Reevaluating Investment in Chinese Companies Amid FEOC·IRA Regulations
"Anode Material Market to Improve in 2 Years... Investment to Continue"
Kim Jun-hyung, Vice President and Head of Secondary Battery Materials at POSCO Holdings, said on the 11th, "With lithium prices just over $10, now is a very good timing to secure new mines or salt lakes."
Kim made this remark after meeting with reporters following the inaugural general meeting of the 'Secondary Battery Forum' held at the 2nd Conference Room of the National Assembly Members' Office Building in Yeongdeungpo-gu, Seoul.
Kim said, "We participated in the bidding for Maricunga and Salares Alto Andinos in Chile, and at the Korea-Australia Economic Cooperation Committee level, I went to Australia with Chairman Jang In-hwa to review new lithium ore (Spodumene) mines."
Recently, lithium prices have been declining due to oversupply and the impact of the electric vehicle chasm (temporary demand stagnation). The price of lithium carbonate refined from lithium recorded 70.5 yuan per kg (about 13,000 KRW) as of the 5th. This is the lowest price in 3 years and 6 months since the end of February 2021.
On the 11th, at the 2nd Conference Room of the National Assembly Members' Office Building in Yeongdeungpo-gu, Seoul, Kim Junhyung, Vice President and Head of Secondary Battery Materials at POSCO Holdings, delivered a greeting to member companies at the inaugural general meeting of the 'Secondary Battery Forum.' Photo by Choi Seoyoon
Regarding the recent withdrawal of the precursor joint venture plan between POSCO Future M and China’s Huayou Cobalt, Kim said, "We are adjusting the investment pace somewhat due to a decrease in customer orders, but this issue will be resolved soon," adding, "(Since the National Assembly is also actively supporting the industry) we view this positively."
Earlier, POSCO Group’s secondary battery material affiliate POSCO Future M completely withdrew its investment plan on the 4th to build a precursor joint venture plant in Pohang, Gyeongbuk, with Huayou Cobalt, the world’s largest cobalt producer, investing 1.2 trillion KRW. At the time, the company said it was "adjusting the investment pace considering the chasm and other factors."
Kim said, "Chinese companies like Huayou Cobalt and CNGR (Zhongwei·中偉) decided to invest in Korea to avoid Foreign Entity Ownership Controls (FEOC), but it is difficult to determine whether they fall under the U.S. Inflation Reduction Act (IRA) and FEOC," adding, "Since these companies are skeptical about whether they must build facilities in Korea, we are adjusting accordingly."
Regarding the anode material market situation, Kim said, "The situation is somewhat unfavorable," but emphasized, "What we believe in is two years from now." He explained, "If anode material supply is not properly secured within two years, customers will not receive IRA benefits, so we are securing more customers until then." He continued, "We recently signed an investment contract with Australia’s BRM and (Tanzania graphite mine), and since we have actually signed an MOU and further investments will occur in the future, the situation will improve in two years, so we plan to endure until then."
Regarding POSCO Group’s restructuring of 120 entities, Kim said, "Most secondary battery material businesses are new growth sectors and are largely unrelated to divestments," adding, "Even if some underperforming businesses are wound down, investments in the secondary battery industry will continue as planned." He added, "As Chairman Jang In-hwa said, the momentum for overall secondary battery promotion remains valid," and "Some projects connected with customers are being delayed slightly, but the overall direction is proceeding as planned."
Regarding POSCO Group’s future investment plans, Kim said, "The completion of the second site in Pohang Blue Valley Industrial Complex is imminent, but specific investment decisions will depend on the outcome of the U.S. presidential election," adding, "Some of the investment plans already established may be adjusted depending on the election results."
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