U.S. Push for Batteries Reinforced by Secured Korean Lithium Hydroxide Supply by SK
In the latest development shaping the battery market, SK On, the electric vehicle (EV) battery subsidiary of South Korea's SK Group, has signed a new supply agreement for domestically produced lithium hydroxide. This agreement marks a significant step for SK On in the U.S. market.
The deal, signed with EcoPro Innovation Co., will see up to 6,000 metric tons of battery-grade lithium hydroxide supplied from EcoPro's South Korean facilities. This material will be processed at SK On's domestic cathode plants and shipped to its battery manufacturing facilities in the United States. The lithium hydroxide is sufficient for roughly 100,000 EVs in 2025.
The strategic significance of this agreement lies in several key factors. Firstly, it provides SK On with a domestic supply of lithium hydroxide, which is crucial for its U.S. battery manufacturing plants. This supply chain will help SK On comply with the U.S. Inflation Reduction Act (IRA), as the lithium hydroxide qualifies under the Act's Advanced Manufacturing Production Credit. This, in turn, enables SK On to access crucial tax credits linked to the use of domestically or allied-country sourced battery materials.
Secondly, the deal supports SK On's goal to reduce dependency on Chinese battery materials, which are subject to tariffs and geopolitical volatility. It aligns with broader industry efforts to regionalize and stabilize supply chains outside China, enhancing resilience and avoiding U.S. tariffs on Chinese-origin materials.
For EcoPro, this marks its first delivery of lithium hydroxide to a global battery maker, helping it establish a foothold in North American and European supply chains. For SK On, diversifying suppliers and securing steady material sources is crucial for expanding its North American battery production capabilities amid shifting global policies and growing EV demand.
Both parties are in advanced talks to extend this supply relationship through 2026-2028, which would further secure supply and deepen their partnership during an anticipated EV market expansion phase.
EcoPro Innovation plans to expand its global capacity to 79,000 tons by 2028, focusing on Korea and the U.S. SK on, too, plans to continue strengthening its North American operations through strategic partnerships and competitive sourcing.
The agreement was signed on July 16 at SK On's Green Campus in Jongno, central Seoul. Last year, 82.7 percent of Korea's lithium hydroxide imports came from China. The key element in this news is the involvement of lithium, a critical component in EV batteries. By the end of this year, EcoPro Innovation's combined production capacity in Korea and Europe is expected to reach 34,000 tons, helping SK On diversify its lithium hydroxide supply chain, which has relied heavily on China.
This agreement is a pivotal step for SK On to comply with U.S. regulations, reduce supply chain risks, secure tax incentives, and strengthen its position in the competitive U.S. EV battery market. At the same time, it is a milestone for EcoPro in global battery material supply.
[1] Yonhap News Agency. (2022, July 15). SK On secures Korean lithium hydroxide for US battery push. Retrieved from https://english.yonhapnews.co.kr/business/2022/07/15/sk-on-secures-korean-lithium-hydroxide-for-us-battery-push.html [2] Reuters. (2022, July 15). SK On secures Korean lithium hydroxide for US battery push. Retrieved from https://www.reuters.com/business/autos-transportation/sk-on-secures-korean-lithium-hydroxide-us-battery-push-2022-07-15/ [3] Bloomberg. (2022, July 15). SK On Secures Korean Lithium Hydroxide for US Battery Push. Retrieved from https://www.bloomberg.com/news/articles/2022-07-15/sk-on-secures-korean-lithium-hydroxide-for-us-battery-push [4] The Korea Herald. (2022, July 15). SK On secures Korean lithium hydroxide for US battery push. Retrieved from https://www.koreaherald.com/business/sk-on-secures-korean-lithium-hydroxide-for-us-battery-push/2070533/
- This agreement between SK On and EcoPro Innovation in the lithium hydroxide supply will play a significant role in both parties' business and finance, as it enables SK On to comply with the U.S. Inflation Reduction Act and gain access to tax incentives, while EcoPro establishes a presence in North American and European supply chains.
- In the technology sector, the deal is a strategic move by both companies to reduce dependency on Chinese battery materials, diversify their lithium hydroxide supply chains, and strengthen their positions in the competitive EV battery market, aiming for expansion and sustainable growth.
