation Reduction Act' signed by President Joe Biden.

According to the Korea Exchange on the 17th, POSCO Chemical's stock price surged 51.40% from 107,000 KRW (July 1) to 162,000 KRW (August 16) in the second half of the year.

Until the first half of the year, POSCO Chemical's stock price was sluggish due to the impact of interest rate hikes. When the U.S. Federal Reserve raised the benchmark interest rate by 75 basis points (1bp = 0.01 percentage points) in May, the stock price fell from the 130,000 KRW range to the 100,000 KRW range.

The biggest reason for the recent stock price increase is the order worth 13.7697 trillion KRW. POSCO Chemical announced on the 28th of last month that it had signed a mid- to long-term supply contract for high-nickel NCM cathode materials with GM. The contract period is three years, from January 2023 to December 31, 2025.

Along with this, the 'Inflation Reduction Act (IRA)' signed by U.S. President Biden is also affecting the stock price. The core of the IRA bill is that semiconductor, battery, and other businesses must produce products in the U.S. or U.S. allied countries (FTA partner countries) to operate in the U.S.

According to the IRA bill, for secondary battery components, 100% (starting from 50% in 2023 and increasing) must be produced in the U.S. and U.S. allied countries to receive a subsidy of $7,500 (minerals $3,750 + components $3,750 tax credit). In particular, if components manufactured or minerals mined, refined, or recycled in Foreign Entity of Concern countries are included, all benefits are excluded.

POSCO Chemical has already decided on North American investments since last year and has been actively strengthening investments from this year. In March this year, it established a cathode material joint venture with GM in Quebec, Canada, and in May, it established a U.S. corporation.

Researcher Cho Cheol-hee of Korea Investment & Securities analyzed, "It will become difficult to export secondary battery material value chains that use Chinese minerals or have production plants in China to the U.S.," adding, "POSCO Chemical, which has all the necessary materials and raw material value chains for secondary batteries through its group companies, is a representative beneficiary that finds it easier to enter the U.S. market."