In a significant move aimed at reducing reliance on China and securing a stable supply of critical raw materials, POSCO Future M has inked a landmark deal with POSCO-Pilbara Lithium Solution, a joint venture between South Korea’s POSCO and Australia’s Pilbara Minerals. The agreement, announced on Friday, involves the purchase and supply of 20,000 tons of lithium hydroxide, a key ingredient in the production of cathode materials for electric vehicle (EV) batteries.

This deal, which comes as part of POSCO Future M’s strategy to bolster its position in the rapidly growing EV market, is set to supply enough lithium hydroxide to produce approximately 43,000 tons of cathode material, sufficient to power around 460,000 electric vehicles. The lithium hydroxide sourced through the partnership will be mass-produced by POSCO Pilbara Lithium Solution, which processes raw lithium from the Pilgang Gura mine in Australia, where POSCO Holdings holds a 4.75% stake.

The deal is a direct response to global efforts to limit reliance on Chinese-manufactured raw materials, especially in the context of the U.S. Inflation Reduction Act (IRA). Starting in 2025, the U.S. will impose restrictions on the use of raw materials sourced from "foreign entities of concern" (FEOC) such as China, Russia, North Korea, and Iran. These regulations, which are part of the IRA, mandate that EV battery manufacturers use materials from trusted sources to qualify for up to $7,500 in tax incentives for EV buyers. By securing lithium hydroxide from POSCO Pilbara Lithium Solution, which does not fall under the FEOC designation, POSCO Future M is positioning itself to take full advantage of these incentives.

Currently, South Korea imports approximately 80% of its lithium hydroxide from China, but this new agreement is part of a larger strategy to diversify supply chains and avoid potential disruptions. POSCO Future M aims to gradually increase its procurement from POSCO Pilbara Lithium Solution as sales in the U.S. market are expected to grow in the coming years. The supply agreement is designed not only to meet the demand for cathode materials but also to enhance POSCO Future M’s competitiveness in the U.S., the world’s largest market for electric vehicles.

POSCO Pilbara Lithium Solution, established in 2021, is a joint venture between POSCO and Pilbara Minerals. It operates two plants in South Jeolla, South Korea, with a total annual production capacity of 43,000 tons of lithium hydroxide. By sourcing lithium concentrates from the Pilgang Gura mine in Australia, the joint venture can supply high-quality lithium hydroxide that is processed domestically, helping South Korea establish a more self-reliant and secure raw materials supply chain.

With the completion of its second plant in late November, POSCO Pilbara Lithium Solution is well-positioned to meet the growing demand for lithium hydroxide in the EV market. The new supply agreement is expected to help POSCO Future M fulfill its production goals and increase its market share in the U.S. By securing stable access to this critical raw material, the company is positioning itself as a major player in the global transition to electric vehicles.

Overall, this deal not only solidifies POSCO Future M’s supply chain but also aligns the company with the U.S. government’s vision of reducing dependency on Chinese and other foreign-controlled supply chains for raw materials essential to EV production. As the U.S. market continues to grow, POSCO Future M’s strategic move will enable it to meet demand and navigate regulatory challenges with a stable and competitive edge in the industry.