“We are preparing ourselves first of all to secure supply of raw material, which is more important than the price,” said LG Chem CEO Shin Hak-cheol. — Reuters
SEOUL: South Korea-based LG Chem Ltd is prioritising efforts to secure raw materials used in electric vehicle (EV) batteries and establishing a self-sufficient global supply chain, including via potential partnerships and investments in mining companies.
“We are preparing ourselves first of all to secure supply of raw material, which is more important than the price,” LG Chem chief executive officer Shin Hak-cheol said in an interview with Bloomberg Television in Seoul.
“Our first and foremost priority is to secure enough raw material for the future.”
LG Chem makes cathode-active materials, a key ingredient for EV batteries. It is the parent of LG Energy Solution, the world’s second-largest battery cell maker and supplier for automakers including Tesla Inc, General Motors Co (GM), Ford Motor Co and Stellantis NV.
The company is doing “a lot of projects” to ensure it has a stable source of supply, according to Shin. “I don’t think we’ll ever be a mining company. However, if there’s a project that makes sense, maybe we can invest.”
The fragility of the EV industry’s supply chain has been exacerbated by disruptions caused by major global events such as the Covid pandemic and Russia’s war in Ukraine, driving up the cost of raw materials including metals like lithium, nickel, cobalt and manganese, which are used in batteries.
While the price of lithium has weakened 13% this year, the material is still trading at sky-high levels after climbing 87% last year and almost 430% in 2021.
Asked about the US Inflation Reduction Act (IRA), which aims to reduce the EV industry’s reliance on supplies from China, Shin said more clarity on policies was needed and that the industry expects further details to emerge before the end of March.
“Different elements and components need clarification,” he said, echoing comments he made in an interview with Bloomberg News in December. “You’re talking about a pretty complicated puzzle.”
The law requires companies to source battery minerals from countries that have free-trade agreements (FTAs) with the United States to be eligible for US$7,500 (RM32,700) tax credits on EV purchases.
Automakers have pushed back against the plan, arguing for leeway given the time it will take to secure materials. Many mines are located in emerging markets that don’t have FTAs with the United States.
“I’m not sure even the US government has all the answers to satisfy everyone in the supply chain,” said Shin, adding that the IRA situation in the United States is probably getting a disproportionate share of attention.
“Any country’s policy will change, it will not be the same,” Shin said. “LG Chem will be here for 50 years, 100 years, many, many hundreds of years more, so I’m not really basing my supply-chain strategy on one country’s policy, which is transient by definition”
“Long before the IRA, we have been pursuing a global supply-chain strategy,” he said. “Our strategy is to be relatively self-sufficient in three mega regions of the world, and the United States is just one of them.” — Bloomberg
