LG Chem Vice Chairman: "Largest Cathode Material Plant in the US, a Crucial Cornerstone... Meeting IRA Requirements"

"As the first 'large-scale cathode material factory' established in the United States, it holds significant meaning in itself. It is also a factory that meets the requirements of the Inflation Reduction Act (IRA)."

On the 19th (local time), Shin Hak-cheol, Vice Chairman of LG Chem, held a press briefing ahead of the groundbreaking ceremony for the cathode material factory held in Clarksville, Tennessee, USA, stating, "The Tennessee factory will start as a cathode material factory but will be positioned as a major center for LG Chem's comprehensive battery materials in North America."

LG Chem is investing about 2 trillion KRW to build a factory on a secured site of approximately 1.7 million square meters in Clarksville, and from 2026, it will begin producing NCMA (Nickel-Cobalt-Manganese-Aluminum) cathode materials, a core material for electric vehicle batteries, at an annual scale of 60,000 tons. This corresponds to the amount needed for about 600,000 high-performance pure electric vehicles (EVs) and is the largest scale in the United States. Additional expansions will be made depending on future supply conditions. Vice Chairman Shin emphasized the significance by saying, "Although we are starting with 60,000 tons of cathode materials, since we have declared our ambition to become the 'world's largest comprehensive battery materials company,' this can be considered the most important cornerstone among the three new growth engines."

LG Chem's Tennessee cathode material factory is a 100% sole investment and meets the subsidy requirements under the IRA. Vice Chairman Shin said, "There are no issues with North American production requirements, and the supply chain for materials such as lithium and nickel is operating under a master plan." He explained that a stable supply chain has already been established, such as using precursors produced by Korea Precursor Company (KPC) in Ulsan to meet the IRA electric vehicle subsidy standards for customers. The IRA benefits LG Chem receives through the establishment of the Tennessee factory are also estimated to be worth several hundred billion KRW over ten years, even by conservative standards.

Vice Chairman Shin chose Tennessee as the site for the first large-scale cathode material factory because "the distance to customers is important," emphasizing the importance of creating differentiated customer value. He evaluated, "Most OEMs and battery companies are within 500 km," and "It is also a convenient location for raw material imports, such as the Savannah port in Georgia." Through this, it is expected that responsiveness can be strengthened by communicating with customers locally from the product development stage. Tennessee, located in the U.S. Midwest-East region, is also home to the battery factory of Ultium Cells, a joint venture between General Motors (GM) and LG Energy Solution.

Additionally, Vice Chairman Shin cited Tennessee's strengths as the ability to secure skilled engineering personnel and the capability to use 100% renewable energy for power from the start of factory operations. Furthermore, the tax benefits and other incentives offered by Tennessee are by no means inferior to those of other states. The cash and non-cash incentives supported by Tennessee alone amount to several hundred billion KRW annually based on the 60,000-ton production scale.

However, the actual groundbreaking and mass production timeline was somewhat delayed compared to the plan announced when the MOU with Tennessee was signed last year. Regarding this, Vice Chairman Shin said, "The negotiation process with the factory's main customers, GM and Ultium Cells, took longer than expected," and drew a clear line that it was unrelated to the recent trend of global companies reducing electric vehicle investments. He added, "The industry is still growing, just slowing down from 30% growth to 25%," and "This temporary slowdown does not affect LG Chem's overall plan or blueprint at all."

Compared to competitors such as Chinese battery companies including CATL and Posco Future M, LG Chem's advantage lies in its "leading patents derived from its long business history." Vice Chairman Shin said, "LG Chem's business history is by far the longest," and "I can say that the patents accumulated over this history are several times more than any competitor." He also cited a strong customer base including GM and Toyota as strengths. Last year, LG Chem signed a comprehensive long-term supply agreement for 950,000 tons of cathode materials with GM, and in October, it signed a 2.9 trillion KRW North American cathode material supply contract with Toyota.

Regarding the growing policy uncertainty ahead of next year's U.S. presidential election, Vice Chairman Shin said, "We are examining various possibilities of how the IRA and other policies might be affected," but assessed that "there will be no major changes in the fundamental trend." He viewed that both the Democratic and Republican parties have reached a consensus on the basic legislative intent to reduce dependence on China in the supply chain. Furthermore, he emphasized, "Even if there are changes, the reason for doing business here is not because of subsidies," but "it is due to customer needs that require a North American supply chain." He added that "there will be a situation where it will not be easy to export used batteries outside North America," highlighting the strategic nature of securing the ecosystem.

He predicted that the macroeconomic environment next year will be similar to this year. He explained, "It will not get worse than this year, but it will not dramatically improve either," and "We are planning our business based on this year's conditions." He also pointed out China as a concern, especially regarding dependence in the petrochemical sector. He said, "There is nothing particularly different in management next year," and "Even if the economy worsens, we will not reduce investments in the three growth engines."

Meanwhile, the groundbreaking ceremony was attended by Bill Lee, Governor of Tennessee; Stuart McWhorter, Tennessee Department of Economic and Community Development Commissioner; Senator Marsha Blackburn; Cho Hyun-dong, Ambassador of the Republic of Korea to the United States; Joe Pitts, Mayor of Clarksville; and Wes Golden, Mayor of Montgomery County.