Hopes rise for Korean copper foil makers’ gains under IRA

South Korea’s SK Nexilis Co., the world’s largest copper foil producer, is in negotiations with six electric vehicle battery makers to supply the material to their US-based plants, in deals worth up to 10 trillion won ($760 million) combined, according to battery industry sources on Thursday.

The negotiations have gained momentum amid growing expectations that copper foil will likely be added to the list of critical minerals such as aluminium and platinum under the US Inflation Reduction Act (IRA).

That means battery makers must source the mineral from North America or its trading partners like South Korea, along with other raw materials, so that EVs powered by their batteries qualify for US tax credits of up to $7,500 per vehicle.

Namely, battery producers will likely increase their purchases from South Korean suppliers, putting the brakes on Chinese rivals’ facility expansion, which led to the supply glut and price wars in the copper foil market.

The US Department of Energy is expected to release an updated list of critical minerals pursuant to the IRA in October, according to the sources.

They said copper foil will likely be included on the list after the energy ministry recently classified copper as a critical battery material. Copper foil is a foil-based form of copper.

“South Korean companies believe that copper foil has already been designated a key mineral and are busy drawing up business plans accordingly,” said one of the sources.

Copper foil is a key material of anodes, one of four ingredients in rechargeable batteries.

Lotte Energy Materials Corp., formerly Iljin Materials Co. and Solus Advanced Materials Co. produce the mineral. Korea Zinc Inc. recently jumped into the market.

If copper foil is classified as a critical battery material, there is no need for them to build plants in the US to qualify for US tax credits.

Nonetheless, SK Nexilis, a subsidiary of SKC, signed a memorandum of understanding with Toyota Tsusho Corp. last month to build a copper foil production plant in North America. Their joint factory there will be eligible for a tax deduction for investment by up to 30%, as well as tax breaks for production costs and incentives.  

The companies, with which SK Nexilis is in supply negotiations, include Toyota, LG Energy Solution Ltd., Samsung SDI Co. and SK On Co., as well as Europe-based battery makers, the sources said.

The copper foil market is in fierce competition among companies from South Korea, China, Taiwan and Japan.

Particularly, Chinese companies are stepping up facility expansion, supported by low electricity rates and labor costs.

Restricting Chinese rivals’ exports to the US will be a boon for Korean copper foil makers, which source copper from domestic companies which import copper ore and process them.

To qualify for US subsidies, critical battery minerals also must use metals mined or processed in North America or its free trading partners.  

Meanwhile, the European Union is negotiating a Critical Minerals Agreement with the US, to ensure it receives FTA-like treatment under the IRA. 

If the EU is granted a status equivalent to FTA partners of the US under the IRA, copper foil produced by SK Nexilis and Lotte Energy Materials in Poland and Spain, respectively, will also be eligible for US tax credits.

SK Nexilis is scheduled to complete a 57,000-ton copper foil plant in Poland next year. Lotte Energy runs a factory in Spain with an annual capacity of 30,000 tons.

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