SEOUL -- LG Energy Solution, the battery-making wing of South Korea's LG Group, signed a supply deal with China's Changzhou Liyuan New Energy Technology to receive about 160,000 tons of cathode materials for five years. This amount is enough to produce one million batteries for electric vehicles with maximum travel distances of more than 400 kilometers.
Cathode materials play a crucial role in determining the capacity and voltage of batteries. Changzhou Liyuan New Energy Technology specializes in producing cathode materials for lithium iron phosphate (LFP) batteries. LFP batteries offer advantages such as low cost, low toxicity, and long-term stability compared to lithium-ion batteries. Despite their lower energy density compared to lithium cobalt oxide, a key material for lithium-ion batteries, LFP batteries are gaining popularity among electric vehicle manufacturers due to rising raw material prices.
LG Energy Solution (LGES) said on February 22 that the battery maker signed a five-year contract with the Chinese company to receive LFP materials. Starting this year, Changzhou Liyuan New Energy Technology will provide around 160,000 tons of LFP cathode materials to LGES. The South Korean company aims to begin production of LFP batteries for EVs in the second half of 2025. The two sides will discuss additional supply contracts depending on market conditions.
The materials are projected to be utilized in markets outside of the United States. Under the inflation reduction act (IRA), the U.S. government offers tax credits to EVs assembled in North America. EVs produced with a certain percentage of core minerals extracted in the North American region and other countries that signed Free Trade Agreements (FTAs) with the U.S. are also eligible for government support money. However, from 2025 onward, subsidies won't be provided if core minerals are sourced from Foreign Entities of Concern (FEOC), which encompass organizations tied to governments labeled "countries of concern," such as China.
According to LGES, its Chinese partner has an annual production capacity of 310,000 tons of LFP cathode materials. The Chinese company has a facility in Indonesia, producing around 30,000 tons of LFP cathode materials.
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