Little QPM mention. Would not be surprised if LG further increases their offtake agreement
http://m.koreaherald.com/view.php?ud=20211202000548
The ongoing urea solution shortage in South Korea is just a trailer. The real movie hasn’t even started yet.China can always send another wave of supply chain crises to Korea, and next time, the electric vehicle battery industry could be the target.According to Hana Financial Investment Thursday, electric vehicle batteries manufactured in South Korea by LG Energy Solution, Samsung SDI and SK On are heavily dependent on Chinese metals.“The three companies source 71 percent of cobalt, 63 percent of manganese and 82 percent of lithium from China. Such heavy reliance on China won’t be much different for their overseas production facilities in Europe or the US,” said Kim Hyun-soo, an analyst at Hana Financial Investment.“Depending on how strongly Beijing weaponizes those metals, Korean battery firms’ dominance in the global market can fade rapidly.”EV batteries use expensive metals as raw materials, including cobalt, nickel and manganese. These metals take up 70-80 percent of total costs. If China limits the supplies of just one of those metals, the Korean battery trio, despite controlling 40 percent of the global EV battery market, could suddenly find their existence under threat.And China’s weaponization of metals has already begun.Manganese cartelManganese is a common metal produced pretty much anywhere on Earth, but China produces more than 90 percent of the “high-purity” manganese used for EV batteries.Dozens of Chinese manganese companies in October last year joined a state-backed initiative and formed a cartel-like organization called “Manganese Innovation Alliance.”Since its establishment, the cartel has driven up the price of manganese. The price, which stood at $1,145 per ton in October last year, more than doubled to $2,505 this October, data from the Korea Mineral Resource Information Service showed.Manganese is not the only metal whose supply comes at the mercy of China. Though 70 percent of the world’s cobalt is mined in Congo, 72 percent of global supplies are purified and refined in China.Australia, the world’s largest producer of lithium, exports 89 percent of the supplies to China because most of the infrastructure to process lithium for EV batteries is located there.Also, China is spending billions of dollars in Indonesia, which accounts for 30 percent of global nickel production. With massive capital, multiple Chinese firms are setting up infrastructure to process the metal locally.“China’s overwhelming dominance over key metal resources is a ticking time bomb that can always explode,” analyst Kim said.The same old playbookThe EV industry’s mounting concerns stem from China’s frequent habit of weaponizing its resources. The world’s No. 2 economy has a track record of frequently banning exports of rare earth metals to countries as part of trade retaliations.China, which produced approximately 90 percent of the world’s rare earths as of 2019, is showing signs to further consolidate its dominance. The Chinese authorities announced in September that it would merge three domestic rare earths producers and create a giant state-owned company.As China is likely to follow the same playbook for EV battery raw materials, the EV industry is making diversification efforts. LG Energy Solution, which is scheduled to go public in January, acquired a 7.5 percent stake in an Australian mining company QPM in June and signed a long-term supply contract. Under the 10-year contract, QPM will provide 7,000 tons of nickel and 7,000 tons of cobalt per year to LG Energy Solution.LG Energy Solution also signed a long-term purchase agreement with Australian Mines in August, which would give the Korean battery maker access to 71,000 tons of nickel and 70,000 tons of cobalt for six years from the end of 2024.In October, LG Energy Solution signed a long-term contract with Sigma Lithium to source 100,000 tons of lithium from the Canadian company for three years starting 2024.EcoPro Innovation, a subsidiary of Korean battery materials company EcoPro, signed a three-year procurement agreement with Ioneer to source 7,000 tons of lithium carbonate per annum from the Australian company.Korean steel giant Posco, which conducts battery materials business through its subsidiary Posco Chemical, aims to secure independent annual production capacities of 220,000 tons of lithium and 100,000 tons of nickel by 2030. It acquired a salt lake in Argentina with 13.5 million tons of lithium reserves and a 15 percent stake in a graphite mine in Tanzania.
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