LG Energy Solutions has signed an eight-year agreement with Chilean chemical company Sociedad Química y Minera (SQM). Under the contract, SQM is to work in partnership with the subsidiary of South Korean company LG Chem. They will provide a steady supply of battery-grade lithium carbonate and lithium hydroxide.
SQM is expected to bring in a volume of approximately 55,000 metric tons of lithium carbonate equivalent. This will aid LG Energy Solutions in manufacturing high-quality lithium cathode material, a major component in powering electric vehicles. The companies will administer the long-term deal starting from 2021 to 2029.
“This seems a constructive development as it enables LG Energy Solutions to secure supply from a low-cost producer while at the same time it provides SQM with a secured buyer that will help SQM plan and invest in future capacity,” said William Adams, head of base metals and battery research at Fastmarkets.
“We expect to see more deals like this as the downstream part of the supply chain will likely want to secure supply given the billions they are investing in electric vehicle production capacity.” Lithium manufacturing companies have been increasing their production capacities. This is in preparation for the rising demand from automakers for use in electric vehicle battery cells.
SQM is the second-largest lithium producer in the world. They announced that one of their goals by 2023 is to expand their production of lithium carbonate to 180,000 metric tons and lithium hydroxide to 30,000 metric tons.
LG Chem’s energy division
South Korean company LG Chem is a supplier of battery cells to electric vehicle manufacturers like GM and Tesla, Inc. In September 2020, LG Chem revealed their plan to have a separate division focusing on its battery-making business. By December, they discontinued their previous battery division and officially launched the subsidiary under the name of LG Energy Solutions.
LG Chem established LG Energy Solutions to gain better stability in manufacturing raw material for their batteries. LG Energy Solutions accommodates the rising demand from European markets and the growing sales of cylindrical batteries for electric cars. They appointed Kim Jong Hyun as the first president of the subsidiary. He was the previous head of LG Chem’s battery business.
