SK On Signs Lithium Hydroxide Supply Agreement to Boost EV Battery Supply Chain

On July 16, South Korean electric vehicle battery manufacturer SK On signed a lithium hydroxide supply agreement with metal refining company EcoPro Innovation. This move aims to strengthen SK On's domestic electric vehicle battery supply chain in compliance with the U.S. Inflation Reduction Act (IRA). According to the agreement, SK On will secure up to 6,000 tons of locally produced lithium hydroxide by the end of this year, sufficient to supply around 100,000 electric vehicles. The material will be processed at a cathode materials plant in South Korea before being shipped to SK On's battery production facility in the U.S. SK On and EcoPro Innovation are also planning to sign a long-term supplementary supply agreement lasting two to three years within this year to deepen their cooperation. Lithium hydroxide is a key component of nickel-cobalt-manganese cathode materials, traditionally reliant on imports, particularly from China. Data from the Korea International Trade Association revealed that last year, China accounted for 82.7% of South Korea's total lithium hydroxide imports. By securing a domestic supply of raw materials, SK On aims to enhance price competitiveness and mitigate geopolitical risks. Notably, the lithium hydroxide produced in South Korea meets the advanced manufacturing production tax credit (AMPC) criteria under the IRA, which will help SK On obtain tax benefits in the U.S. market and improve cost efficiency. EcoPro Innovation's CEO Kim Yoon-tae stated that this agreement marks their first supply of lithium hydroxide to global battery manufacturers and will help expand their market share in North America and Europe. SK On's strategic procurement head Park Jong-jin mentioned, "In the context of global policy changes, we are building a stable supply chain. Ensuring a competitive supply of raw materials and diversified partners will enhance our capabilities in the North American market." As a significant player in the global lithium hydroxide production sector, EcoPro Innovation has achieved large-scale production since 2021. By the end of this year, the company's combined production capacity in South Korea and Europe is expected to reach 34,000 tons. Looking toward global market expansion, EcoPro Innovation has set ambitious plans to increase its total global capacity to 79,000 tons by 2028, with South Korea and the U.S. as key focus areas. SK On primarily supplies batteries to the Hyundai Motor Group, Mercedes-Benz, and Volkswagen Group and is actively expanding its battery business. Earlier in January, it was reported that SK On would supply electric vehicle batteries worth 25 trillion won (approximately $12 billion) to Japan's Nissan for its U.S. manufacturing plant, enough to power about 300,000 standard electric vehicles. Nissan plans to start sourcing batteries from SK On around 2028 for its electric vehicles in the U.S. Earlier in July, it was reported that SK On is seeking business recovery through an exclusive battery supply agreement with U.S. electric vehicle startup Slate. As SK On expands beyond traditional high-end markets into the mid-to-low-end electric vehicle sector, investors and analysts are closely watching whether the company can turn a profit in the second quarter of this year. Notably, in the first four months of this year, SK On's global electric vehicle battery installations increased by 24.1% year-on-year to 13.4 GWh, although its market share dropped from 4.9% last year to 4.3%. In the first quarter of this year, SK On's sales reached 16 trillion won (approximately $12 billion), representing a slight year-on-year decline of 4.6%, while its operating losses narrowed by 9.7% to 299.3 billion won.