POSCO International, Lotte Energy in $4.4 bn battery materials supply deal

POSCO International Corp. has signed a 6 trillion won ($4.4 billion) deal to supply raw materials used to make copper foil, a battery component, to Lotte Energy Materials Co. over the next decade.

The two South Korean companies on Wednesday inked a memorandum of understanding on business cooperation, including stable battery materials supply.

Under the deal, POSCO International, the general trading and energy exploration unit of steel giant POSCO Holdings Inc., will supply 600,000 tons of scrap copper and scrap wires to Lotte, the world’s fourth-largest maker of copper foil, also known as elecfoil, until 2033.

POSCO said it expects about 6 trillion won in sales revenue from the contract.

The deal marks POSCO International’s single largest rechargeable battery raw materials contract in terms of value.

The company plans to secure scrap wires and scrap copper through its global network for a stable supply to Lotte. POSCO also plans to offer a consulting service on battery materials and business know-how to Lotte.

For their strengthened partnership, the two companies agreed to launch a consultative body.

GROWING COPPER FOIL MARKET

A copper foil is a thin foil that surrounds the anode, the negative end of a lithium-ion battery. High-strength copper foils are essential to making safer, high-density rechargeable batteries.

A thin copper foil less than 10 micrometers thick made through electrolysis of a copper sulfate solution, elecfoil is also used to make cathode collectors in rechargeable lithium batteries.

It is widely used in EVs and energy storage systems. The growth of the EV market is generating robust growth in the elecfoil market.

The overall copper foil market is expected to rise to 748,000 tons by 2025 from 265,000 tons in 2021, according to an industry estimate.

POSCO International said it will also supply copper foil raw materials to Lotte Energy’s new overseas factories in Malaysia, Spain and the US as well as supporting Lotte in developing process technology.

LOTTE’S AND POSCO’S AMBITIONS

Lotte currently runs factories in two locations globally: one in Korea with an annual production capacity of 20,000 tons and the other in Malaysia with a capacity of 40,000 tons.

The company is aggressively expanding its production capacity with a plan to raise its Malaysian factory capacity to 60,000 tons annually and build a 30,000-ton plant in Spain with a 560 billion won investment.

Lotte is currently scouting a factory site in the US. It is considering Michigan, Kentucky, Tennessee and Georgia, where US and Korean EV makers already operate, as potential locations for the factory site, sources said.

Formerly Iljin Materials Co., Lotte Energy aims to expand its annual high-end copper foil production capacity to 240,000 tons by 2028 from the current 60,000 tons.

Lotte Energy’s clients include Tesla Inc., China’s BYD as well as Korea’s LG Energy Solution Ltd. and Samsung SDI Co.

Meanwhile, POSCO International has been expanding its secondary battery materials business.

In April, the company unveiled its vision to transform into a green company by 2030.

POSCO International, which earlier this year absorbed its unlisted affiliate POSCO Energy Co. to reinforce its energy exploration and production value chain, said it aims to raise its enterprise value to 23 trillion won by 2030 from the current market capitalization of 3.8 trillion won.

“We will spend heavily to expand our battery materials-related value chain from raw materials procurement to processing,” said Jeong Tak, chief executive of POSCO International.

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


In-Soo Nam edited this article.