SK On signed a lithium hydroxide supply deal with Chile’s SQM, a move that will further strengthen the company’s supply chain for critical battery materials in coping with the U.S. Inflation Reduction Act (IRA) following its recent deals with Australian lithium developers, the global leading electric vehicle (EV) battery manufacturer announced on Nov. 7.
Attended by Jin Kyo-won, Chief Operating Officer at SK On, and Carlos Díaz, Executive Vice President Lithium at SQM, the two companies held a signing ceremony for the lithium deal on November 4 at SK Group’s headquarter Seorin building in Seoul, South Korea.
Under the deal, SK On shall purchase up to 57,000 tons of high-quality lithium hydroxide for five years starting in 2023. This amount is enough to produce batteries for approximately 1.2 million electric vehicles (EVs).
In addition to the supply deal, SK On and SQM agreed to discuss a mid-to long-term partnership to enhance their cooperative relationship, including additional lithium supply, potential investment in production plants, and waste battery recycling.
Prior to the signing ceremony, Díaz and his delegation visited SK On’s battery plant in Seosan, South Chungcheong Province, and toured the company’s state-of-the-art manufacturing system.
The deal with SQM is expected to boost SK On’s efforts to meet the IRA requirements as Chile is a free trade agreement (FTA) partner with the U.S. The IRA is a law that offers a tax credit to consumers when they buy an EV with batteries equipped with a certain percentage of critical minerals extracted or processed in the U.S. or in the countries whose FTA with the U.S. is in effect.
Established in 1968 and listed in the Santiago and New York stock exchanges, SQM is the only lithium hydroxide producer in Chile.
Through cooperation with SQM, SK On is expected to not only stably secure critical minerals, but also further enhance competitiveness in ESG (environmental, social, governance). SK On has played a leading role in establishing a sustainable battery supply chain by participating in major eco-friendly initiatives such as Global Battery Alliance and Responsible Mineral Imitative.
SQM is currently one of the lithium-producing companies with the lowest carbon and water footprint in the world and is fully committed with the environment. Consistent with that commitment, SQM joined the Initiative for Responsible Mining Assurance (IRMA) in 2020 to ensure ethical and environmentally friendly lithium mining. In accordance with IRMA standards, the Atacama site conducts independent third-party audits in areas such as worker health and safety, human rights, community engagement, and pollution control.
SK On has been steadily reinforcing its supply chain for key battery materials. Last month, it signed a lithium supply deal with Lake Resources to receive battery-grade lithium for a maximum 10 years from the fourth quarter of 2024 after acquiring 10 percent stake in the Australian firm.
In addition, SK On secured various contracts on key battery materials with global suppliers, including a memorandum of understanding (MOU) on lithium supply with Australia’s Global Lithium Resources, a cobalt supply contract with Switzerland’s Glencore, and an MOU with Korea’s POSCO Holdings on 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.” He added, “We will create synergy by carrying out various cooperation in the value chain beyond the supply of lithium hydroxide to SK On.”