![Korea battery materials maker onshores China supply chain to win US subsidies Korea battery materials maker onshores China supply chain to win US subsidies](https://i0.wp.com/www.ft.com/__origami/service/image/v2/images/raw/https://d1e00ek4ebabms.cloudfront.net/production/db0663d9-5352-4f6e-b8ac-5081d727e0f3.jpg?fit=%2C&ssl=1)
Receive Free POSCO Updates
we will send you myFT Daily Digest Email summary of the latest information Posco Every morning there is news.
South Korean conglomerate Posco is leading a push to shift production of battery materials from mainland China to South Korea as companies around the world adapt to U.S. tax incentives reshaping the global electric vehicle supply chain.
US President Joe Biden’s flagship climate legislation, the Reducing Inflation Act (Ira), provides billions of dollars in subsidies to electric carmakers and battery makers to source components from the US and its free trade partners instead of China .
But South Korean producers of EV battery anodes and cathodes made by companies such as LG Energy Solution and Samsung SDI still rely on Chinese partners to source and refine certain key minerals. China controls supply chains for dozens of clean-tech minerals and produces about 90 percent of the world’s rare earth elements.
South Korean companies have entered into a series of joint ventures with Chinese firms in recent months to build domestic facilities and produce IRA-compliant materials.
Steelmaker Posco is aggressively expanding into the battery industry, with Lee Kyung Sub, head of its battery materials business, saying the company is targeting the booming U.S. electric vehicle market.
In an interview at Posco’s headquarters in Seoul, Lee said Posco was building an Ira-compliant material supply chain in which “none of the materials will be produced or sourced in China”.
“The nickel needed for the North American market will be sourced from Australia and will be smelted in a Korean factory.”
But he acknowledged that Chinese companies would continue to play an important role in the supply chain because of their “advantages” in areas such as nickel and graphite processing.
In May, Posco’s battery materials subsidiary signed a wide-ranging memorandum of understanding with China’s Zhejiang Huayou Cobalt to jointly produce lithium-ion battery cathode and anode materials in South Korea.
In June, Posco announced a $1.2 billion joint venture with China’s CNNC Advanced Materials Co to produce high-nickel cathode materials on the southeastern coast of the Korean peninsula. The two companies also operate a battery recycling plant in South Korea with South Korean conglomerate GS Group.
“It’s very difficult and costly to break away from China completely,” Li said.
Several other leaders in South Korea’s battery industry agree with Posco’s strategy. South Korean battery maker SK On and materials producer EcoPro have entered into a partnership with China’s GME Resources to produce batteries at a factory in South Korea’s Saemangeum, while LG Energy Solutions, one of the world’s second-largest battery producers, The company LG Chem has also established a partnership with Zhejiang Huayou Cobalt Industry.
“Korean battery companies have been cooperating with China,” said Tim Bush, a battery analyst at UBS Group AG in Seoul. “The difference now is that the joint venture is moving from China to South Korea.”
Bush noted that Washington has not yet specified the extent to which China will own a joint venture that produces components destined for the U.S. market.
He said that while U.S. officials might tolerate Chinese participation in joint ventures, “it is unlikely that a Chinese-controlled entity anywhere in the world would be considered compliant with the Inflation Cutting Act.”
One of the world’s top 10 steelmakers, Posco’s market value has more than tripled over the past three years as investors piled into South Korean battery-related stocks.
The group has identified the battery industry as a key driver of its future growth. Between 2023 and 2025, the company will spend 43.6% of its capex on its battery materials business – higher than its steel investment – compared with 13.6% between 2016 and 2018.
Svlook