POSCO Future M inks $22 bn cathode materials deal with LG Energy Solution

POSCO Future M Co. logo [Courtesy of POSCO Future M]

POSCO Future M Co., a secondary battery materials unit of South Korean steel giant POSCO, signed a deal with LG Energy Solution Ltd. (LGES), a pure-play vehicle battery maker under LG Group, to supply cathode materials worth more than 30 trillion won ($22.4 billion) over the next seven years, bringing the company’s total orders to exceed 90 trillion won.

POSCO Future M said Wednesday that it signed a contract with LGES to supply cathode materials worth about 30.26 trillion to LGES until 2029 starting this year. Under the contract, POSCO Future M will supply 4.3 trillion won worth of high-nickel cathode materials every year. Its sales are expected to double from 3.3 trillion won last year on the back of the latest deal.

“POSCO Future M will supply cathode materials to LGES’ Ochang plant and its U.S. plant,” said an unnamed official from the battery industry. LGES has an energy plant in Ochang, North Chungcheong Province in Korea, and a single battery factory in Michigan in the U.S.

The annual supply exceeds that of the contract that POSCO Future M signed with Samsung SDI Co. in January, under which 40 trillion won worth of cathode materials is to be supplied over 10 years, meaning 4 trillion won a year.

Cathodes are a key for batteries that account for more than 40 percent of the battery cost. They determine the battery capacity and output.

POSCO Future M will provide high-nickel cathodes from nickel, cobalt, and manganese (NCM) and nickel, cobalt, manganese, and aluminum (NCMA), which are core materials for batteries needed for high-performance electric vehicles (EVs), to domestic and overseas battery factories of LGES.

POSCO Future M has been maintaining a close partnership with LGES. It started cooperation for product development with LGES that launched the battery materials business in 2011 and has been supplying cathode and anode materials since 2012.

POSCO Future M is the only Korean company that produces both cathode and anode materials for EV batteries.

LG Energy Solution Ltd. logo [Courtesy of LGES]

In 2020, POSCO Future M signed a cathode materials supply contract worth 1.85 trillion won with LGES, the first contract exceeding 1 trillion won. Last year, it also clinched a deal to supply cathode and anode materials worth trillions of won with Ultium Cells LLC, a joint venture between LGES and U.S. carmaker General Motors Co. The combined supply of cathode and anode materials to LGES and Ultium Cells reaches 53 trillion won.

“The growth of the battery material business was possible as we forged close cooperation with LGES that goes back to the early days of the business,” said Kim Joon-hyung, chief executive officer of POSCO Future M. “POSCO Future M will further strengthen its business capabilities for customers, such as raw materials competitiveness, quality technology, and stable mass production capabilities, and further solidify the partnership.”

POSCO Future M is actively expanding its production facilities to meet the demand from rising orders. The company on Monday announced plans for cathode material facility expansion worth 614.8 billion won in Pohang, North Gyeongsang Province.

The capacity of POSCO Future M to produce cathode materials is projected to increase to 610,000 tons in 2030 from 105,000 tons and that of anode materials to 320,000 tons from 82,000 tons. The board of POSCO Future M on Monday approved the plan to build an additional plant in Pohang with an annual capacity to produce about 46,000 tons of high-nickel NCMA cathode materials.

“We are examining plans to expand areas of collaboration to include not only cathode materials but also battery recycling and local production of precursors,” said an unnamed official from POSCO Future M.

Shares of POSCO Future M were trading 0.45 percent higher at 334,000 won on Thursday morning after closing lower at 332,500 won on Wednesday despite the super-large deal with LGES.