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SK On signs 5-year lithium hydroxide supply deal with SQM

Battery manufacturer SK On signed a lithium hydroxide supply deal with Chile’s SQM, a move that will further strengthen SK On’s supply chain for critical battery materials in coping with the US “Inflation Reduction Act” (IRA) following its recent deals with Australian lithium developers.

Under the deal, SK On will 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.

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 US. The IRA 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 US. or in the countries whose FTA with the US is in effect. (Earlier post.)

Established in 1968 and listed in the Santiago and New York stock exchanges, SQM is the only lithium hydroxide producer in Chile. SQM is currently one of the lithium-producing companies with the lowest carbon and water footprint in the world. 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% stake in the Australian firm. (Earlier post.)

Skon

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.

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