LG Chem and Huayou Group Plan to Establish Electric Car Battery Plant in Morocco

South Korea's largest chemical company, LG Chem, has unveiled a strategic partnership with China's Huayou Group subsidiary Youshan to embark on a joint venture in Morocco. The objective of this partnership is to establish an electric vehicle (EV) battery material plant.

Historically, LG Chem has been recognized for its expertise in producing more expensive nickel-cobalt-manganese (NCM) cathodes for EV batteries. However, this new venture marks LG Chem's debut in the LFP cathode business. The shift is in response to the burgeoning demand for cost-effective LFP batteries, aligning with the broader industry trend toward producing more affordable electric vehicles. Batteries represent a significant proportion of an EV's total cost, accounting for an average of 40% of the overall expense.

LG Chem has announced that the LFP cathodes manufactured at the Morocco plant will primarily serve the North American market. Moreover, they will be eligible for subsidies through the US Inflation Reduction Act program, as Morocco maintains a free-trade partnership with the United States.

The US Inflation Reduction Act is designed to decrease the United States' dependency on the Chinese supply chain for electric vehicles. It stipulates that at least 40% of the value of critical minerals used in an auto battery must originate from the United States or a free trade partner to qualify for a $3,750 tax credit per vehicle. As South Korea has an established free-trade agreement with the United States, LG Chem's Morocco-produced LFP cathodes are well-positioned to benefit from this program.

In addition to the Morocco plant, LG Chem disclosed an additional investment plan in collaboration with Huayou Cobalt. This initiative entails the construction of a lithium conversion facility in Morocco, with the aim of initiating mass production by 2025. The plant is projected to possess an annual production capacity of 52,000 tonnes of lithium.

Furthermore, LG Chem has outlined its intentions to establish two additional facilities in Indonesia. The first facility is designed for precursor production, featuring an annual production capacity of 50,000 tonnes. The second facility will be tasked with extracting mixed hydroxide from nickel ore, a critical component in precursor production.

While the exact magnitude of LG Chem's investments in these four facilities in partnership with Huayou Group remains undisclosed, the company's CEO, Shin Hak-cheol, emphasized their commitment to the evolving LFP cathode materials market. CEO Hak-cheol articulated, "We will actively respond to the emerging LFP cathode materials market with the Morocco plant as our global base. Our goal is to create a strong, vertically integrated materials supply chain flowing from raw materials to precursors and cathode materials and solidify our status as the world's top comprehensive battery materials producer."