Recent rumblings about a deepening Posco/SKI relationship are...

Recent rumblings about a deepening Posco/SKI relationship are encouraging on a number of levels. SKI’s first battery plant under construction is in Changzhou, Jiangzhou province. Posco’s recently completed Chinese cathode plant is in the neighbouring Zhejiang provence, city of Tongxiang City, two hours away by car, coincidence? I don’t think so. In this industry that’s crucial with freight/weight cost considerations. Yes Posco already have a supply relationship with Huayou Cobalt who have more cobalt than anyone else and are trying to crack the Indonesian HPAL open but there are still many doubts regarding nickel sulphate supply This article states they want to grow with the Chinese market...

http://www.businesskorea.co.kr/news/articleView.html?idxno=35239

...which would suit SKI as they are seeking to do the same as they are indeed embarking on their second Chinese battery plant, location undisclosed as yet.

Amongst several recent South Korean government campaigns to back local firms on the back of a raft of recent major macro events, especially in areas they see as “future growth engines” we add this one to the list as of sept 11...

http://english.moef.go.kr/pc/selectTbPressCenterDtl.do?boardCd=N0001&seq=4753

”3 plans for high-tech supplies development, global value chain security and FTA expansion

- Invest 2.7 trillion won for the next 3 years from 2020 to 2022 in global R&D and overseas M&A to help the manufacturing of high-tech supplies

- Increase the trade insurance support by 3.7 trillion won in 2020 for global value chain security

- Work on FTA 2.0, a strategy for expanding FTA’s”

So if Posco and SKI are going to ‘hook up’ re cathode supply it makes sense that the government will assist especially with the above additional mandates.

So the takeaway is it’s well documented that the government see batteries as a major future growth engine up there with the once mighty semiconductor industry and have held recent meetings with industry leaders to thrash out ways through the turbulence. Two of their major conglomerates may be linking up and need “supply chain security”. Add medium sized Ecopro to the list of firms requiring backing and there is, imo an increasingly compelling reason for state based backing of this deal.