LG Chem invests €4,4 billion in battery materials
LG Chem wants to invest €4,4 billion to expand its battery materials business for electric cars by 2025. The company also announced it would build a new factory for cathode material in South Korea’s Gumi.
The huge investment is part of a still broader investment offensive with a total sum of some €8 billion that LG Chem wants to invest into various business fields. The main focus lies on investments in secondary battery materials, such as cathode materials and separators.
It is probably not a coincidence that the news follows only a few days after the South Korean government announced its intention to support its domestic battery manufacturers with billions of dollars in investment.
LG Chem plans to break ground in December 2021 for a new plant in Gumi with an annual production capacity of 60 000 tons of cathode material. Basically, the group aims to increase its output from 40 000 tons in 2020 to 260 000 tons in 2026. No wonder that the signing of a joint venture agreement with a mining company is expected. Most analysts think this is Korea Zinc, but it hasn’t been confirmed yet.
According to some sources, LG Chem specifically wants to expand its capacity for NCMA cathodes (nickel, cobalt, manganese, and aluminum oxide), which are used in batteries for cars with a range of more than 600 kilometers.
Vice-chairman Shin Hak-Chul says LG Chem is also planning to establish an overseas presence soon. More than 30 options are currently being explored, including mergers and acquisitions, joint ventures, and strategic investments.
It will be interesting to see how parent company LG Chem and the battery subsidiary LG Energy Solution, which spun off at the end of 2020, will outline their different policies.
According to the specialized news gatherer Business Korea, it is most likely that both companies are working on synergies. Given LG Chem’s investment in the battery materials business, LG Energy Solution is probably the first buyer of these materials.
The subsidiary is expected to go IPO, but LG Chem will keep a 70-80% stake in LG Energy Solution. LG Energy Solution had already applied for preliminary approval for an IPO in June.
SK Innovation, the battery subsidiary of the South Korean conglomerate SK had also announced expansion plans only a few days ago. This compatriot and competitor of LG Energy Solution plans to expand its production capacity to more than 500 GWh by 2030 and is also highly likely to go public.
Both SKI and LG Energy Solution are competing to develop samples of the larger 4680 battery cells, for which there is large interest and high demand. The cells are favored by Tesla for the vehicles it will produce in the future.
Both South Korean manufacturers hope to win an order for the new 4680 cells from the Californian car manufacturer. Although Tesla is planning its own production of 4680 cells in its factories in Texas and Grünheide (near Berlin), it will probably buy such cells externally.
In January, Tesla’s battery partner Panasonic announced that it would start manufacturing prototypes of 4680 cells for Tesla in 2021. The competition is on.