Korea seeksAustralian lithium to secure US subsidies, sideline...

Korea seeksAustralian lithium to secure US subsidies, sideline China

Seoul | Korean conglomerate Posco is scouring Australia forlithium investments that qualify for United States subsidies that are stillreshaping the global electric vehicle supply chain amid the battery metal’ssecond reckoning.

US President Joe Biden’s flagship climate policy, the InflationReduction Act, offers electric carmakers tax breaks for sourcing componentsfrom the US and its free trade partners such as Australia and South Korea,instead of China.

Posco’s widening gaze means the rush to set up alternative traderoutes for non-Chinese supply of battery metals is yet to run its course. It islooking to replicate the structure of a partnership struck with ASX-listedPilbara Minerals, where West Australian ore is refined in South Korea’sindustrial heartland.

Posco, South Korea’s largest steel producer, is aggressivelyexpanding into the battery industry to access lithium concentrate fullycompliant with US trade rules and assist the EV industry.

It has just built a $US800 million ($1.2 billion) plant thatwill process Australian ore in Gwangyang in a joint venture with PilbaraMinerals to turn its lithium-rich spodumene concentrate into higher valuelithium hydroxide.

“We’re reaching out to severalAustralian lithium miners,” a spokeswoman said in an invitation at the facilityin Gwangyang. “We’re looking for joint venture partners with lithium miners inAustralia to build more facilities like this one.”

Located 300 kilometres south of Seoul, Posco’s refinery, inwhich Pilbara Minerals owns 18 per cent, was the first of its kind in SouthKorea. If expanded upon, it could establish a cluster of refineries near itsflagship steelworks.

The conglomerate has previously ruled out setting up a refineryin Australia because it is 40 per cent cheaper to build one in South Korea.

In May, rules published by the US Department of Energy made itclear that a company is disqualified from subsidies under the IRA if it isregistered in China, or is 25 per cent-owned by a “foreign entity of concern” –a term that largely refers to China, but includes Iran, North Korea and Russia.

Korean automakers have been given a two-year reprieve from theUS rules that start next year, without which the manufacturers would have beenineligible for US subsidies of up to $US7500 per EV.

Just after the rules were released, Seoul unveiled 5 trillionwon ($6 billion) in financial aid and tax incentives to help wean its EVbattery supply chain away from China and align more with US trade guidelines.

This is on top of South Korean government agencies alreadyloaning $US460 million towards construction of the Gwangyang plant.

Pilbara counts Chinese lithium giant Ganfeng as an investor, butit holds less than 10 per cent of the company’s register, making the jointventure with Posco US-compliant.

This sets the Posco-Pilbara plant apart from rivals such as NewYork-listed Albemarle, which last week said the lithium it mines and processesin Australia does not qualify for US subsidies in a major blow to the future of its downstream operations in WA

The battery materials heavyweight is shut out under the “foreignentity of concern” rule because Albemarle owns 49 per cent of the Greenbushesmine in WA and the remaining 51 per cent is owned by China’s Tianqi andASX-listed IGO.

Albemarle said the inability to access subsidies under theInflation Reduction Act had been a major factor in its decision to slash 40 percent of its workforce and curtail investment in WA lithium refining.