LGES signs deal with Australia's Syrah Resources for graphite sourcing in the US

South Korea’s battery giant LG Energy Solution Ltd. (LGES) has signed a deal with an Australian industrial minerals company, to receive 2,000 tons of graphite, a key battery anode material, starting in 2025, and up sourcing from allies of the United States as the result of Inflation Reduction Act (IRA) that would restrict tax credits for EVs to vehicles produced with sourcing from the U.S. or its free trade agreement partners.

LGES announced Thursday that it signed a memorandum of understanding (MoU) with Syrah Resources Limited on Wednesday on supply of natural graphite. The Korean No. 1 battery maker will receive 2,000 tons of natural graphite mass produced at Syrah’s factory in Louisiana, the United States, starting in 2025. The two companies agreed to continue to expand supply.

Syrah owns and operates Mozambique mine in Africa with world’s largest graphite reserves. It plans to build and operate a production factory in Louisiana next year.

LGES and Syrah plan to agree on detailed terms by the end of this year to finalize supply contract.

China controls more than 70 percent of global graphite supply, according to International Energy Agency. Battery makers cannot rely on Chinese minerals if they are sourcing finished carmakers hoping to qualify for tax credits for EV purchases in the U.S. from next year.

LGES said that it has been able to enhance stable supply of key battery materials from graphite to key cathode materials like lithium, nickel, and cobalt. The Korean company earlier announced to receive 7,000 tons of cobalt sulfate and 255,000 tons of lithium hydroxide from Canadian mineral company Electra, Avalon, and Snow Lake.

It has also secured 40 percent of U.S. lithium producer Compass Minerals’ lithium carbonate and hydroxide production for seven years starting 2025 and 690,000 tons in spodumene from Canada’s Sigma Lithium Resources, 45,000 tons in lithium hydroxide from Germany’s Vulcan Energy, and 700,000 tons of spodumene from Australia’s Liontown Resources.

“Our partnership with Syrah demonstrates our commitment to diversifying the critical minerals portfolio by directly procuring from local and regional suppliers in North America, more so as natural graphite is one of the battery materials with the least diverse supply chain,” said Kwon Young-soo, chief executive of LGES. “As we aim to not only expand our customer base but also increase our production capacity in North America, securing a competitive local supply chain for key critical minerals will play a crucial role in ensuring a stable delivery of the world-best quality products to our customers.”

“Syrah is pleased to sign an MoU with LGES as a key step toward the supply of anode materials and supportive of the further development of our Vidalia production facility,” said Shaun Verner, chief executive of Syrah. “LGES is a tier 1 global manufacturer of lithium-ion batteries and their rapidly expanding manufacturing position in the USA is aligned with Syrah’s growth plans.”

Shares of LG Energy Solution fell 2 percent to 486,500 won in Thursday afternoon.

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