LG Energy triples lithium orders from SQM for US benefits

LG Energy Solution Ltd., the world’s second-largest electric vehicle battery maker, agreed to nearly triple lithium procurement from Sociedad Química y Minera de Chile (SQM) to maximize benefits from US policy that favor products made in the country or its trading partners.

LG Energy said on Friday that it signed a deal with SQM, the world’s top lithium producer, to buy over 100,000 tons of battery-grade lithium carbonate and lithium hydroxide from 2023 to 2029, enough for more than 2 million high-performance all-electric vehicles. The two companies also plan to expand their cooperation on lithium production and supply in North America and Asia.

The contract replaced their previous agreement inked in 2020 for the South Korean cell manufacturer to procure 36,000 tons of the materials during the period.

“Through this agreement, we have not only enhanced the supply stability of lithium, a critical mineral in batteries, but also strengthened our ability to actively respond to the IRA (Inflation Reduction Act) by diversifying our supply chains,” LG Energy Chief Production & Procurement Officer Kim Myung-hwan said in a statement.

TO TAKE ADVANTAGE OF IRA

The IRA grants up to $7,500 per EV to customers if the clean vehicle is assembled in the US and the battery's minerals are mined or processed in the country or its free trade partners such as Chile. SQM also operates a lithium mine in Australia, another US free trade ally.

Washington requires that 40% of the value of critical battery minerals be sourced from the US or its free trade partners and 50% of the value of battery components be produced or assembled in North America to qualify for an EV tax credit.

The IRA added a new advanced manufacturing production credit (AMPC) with respect to “eligible components” produced in the US or a possession. The US government is set to provide $35 per kilowatt-hour (kWh) to battery cells made in the US and $10 per kWh to modules.

LG Energy separately said it received some 110.9 billion won ($84.9 million) of the benefit during the second quarter, more than trebling its preliminary operating profit to 611.6 billion won during the period from a year earlier. Sales surged 73% to 8.8 trillion won in the April-June period.

LG Energy said in March it is investing $5.6 billion to build a battery complex in Queen Creek, Arizona to meet rising demand for clean cars in North America.

In addition to another standalone battery plant in Holland, Michigan, LG Energy operates a battery joint venture, Ultium Cells LCC, with its US partner General Motors Co. LG Energy and multinational automaker Stellantis N.V. is also building a battery JV in Canada.

The South Korean company has deals with eight raw material producers in the US, Germany, Australia, Chile and China to stably secure core minerals such as lithium, nickel, cobalt and natural graphite for business expansion in the rapidly growing global EV market.

(Updated with LG Energy’s second-quarter earnings)

Write to Nan-Sae Bin at binthere@hankyung.com
 
Jongwoo Cheon edited this article.