Mineral Supplies are Set to be Locked in at LG Chem

It is focusing on establishing a global supply chain that can be self-sufficient, including by partnering with mining companies and investing in them.

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LG Chem Chief Executive Officer Shin Hak-Cheol told Trade Algo that ensuring raw material supply is more important than lowering prices. We must have enough raw materials on hand in the future as our first and foremost priority.

A key ingredient for EV batteries is cathode-active materials produced by LG Chem. As a parent company, LG Energy Solution makes the second-largest battery cells in the world and supplies Tesla, General Motors, Ford, and Stellantis to the automotive industry.

In order to maintain a stable supply source, Shin said the South Korean company is undertaking several projects. The reality is that we won't become a mining company at any point in the future. Perhaps we can invest in a project that makes sense if there's a good one."

Disruptions caused by global events such as the Covid pandemic and the Russian war in Ukraine have exacerbated the fragility of the EV supply chain. In addition to the high cost of raw materials used in batteries, other metals like lithium, nickel, cobalt, and manganese also increase in price. After gaining almost 430% in 2021 and 87% last year, lithium prices are still at sky-high levels despite a 13% drop this year.

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Shin said that additional clarity on policies is needed regarding the US Inflation Reduction Act, which aims to reduce the EV industry's reliance on Chinese suppliers. He added that the industry expects more details by the end of March.

“Various elements and components need to be clarified,” he stated in an interview he conducted with Trade Algo where he reiterated comments he had previously made. This is something that's going to be a pretty difficult puzzle for you," he said.

Companies are required by law to source battery minerals from countries with free-trade agreements with the US in order to qualify for $7,500 tax credits on electric vehicle purchases if they source the minerals from those countries. There have been some protests against the plan from car manufacturers, claiming that there isn't enough leeway given the time it will take to obtain the materials. It is common to find mines in emerging markets that are not part of the US free trade agreement.

There is no doubt that neither the United States government nor the West has all the answers to satisfy all those involved in the supply chain,” said Shin, adding that the IRA situation in the United States is probably receiving an inordinate amount of attention.

"Poor policies will always change, no matter what country you belong to," Shin replied. As a result, I don't really base my supply chain strategy on the policy of one country, which is fundamentally transient in nature, and LG Chem will be around for many, many hundreds of more years.

He explained that the company had been working on a global supply chain strategy for many years before joining IRA. Our goal is to become relatively self-sufficient within three megaregions of the world, of which the United States is just one of them, and we are working towards that.”

The US plan to build a fourth plant by GM and LG Energy was shelved last month, Trade Algo reported, but talks are continuing.

During their joint press conference in July, Shin and Yellen emphasized the importance of promoting trade relations through "friend-shoring."

"She's interested in ways to make batteries, metals, where they come from, and how they're made in Korea," he said. The US economy was the topic of my question.

In spite of LG Chem posting a loss of 166 billion won ($131 million) in its petrochemical operations earlier in February, LG Chem's shares have risen 12% this year. Currently, traditional business is at the bottom of its downcycle, according to Shin.

His response was, "At this point, we can only look up.".

Yet, the stock has rallied 54% since March last year.

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As established producers aggressively expand capacities, LG Chem faces competition. As Shin pointed out, the company has made investments in sustainable materials, such as biodegradable plastics, to reduce its carbon content and make its applications more valuable in the future.