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By Baek Byung-yeul
LG Energy Solution, Samsung SDI and SK Innovation are actively responding to increasing prices of raw materials for electric vehicle (EV) batteries as supply chain disruptions induced by several negative factors such as the U.S.-China trade row, the impact of the pandemic and fears of a Russian invasion of Ukraine.
Company officials said Tuesday that they have been implementing various strategies to secure a stable supply of raw materials, such as securing overseas mining rights, investing in overseas miners and adding a production base to better facilitate connections with carmakers in other countries.
The officials also said they don't see any major restrictions to their business as they have already signed long-term contracts with material suppliers. "Basically, battery prices are linked to orders for EVs and battery makers have reduced risks through long-term contracts with material suppliers. When price increases are prolonged, battery makers try to hedge risks through diversification of suppliers as well," an official in the local battery industry said.
They added they are able to pass on the increase in battery prices to carmakers at the moment, but battery makers are closely watching the changing situation as it will be difficult to shake off the cost burden of rising prices even if they try to reduce costs through technological innovation and improved productivity.
According to data from the Korea Mine Rehabilitation and Mineral Resources Corporation, prices of core battery materials are on a steep rise. It said the price of nickel, a key raw material for batteries, was $23,182 per ton as of Jan. 24. It is the first time in 10 years that nickel prices exceeded $20,000 since 2012.
LG Energy Solution, the largest battery maker here, said it continues to increase contracts with raw material suppliers. In 2020, the company invested 57.5 billion won in Solus Advanced Materials' Europe branch to secure a supply of battery copper foil by 2025. In 2021, the company acquired a 7.5 percent stake in QPM Australia for supply of nickel and cobalt. The company also inkeda deal with another Australian mineral business, AM, for the supply of nickel.
The latest deal signed for a stable supply of raw materials was with Australian lithium miner Liontown Resources in order to buy 100,000 dry metric tons of lithium spodumene.
Samsung SDI is also investing in lithium producers, acquiring a stake in Chinese lithium producer Ganfeng Lithium in 2019. Last year, the company also inked a contract with Australia's QPM to receive 6,000 tons of nickel every year for a period of three to five years.
SK On, a battery division of SK Innovation, also signed a contract with Swiss-based trading firm Glencore for the supply of cobalt. SK IE Technology, a battery separator maker and subsidiary of SK Innovation, is currently building its third and fourth plants in Poland to facilitate separate supply to European carmakers.
Experts believe mineral-rich countries are increasingly trying to assert control over their resources, adding the government should strengthen its support to make it easier for domestic companies to secure resources in other countries.
"Many countries will increasingly try to strengthen control over mineral resources due to factors like the U.S.-China trade dispute. Under the strategy of strengthening energy security, companies should be systematically supported to develop overseas resources," Park Ho-jeong, a professor at the Department of Food and Resources Economics at Korea University, said.
