SK on secures lithium supply from Chile’s SQM to meet IRA sourcing rule in US

[Provided by SK on]

SK on Co., a pure-play battery maker under South Korea’s SK innovation Co., has signed a lithium supply deal with a Chilean lithium firm to meet the U.S. Inflation Reduction Act (IRA) that restricts consumer tax credits for electric vehicles to cars with batteries and materials sourced from the U.S. and its partners of free trade agreements.

SK on announced Sunday that it signed an agreement with Chile’s leading lithium company SQM to be supplied with 57,000 tons of lithium hydroxide for five years from 2023, which is enough to produce batteries for 1.2 million electric vehicles (EVs).

SQM is the only lithium hydroxide producer in Chile and is listed on New York and Chile’s Santiago stock exchanges.

The deal signed by Jin Kyo-won, SK on’s chief operating officer, and Carlos Diaz, executive vice president of lithium, in Seoul on Friday would help the battery maker building expansive battery facilities in North America to keep up with its foray under the new EV tax rules.

From next year, Americans can claim tax credits only for EVs that are loaded with batteries produced and sourced from the U.S. or countries in free trade agreement with the U.S.

From 2027, 80 percent of minerals in a battery depending on the produced year should be produced in the U.S. or countries that signed FTA, doubled from 40 percent in the first year.

SK on has secured up to 230,000 tons of lithium from Australia’s Lake Resources in October. It has also been expanding its supply chain strategy for additional raw materials supply such as graphite from Australia.

“We signed the deal to preemptively respond to changing external environment and to support global production expansion,” Jin said. “Our key mineral supply network has been reinforced under partnership with SQM that has been proven of its outstanding quality and realibiltiy.”

Diaz from SQM who toured SK on’s battery factory in Seosan, South Chungcheong Province on Friday, noted that the two companies are in talks for mid- to long-term partnership such as additional lithium supply, investment in production facilities, and reuse of waste batteries.

By Song Min-geun and Lee Eun-joo