LGES inks deal with Chile’s SQM to bolster EV supply chain

LG Energy Solution’s Ohchang factory in North Chungcheong Province (LG Energy Solution)

LG Energy Solution, the world's second-largest battery maker, said Friday it has inked a long-term deal with Chilean lithium producer SQM for the key electric vehicle battery component.

Under the agreement, SQM is set to supply 100,000 metric tons of lithium to LG Energy Solution over the next seven years, beginning this year through 2029. The supply would be able to power 2 million all-electric vehicles, making it the world's largest single purchase agreement in scale.

This agreement replaces the previous contract LG Energy Solution signed with the Chilean supplier in 2020, expanding by nearly threefold the outstanding supply volume of 36,000 tons, the Korean battery maker said in a statement.

With the latest agreement, LG Energy Solution has secured lithium hydroxide, a raw material for high-nickel, high-capacity batteries, as well as lithium carbonate used in the cheaper low-nickel and lithium iron phosphate cells.

LG Energy Solution has been accelerating efforts to diversify channels for the sourcing of key minerals for secondary batteries amid escalating EV demand.

Previously, it has won a number of supply deals with mineral companies in Australia and the US, in a bid to meet the requirements for the US' Inflation Reduction Act. The law only grants subsidies to EVs made with components produced or processed in North America or in the territory of its free trade agreement partners.

SQM fulfills the requirements as stipulated in the IRA, as it possesses lithium mines in FTA partners' territories, including Chile, Australia and elsewhere.

"Through this agreement, we have strengthened and diversified the supply chain of lithium, a key mineral for EV batteries, aiding us to proactively respond to the IRA," LG Energy Solution Chief Product Officer Kim Myung-hwan said.

"Leveraging our distinguished raw material supply and unrivaled product competitiveness, we will strive to deliver world-class customer value.”

SQM, equipped with advanced eco-friendly technologies, utilizes solar energy for over 95 percent of the lithium extraction process, which also aligns with LG Energy Solution's commitment to environmental, social, and corporate governance management, it added.

Both companies plan to further expand their strategic partnership to enhance cooperation in lithium production and supply in the North American and Asian regions.

LGES also plans to build a factory for cylindrical batteries in Queen Creek, Arizona, with construction scheduled to be complete by 2026.

By Song Jung-hyun(junghyun792@heraldcorp.com)