The rising demand for EV power batteries has led to a corresponding increase in the demand for cathode materials used in Li-ion batteries. Cathode represents a fairly large share of the total manufacturing cost of a battery, coming around 40%. Furthermore, precursor represent a significant share of the total material cost of a cathode, reaching around 60%. Hence, ensuring a stable supply of precursor materials is crucial.

This March, GEM, a major Chinese supplier for battery-related materials, formed a joint venture with South Korea’s SK On and ECOPRO. Together they will invest KRW 1.21 trillion in a plant that will manufacture a new generation of high-nickel precursors (PCAM). The precursor will be used to make the cathode materials for EV power batteries. Furthermore, the battery-related materials made at the plant will be exported to North America.

On March 23, GEM, SK On, and ECOPRO jointly signed a memorandum of understanding. According to the memorandum, they will form a joint venture for the manufacturing of high-nickel precursors. The new entity will help them process precursor orders from customers in South Korea and other countries. Specifically, it will build and operate a plant with an initial production capacity of 43,000 tons per year.

Caption: Representatives from GEM, SK On, and ECOPRO sign a memorandum to form a joint venture for the manufacturing of precursors. (Source: GEM)

Over many years, GEM and ECOPRO have established a good relationship that is built on mutual trust and cooperation. In March 2022, the two companies signed a memorandum of understanding under which GEM will provide ECOPRO with 700,000 tons of high-nickel precursors (i.e., NCA and NCM) for power battery cathodes during the 2023-2026 period.

On March 24 of this year, GEM’s South Korean subsidiary signed a memorandum of understanding with the agencies under the government of Gunsan, a city in South Korea’s North Jeolla Province to push for the landing of a precursor plant. The memorandum states that all parties will strive to reach agreements on the details related to the construction of a plant for the production of high-nickel and multi-element precursors. These details include the specifications of the plant, the supporting infrastructure, and the network for supplying raw materials (e.g., nickel, cobalt, and manganese).

Caption: GEM’s South Korean subsidiary and the agencies under the government of Gunsan sign a memorandum of understanding for the construction of a new plant for manufacturing precursors for secondary batteries. (Source: GEM)

Going forward, GEM will lead the joint venture to collaborate with SK On, ECOPRO, and other potential partners across the industry chain in investing KRW 1.21 trillion (around CNY 6.4 billion) to set up the first phase of the plant. The first phase is designed to have a production capacity of 43,000 tons for the next-generation high-nickel precursors. It will comprise facilities that supply raw materials. The long-term plan is to have the production capacity of the plant raise to at least 100,000 tons per year. This amount should be sufficient for ECOPRO and SK On to meet the demand from their North America joint ventures that produce cathode active materials (CAMs).

Local government agencies have pledged that if the development of this project is completed within the schedule set by the government for attracting outside investments, it will enjoy the most preferential treatment (e.g., tax incentives, streamlined bureaucratic processes, energy subsidy, and incentives to recruit industry talents).

GEM said this investment in South Korea effectively addresses the challenges posed by the provisions in the US government’s Inflation Reduction Act (IRA) and the EU’s Critical Raw Materials Act (CRMA). Additionally, the new plant in Gunsan will enable GEM to establish a firm presence in South Korea, thereby allowing its products to be exported to the US and the US. Hence, the gains from this project will reinforce GEM’s position in the global market.

This article is a translation of a Chinese article posted by TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.