SK On Enters Supply Agreement for Lithium Hydroxide with Chile's SQM
South Korea's biggest maker of batteries for electric vehicles (EVs), SK On, announced that it had signed a lithium hydroxide supply deal with Chile's SQM. This will help the company deal with the U.S. Inflation Reduction Act (IRA) by strengthening its supply chain for important battery materials. SK On recently signed deals with Australian lithium developers.
The two companies had a signing ceremony for the lithium deal on November 4 at SK Group's headquarters Seorin building in Seoul, South Korea, attended by Jin Kyo-won, Chief Operating Officer at SK On, and Carlos Daz, Executive Vice President Lithium at SQM.
SK On will purchase up to 57,000 tonnes of high-quality lithium hydroxide over five years beginning in 2023. This quantity is sufficient to manufacture batteries for nearly 1.2 million electric vehicles (EVs).
In addition to the supply deal, SK On and SQM agreed to talk about a mid-to-long-term partnership to improve the way they work together. This partnership could lead to more lithium being available, possible investments in production plants, and recycling of used batteries.
Before the signing ceremony, Daz and his group paid a visit to SK On's battery plant in Seosan, South Chungcheong Province, and took a tour of the company's cutting-edge manufacturing system.
The arrangement with SQM is expected to help SK On achieve the IRA requirements because Chile is a free trade agreement (FTA) partner of the U.S. The IRA is a law that gives consumers a tax credit when they buy an electric vehicle (EV) with batteries that contain a certain percentage of essential minerals that were mined or processed in the U.S. or in a country that has a free trade agreement (FTA) with the U.S.
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SQM is the only company in Chile that makes lithium hydroxide. It was founded in 1968 and is listed on both the Santiago and New York stock exchanges.
Through its collaboration with SQM, SK On is expected to not only procure critical minerals more reliably but also to increase its competitiveness in ESG (environmental, social, governance). SK On has taken the lead in building a sustainable battery supply chain by taking part in important eco-friendly initiatives like the Global Battery Alliance and the Responsible Mineral Initiative.
SQM is currently one of the lithium-producing companies with the lowest carbon and water footprint in the world and is fully committed to the environment. In 2020, SQM joined the Initiative for Responsible Mining Assurance (IRMA) to make sure that lithium mining is done in an ethical and environmentally friendly way. According to IRMA rules, the Atacama site has independent third-party audits in areas like worker health and safety, human rights, community engagement, and pollution control.
SK On has steadily strengthened its supply chain for critical battery materials. It signed a lithium supply agreement with Lake Resources last month to acquire battery-grade lithium for a maximum of ten years beginning in the fourth quarter of 2024 after acquiring a 10% stake in the Australian firm.
SK On also signed contracts with global suppliers for key battery materials, such as a memorandum of understanding (MOU) for lithium supply with Australia's Global Lithium Resources, a cobalt supply contract with Switzerland's Glencore, and an MOU with Korea's POSCO Holdings for comprehensive business cooperation in the battery business.
“The deal with SQM is a part of our business strategy to support global production expansion and proactively respond to changes in the external environment,” said Jin Kyo-won, COO at SK On. “SK On’s supply chain for critical minerals has been further strengthened in cooperation with SQM, which has proven excellent quality and reliability.”
Carlos Díaz, Executive Vice President Lithium at SQM said: “We are pleased to strengthen our business with SK On, a leading battery manufacturer which has been rapidly increasing its market share in the global battery market. We will create synergy by carrying out various cooperation in the value chain beyond the supply of lithium hydroxide to SK On.”
Source: Korea IT Times
