LG Energy Solution expands cobalt supply deal with Canada’s Electra

LG Energy Solution Ltd. has signed a long-term contract to receive additional refined cobalt from Electra Battery Materials Corp. in Canada, in a move that is expected to lessen the South Korean lithium-ion battery major's reliance on China for electric vehicle battery materials.

Electra Battery Materials, an Ontario-based battery materials supplier, on Monday announced that it signed a new deal with LG Energy Solution to supply it with 19,000 tons of battery-grade cobalt from 2025 to 2029.

It will provide the material from North America’s only cobalt sulfate refinery in Toronto, Ontario, starting with 3,000 tons of cobalt refined from cobalt sulfate products in 2025 and 4,000 tons in each of the following years through 2029.

This is an additional contract between the two partners after in September of last year they signed a three-year deal for a supply of 7,000 tons of refined cobalt to begin this year.

They agreed not to disclose the financial terms of the latest deal.

ENHANCED EV SUPPLY CHAIN IN NORTH AMERICA

The extended cobalt supply contract between the two companies is expected to enhance LG Energy Solution’s EV battery supply chain in North America, a key strategy in responding to the US' Inflation Reduction Act (IRA) regulations on EVs.

Electrified cars cannot contain critical materials from China and Russia if they wish to enjoy US tax benefits under IRA guidance.

The latest deal should help LG Energy Solution reduce its reliance on China for EV battery materials as the two companies also agreed to explore opportunities to solidify the EV supply chain in North America.

According to CRU, a leading global metals, mining and fertilizer industry tracker, China currently commands 71% of global refined cobalt supply, 76% of refined nickel and 93% of refined manganese supply.  

These are key materials for EV batteries. Especially, battery-grade cobalt refined from cobalt sulfate is a core material for high-performance and high-capacity EV batteries.

BATTERY MATERIAL SUPPLIER DIVERSIFICATION

LG Energy Solution is actively diversifying its battery material suppliers through partnerships with various battery material mining and refining companies across the world in response to the IRA.

Earlier this month, the world’s second-largest electric vehicle battery maker agreed to nearly triple lithium procurement from Sociedad Química y Minera de Chile (SQM), the world’s top lithium producer.

Under the new deal, LG Energy Solution will buy over 100,000 tons of battery-grade lithium carbonate and lithium hydroxide from SQM between 2023 and 2029.

That is enough to power more than 2 million units of high-performance EVs.

LG Energy Solution and Stellantis N.V., also agreed to resume the construction of Canada’s first battery plant in Ontario, which is expected to use cobalt to be supplied by Electra Battery Materials.

The new battery plant aims to commence mass production in 2024.

Write to Sungsu Bae at baebae@hankyung.com

Sookyung Seo edited this article.