LG Energy-led group to set up $9 bn Indonesia battery value chain

A consortium led by LG Energy Solution Ltd., the global No. 2 electric vehicle battery maker, will invest $9 billion in a battery value chain in Indonesia to handle the entire production process in the world’s largest nickel-producing country.

The consortium, consisting of LG Energy, LG Chem Ltd., LX International Corp., POSCO Holdings and China’s Zhejiang Huayou Cobalt Co., on April 14 inked a nonbinding framework agreement to set up a value chain with local mining company PT Aneka Tambang Tbk (Antam) and Indonesia Battery Corp. (IBC), according to the Indonesian government and LG Energy on Monday. The parties are scheduled to discuss details such as ownership structure for the final contract.

The consortium plans to handle the entire EV battery production process including smelting and refining of nickel, manufacturing precursors, cathode materials and cells, as well as assembling finished products in the Southeast Asian country. That will reduce the risk of nickel price volatility while cutting reliance on raw materials from China.

“LG Energy expects the project to improve the battery business capability and profitability by securing competitive raw materials in a stable manner,” the company said in a statement.

STABLE NICKEL PROCUREMENT

It is a key for South Korean battery makers to stably secure nickel as they focus on high-nickel batteries that contain more than 80% nickel.

The metal’s price have been surging recently. The London Metal Exchange (LME) three-month nickel price closed at $33,175 per ton on April 14, up about 60% from $20,730 on Jan. 4, the first trading day of this year.

“The agreement is expected to ease difficulties in nickel procurement as they will be able to secure hundreds of millions of tons of nickel through operating mines in the long term,” said an industry source in Seoul.

Indonesia, which holds the world’s largest nickel reserves of 21 million tons, is fostering its own processing capability while cutting the material’s exports. The move has attracted global battery makers.

China’s Contemporary Amperex Technology Co. Ltd. (CATL), the world’s top battery maker, on April 14 signed a $6 billion deal with Indonesian companies including Antam to cooperate on the Indonesia EV Battery Integration Project, which includes nickel mining and processing, EV battery materials, EV battery manufacturing and battery recycling.

LG Energy is building a $1.1 billion battery cell plant in Karawang New Industry City, near Jakarta, with an annual capacity of 10 gigawatt hours (GWh), enough for over 150,000 EVs. It is scheduled to start commercial operations in the first half of 2024.

Write to Hyung-Kyu Kim at khk@hankyung.com
Jongwoo Cheon edited this article.