[Click eStock] LG Chem and Korea Zinc to Enhance Synergy in Secondary Battery Material Business

LG Chem-Tennessee-Cathode Material-Plant-Expected-Bird's Eye View

[Asia Economy Reporter Minji Lee] An analysis suggests that the synergy in the battery materials sector will be strengthened through the exchange of treasury shares and a business agreement between LG Chem and Korea Zinc.

On the 24th, according to LG Chem and Korea Zinc, they formalized a common stock treasury share exchange agreement and signed a comprehensive business agreement through a public announcement the previous day. LG Chem exchanged 367,000 shares of its common stock treasury shares (KRW 257.6 billion) for 392,000 shares of Korea Zinc’s common stock treasury shares.

LG Chem, together with its subsidiary LG Energy Solution, is strengthening its business capabilities in battery materials (cathode materials, separators, binders, silicon anode materials, etc.). Korea Zinc possesses raw material procurement capabilities utilizing its global network, as well as technologies in metal manufacturing and recovery. Researcher Noh Wo-ho from Meritz Securities said, “It appears possible to create collaborative synergy with the goal of building a secondary battery materials ecosystem.”

One area where collaboration can be strengthened is the precursor sector. Domestic battery companies show a disadvantage in the upstream sector (mineral acquisition, refining and smelting, precursors) compared to Chinese competitors. This area is a task that domestic battery-related companies must preemptively address due to the high likelihood of strengthened origin verification following the implementation of the U.S. IRA (Inflation Reduction Act) in 2023. Earlier in June, the joint venture between LG Chem and Korea Zinc’s subsidiary Kemco, named “Korea Precursor Co., Ltd.,” planned to mass-produce precursors in the second quarter of 2024, and is currently reviewing an increase from the original plan of 20,000 tons to 50,000 tons.

Researcher Noh said, “LG Chem will benefit from stable raw material procurement and cost reduction effects through the joint venture,” adding, “Korea Zinc holds the advantage of selling to a growth-guaranteed joint venture with its global metal sourcing and high-purity metal processing capabilities.”

Battery recycling is another area where collaboration is anticipated. The core competencies in battery recycling are the battery collection rate and metal extraction technology. LG Chem, owning the world’s number one global battery company LG Energy Solution as a subsidiary, has a higher battery collection rate compared to competitors, while Korea Zinc has strong metal extraction capabilities based on dry smelting. To enjoy tax benefits under the IRA law, business sites must be located in the U.S., and both companies are actively establishing operations in the U.S., which is also positive. Researcher Noh explained, “From a mid- to long-term perspective, strengthening Korea Zinc’s precursor and recycling business capabilities will enable vertical integration of battery materials up-, mid-, and downstream linked to LG Chem and LG Energy Solution.”