VANCOUVER (miningweekly.com) – A new deal by Korean battery manufacturer LG Chem and China’s Huayou Cobalt is expected to set the tone for the lithium-ion battery cathode market.

The two partners have announced a significant deal worth about $440-million to build a 40 000 t/y lithium-ion battery precursor materials plant and a 40 000 t/y cathode plant, in China, over the next 18 months. LG Chem said the plants will be designed with the potential to expand each plant to 100 000 t/y.

"It represents a significant development for the lithium-ion battery chain, whether the focus is on lithium, graphite, cobalt or nickel, this sets the tone," said London-based MD of consultant Benchmark Mineral Intelligence Simon Moores on social media. He pointed out that it is the world’s most significant deal between raw material miner and lithium-ion battery manufacturer to date and signals a significant move by a battery manufacturer to control such a large cathode manufacturing capacity.

This is confirming fears that present cathode producers cannot expand quick enough, Benchmark stated in a note to clients on Wednesday.

Under terms of the deal, the partners will form two separate joint venture (JV) companies – Huajin New Energy Material (Quzhou) and Leyou New Energy Material (Wuxi). Huayou has incorporated a new subsidiary Huayou New Energy Technology, which deals with LG Chem directly. Huayou has 51% ownership in Huajin, with the balance owned by LG Chem. Leyou is also 51%-owned by LG Chem, with Huayou holding the balance.

The announcement states that the plants will be mainly equipped to produce both nickel cobalt manganese (NCM) and nickel cobalt aluminium (NCA) battery assemblies. A decision on this direction or the final NCM to NCA split is yet to be made, but LG Chem is a major producer of NCM batteries for electric vehicles.

IN CONTEXT
Benchmark pointed out that the size of the deal is what makes it unique. The base case production scenario calls for nearly double what the world’s largest cathode producer put out in 2017, which was Umicore with 24 000 t of material.

The JV arrangement enables the two companies to control the entire value chain from raw material production, owned by Huayou in the DRC, through to finished cells with LG Chem battery operations located in South Korea, China, Poland and the US, Benchmark pointed out.

LG Chem is a significant producer of batteries for General Motors’/Chevrolet’s Bolt and Volt EVs through the lithium-ion battery plant in Holland, Michigan, which has a 3 GWh capacity and will be expanding to double this number over the next two years. The plant is also one of 30 lithium-ion battery ‘megafactories’ that Benchmark is tracking.

“The cobalt deal confirms that downstream companies such as LG Chem are more and more concerned with securing a reliable source of raw materials, and in order to meet their expected future demand they are prepared to invest and become vertically integrated in the value chain. With such significant expansions needed throughout the supply chain in order to meet forecast demand of lithium-ion battery raw materials question marks have hovered over how the industry will fund the capacity expansions.

“This JV structure is just [one] of a number of ways the industry is tackling the issue, with shared risk among the two parties and an agreement to provide each other with competitive pricing for processed products,” Benchmark commented.