Thank you for rating this post.FYI Resources (ASX: FYI; FRA: SDL) published a remarkable tweet last Friday about an article in the English-language Korean daily "The Korean Herald". LG Chem is taking over the separators business from LG Electronics for 525 billion won (458.5 million US dollars), the paper reported last Thursday.
LG Chem produces cathodes, binders for anodes and additives for electrolytes and wants to expand its leading role in this growth market by acquiring the separator division. According to market research firm SNE Research, the market for separators for electric vehicle batteries is projected to grow from 4.1 trillion won ($ 3.6 billion) this year to 11 trillion won ($ 9.6 billion) in 2025.
What does this have to do with FYI Resources? Why is FYI tweeting about LG Chem's entry into the separator business? As is well known, there are four key components that go into every lithium-ion battery: cathodes, anodes, the electrolyte and the separators. Naturally, the most attention is paid to the electrolyte, i.e. the lithium itself. And rightly so, because the demand is unprecedented. It is expected to grow by 20 percent per year in this decade. You can also read a lot about the chemical composition of the positive pole, i.e. the cathode. Which type of battery needs more or less cobalt, nickel, manganese etc.? The anode material graphite usually has significantly less press (apart from EcoGraf and anode recycling, of course). The fourth component of batteries, however, receives the least attention, the separators. And the close connection between separators and high purity alumina (HPA) should be even less clear to market participants.
As the demand for separators grows, so does the demand for HPA
Separators are basically thin resilient walls with tiny holes that separate cathodes, the positive pole, from anodes, the negative pole. When batteries are charged and discharged, lithium ions migrate back and forth through these tiny holes between cathodes and anodes. Separators prevent cathodes and anodes from reacting directly with one another and triggering short circuits or fires. So far, LG Chem has bought the separators from external suppliers and coated them with its patented SRS (safety-reinforced separator) technology, in which the separators are coated with ceramic particles in the nano range that cannot be penetrated by ions. Thanks to this coating, the separators keep their shape even in extreme heat of 180 degrees Celsius.
The “ceramic particles in the nano range” are nothing more than a description of high purity alumina. The Korean chemical giant apparently needs HPA for its patented SRS technology!
Conclusion: It is difficult to imagine that LG Chem would undertake such a strategic takeover without at the same time ensuring that the long-term supply of HPA is guaranteed. Ultimately, the market for separators is expected to almost triple in the next four years. What if that is not a starting point for FYI Resources? LG Chem's entry into the separators business shows that the growth expectations for HPA demand for separators are real. Such news is likely to strengthen FYI's negotiating position with Alcoa, even if the 90-day exclusivity for the joint venture negotiations with Alcoa ends tomorrow. The signals for the HPA market are green. FYI and Alcoa make it exciting.
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