Investment in battery raw materials raises sodium hydroxide prices

The price of sodium hydroxide or caustic soda, an essential component in the smelting of raw materials for producing batteries, is rising because South Korean battery companies are boosting investment in plants for key materials such as lithium and precursors.

Hanwha Solutions Corp. and OCI Co. have started early expansion of facilities to produce the chemical compound.

Industry sources on Monday said the transactional price of sodium hydroxide in Northeast Asia on Thursday hit $345 per ton, marking a steady rise since reaching the $200 level in January 2020. A further rise in price is expected as demand for the inorganic compound is expected to grow over 60% annually.

Produced through electrolysis on salt water, sodium hydroxide is widely used in washing semiconductors, removing textile impurities, bleaching pulp and paper, and smelting minerals. The compound has also been used more recently in the cleaning of impurities in the manufacturing process for precursors and lithium, two raw materials in battery manufacturing, with one-eighth of a ton of sodium hydroxide needed to produce a ton of battery precursor.

Domestic demand for sodium hydroxide is expected to surge after the completion in order of precursor plants in the country like that of POSCO Future M Co. in Gwanyang, South Jeolla Province, and those around the artificial seawall Saemangeum in the nation's southwestern region of LG Chem Ltd. and China's Huayou Cobalt; SK On, EcoPro Co. and China's GEM; and cathode active materials company L&F Co.

LG Chem is South Korea's largest producer of sodium hydroxide with over a million tons a year made its plants in Yeosu, South Jeolla Province, with 725,000 and China with 295,000. Hanwha Solutions churns out 850,000 tons a year at its Yeosu facility, and its factory expansion will raise the figure to 1.1 million from 2025.

Eyeing the No. 1 spot in domestic sodium hydroxide output, Hanwha Solutions supplies the material to POSCO Future M, Cosmo Advanced Materials Co. and EcoPro Materials, a joint venture between EcoPro and GEM.

The sensitivity of the substance's physical properties limits the import and export of the material, and analysts say domestic investment in the compound is important because of strong domestic demand.

China accounts for half of sodium hydroxide's global production but supply there is also running low.

Write to Mi-Sun Kang at misunny@hankyung.com