![[Image source: LG Energy Solution]](https://file.mk.co.kr/meet/neds/2023/12/image_readtop_2023_951687_17023656795747333.jpg)
이미지 확대[Image source: LG Energy Solution]
South Korean battery material makers are seeking opportunities in the face of the implementation of the new U.S. battery component mandates under the U.S. Inflation Reduction Act (IRA) starting January.
According to industry sources on Monday, Korean electrolyte and separator makers are paying close attention to potential additional orders from related industries that are trying to comply with the new Foreign Entities of Concern (FEOCs) rule.
Under the new rule, automakers and battery makers in the U.S. must use core battery components from companies other than FEOCs, starting next year, to meet the criteria for the $7,500 electric vehicle tax credit provided under the IRA.
For core components classified as such, including electrolytes and separators, the use of products made by Chinese companies will be restricted starting immediately next year, practically making battery companies inevitable to eye Korean and Japanese material companies.
Industry observers are keenly watching Ultium Cells LLC, a joint battery venture between LG Energy Solutions Ltd. and General Motors Co.
In 2021, Ultium Cells signed separator contracts with Yunnan Energy New Material Co. from China and electrolyte contracts with another Chinese company Shenzhen Capchem Technology Co., with agreed supply from them scheduled until 2024 and 2025, respectively.
Due to the FEOC rule, however, industry insiders expect it will be difficult for Ultium Cells to make additional contracts with these companies.
Ultium Cells is now faced with challenges under which it has to diversify its supply sources for electrolytes and separators in the short term to receive IRA subsidies from next year.
“LG Energy Solution and GM selected Chinese separator and electrolyte companies as key suppliers for the initial production line of Ultium Cells in 2021, and Chinese companies are assumed to be still the main suppliers for the joint venture at the current stage of full operation,” said Kim Chul-joong, an analyst at Mirae Asset Securities Co.
LG Energy Solution’s Michigan factory is also reportedly having its electrolyte supplies from China’s Zhangjiagang Guotai Huarong New Chemical Materials Co.
As for Tesla Inc., it is reported that its Fremont and Texas factories are having their electrolyte supplies from China’s Guangzhou Tinci Materials Technology Co.
Some of the leading Korean separator companies, including SK ie technology Co. (SKIET), LG Chem Ltd., and W-scope Chungju Plant Co. (WCP), have been eyeing the North American market.
Among them, SKIET plans to announce its plan to establish a North American separator factory in the first quarter of next year with the goal of starting operations in 2028.
Before completing the North American factory, SKIET plans to use its Polish factory as a base to respond to demand in Europe and North America.
WCP, which has been a main supplier to Samsung SDI Co., is also considering establishing a separator production base in the North American region.
LG Chem, which partnered with Japan’s Toray Industries Inc. and started operating a separator factory in Hungary from this year, is focusing on expanding production capacity at the Hungarian factory.
Electrolyte companies are also eyeing the U.S. market.
Dongwha Electrolyte Co. plans to start production of 86,000 tons at its Tennessee factory from September next year.
Enchem Co., which has a production plant in Georgia, is focusing on expanding production capacity in North America, planning to expand the production capacity of its Georgia factory to 40,000 tons.
By Jung You-jung and Chang Iou-chung
(20min delay)
