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Corporate investment

LG Chem to invest $8.7 bn in battery material, renewable, bio sectors

The planned IPO of LG Energy Solution will help finance the chemical maker's heavy spending on growth drivers

By Jul 14, 2021 (Gmt+09:00)

LG Chem Vice Chairman and CEO Shin Hak-cheol unveils new investment plans
LG Chem Vice Chairman and CEO Shin Hak-cheol unveils new investment plans

LG Chem Ltd., South Korea’s top chemical maker, said on Wednesday it will invest 10 trillion won ($8.7 billion) in the battery material, renewable and bio sectors through 2025 to strengthen its green business portfolio.

The company also said it will aggressively seek mergers and acquisitions and launch joint ventures to achieve sustainable growth in the three key growth areas.

“We’re no longer a traditional petrochemical company. We’re now a materials science company ready to pursue new growth drivers,” LG Chem Vice Chairman and Chief Executive Shin Hak-cheol said during an online media briefing held to unveil its investment plans.

“We’ll drastically restructure our business portfolio for sustainable growth based on the ESG (environmental, social and governance) standards.”

He said more than 30 M&A and JV projects are currently under review and the company could announce tangible results from the second half of this year.

LG’s announcement comes as the country’s private sector is accelerating efforts to transition into eco-friendly companies in a shift toward greener practices.

Earlier this month, SK Innovation Co., a petroleum and battery company, said it will invest  30 trillion won ($26.5 billion) in green projects by 2025.

Lotte Chemical Corp. said on Tuesday it will spend 4.4 trillion won in hydrogen projects by 2030 to foster the business as a new growth driver, moving away from its mainstay petrochemicals.

LION’S SHARE TO GO TO BATTERY MATERIALS

Under the mid-term investment plan announced on Wednesday, LG Chem, the parent of Korea’s top battery maker LG Energy Solution Ltd., will inject 6 trillion won into the “e-mobility” sector to expand production lines of battery materials, including cathodes, separators and carbon nanotubes (CNT).

The company forecasts the battery-related materials market will grow to 100 trillion won by 2026 from 39 trillion won this year.

LG Chem
LG Chem

To meet growing demand, LG Chem said it will start building a cathode material production facility with an annual capacity of 60,000 tons at its Gumi plant from December. Once completed, the company expects its total cathode output capacity to rise sevenfold to 260,000 tons by 2026 from 40,000 tons in 2020.

For the stable supply of materials used to make cathodes, CEO Shin said LG Chem is working to launch a joint venture with a mining company and at the same time seeking to establish new plants in the US and Europe.

The company is also considering reentering the separator business through an M&A or JV.

In 2015, LG withdrew from the business by selling its separator facilities to Japan’s Toray Industries Inc. in the belief that outsourcing the battery component would be more efficient.

LG ENERGY IPO TO HELP FINANCE NEW SPENDING

Of the projected 10 trillion won investment, 3 trillion won will go into producing bio, recycling and renewable materials.

For LG’s main petrochemical business, the company plans to shift into making environment-friendly products such as bioplastics and super absorbent polymer (SAP). It will also look for new growth in plastic recycling operations, as well as materials used in solar panels like polyolefin elastomer.

The company said it will invest the remaining 1 trillion won in its life science business.

LG Chem Vice Chairman and CEO Shin Hak-cheol unveils new investment plans
LG Chem Vice Chairman and CEO Shin Hak-cheol unveils new investment plans

LG Chem said it plans to expand its clinical-stage pipeline for new drugs for diabetes and cancer as well as metabolic and immune-related diseases to 17 candidates by 2025 from 11 this year.

It also aims to enter the US and European markets to become a global pharmaceutical company that has more than two new drugs by 2030.

Industry officials said the planned initial public offering of LG Energy Solution will be the main source of funds to finance the investment.

LG Energy has begun the official process of what could be Korea’s largest-ever IPO that is expected to raise over 10 trillion won ($9 billion).

On June 8, the company applied for a preliminary review by the Korea Exchange of its stock market listing, which is expected to take place in the third quarter at the earliest.

“The listing will likely happen this year,” Shin said, adding that LG Chem will hold between 70% and 80% of LG Energy following the IPO to continue to enhance its shareholder value.

Write to Kyung-Min Kang at Kkm1026@hankyung.com

In-Soo Nam edited this article.

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