[Click e-Stock] "LG Chem Signs Cathode Material Supply Contract... Positive Customer Diversification"

On November 14, NH Investment & Securities analyzed that LG Chem's cathode material supply contract is positive in terms of diversifying its customer base.

On November 13, LG Chem announced that it had signed a mid- to long-term supply contract for electric vehicle cathode materials with a U.S. company. The contract is worth 3.7619 trillion won, with the contract period running from November 15, 2025, to July 2029. The contract volume is 112,000 tons.

Choi Younggwang, a researcher at NH Investment & Securities, stated, "There are concerns about a slowdown in EV demand due to the end of U.S. electric vehicle subsidies in 2026, as well as a resulting decrease in cathode material sales volume. In fact, since the third quarter of 2025, LG Chem's cathode material sales volume has plummeted as OEM customers have adjusted inventories and demand has weakened."

He continued, "Nevertheless, during the third quarter earnings conference call, LG Chem mentioned that it expects a significant increase in cathode material sales volume in 2026 through shipments to new customers. Based on the announcement of this new supply contract, we believe the visibility of sales growth in 2026 has improved even further."

In particular, he positively evaluated the fact that this is a large-scale order for the first time in a while since the 25 trillion won supply contract with General Motors in February last year, and that it is a supply contract with a non-affiliated company.

Choi noted, "This supply contract is LG Chem's third non-captive supply agreement, following those with General Motors and Toyota. On November 22, 2024, LG Chem announced its plan to increase the proportion of external cathode material sales to 40% by 2030 through its value enhancement plan disclosure."

Choi added, "Currently, about 90% of LG Chem's cathode material sales volume is to its affiliate, LG Energy Solution. We expect LG Chem's cathode material sales volume to reach about 43,000 tons in 2025. Given that the volume of this supply contract amounts to about 30,000 tons annually and that new shipments to Toyota are also planned in 2026, it is likely that the company will achieve its goal of expanding the proportion of external sales faster than previously targeted."