SK On announced Wednesday a strategic supply agreement with Posco Holdings to secure up to 25,000 tons of lithium. This deal marks a significant step in SK On’s efforts to diversify its battery raw materials supply chain and reduce reliance on China.
The signing ceremony for the long-term lithium supply agreement took place at the SK On Green Campus in Seoul on Tuesday. Key figures from both companies attended, including Park Jong-jin, Head of Strategic Procurement at SK On, and Lee Jae-young, Head of Energy Materials Business Division at Posco Holdings.
The agreement ensures SK On will receive enough lithium to manufacture batteries for approximately 400,000 electric vehicles. The lithium will be sourced from Posco Argentina’s salt lake operations located in the Hombre Muerto region.
This lithium supply is intended for SK On’s electric vehicle (EV) battery projects across Europe and North America. Automotive manufacturers in these regions are increasingly requiring battery producers to source raw materials from outside of China. SK On is also considering utilizing the lithium for the rapidly growing energy storage system (ESS) sector and for battery recycling initiatives.
Lithium, a vital component of cathode materials, is recognized as a crucial raw material impacting battery price competitiveness. Cathodes represent about 40% of the total battery production cost, with lithium contributing to approximately 30% of cathode expenses.
The concentration of lithium processing capacity in China, which dominates global lithium refining, has raised concerns about supply chain stability. Geopolitical risks have further emphasized the importance of a reliable and diverse supply chain for long-term competitiveness.
North America and Europe, major EV markets, are actively promoting policies that encourage supply chain diversification, aiming to reduce battery manufacturers’ dependence on China. The US Inflation Reduction Act offers EV tax credits favoring sourcing from the US or free trade agreement partners. Similarly, the EU’s raw materials and battery regulations seek to minimize reliance on single-country suppliers like China.
By strengthening its partnership with Posco, SK On aims to enhance its sourcing capabilities and respond more effectively to supply and demand fluctuations in the global raw materials market.
“This agreement is a key component of our supply chain diversification strategy, designed to enhance long-term raw material stability and sourcing competitiveness,” stated Park. “We will continue to expand SK On’s raw material capabilities beyond electric vehicles and into the energy storage system sector.”
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