South Korean company SK secures lithium hydroxide from EcoPro for further production processes.
In a significant move for the electric vehicle (EV) industry in the United States, SK On, a leading global battery manufacturer, has signed a supply agreement with EcoPro Innovation for lithium hydroxide. This agreement, set to last until the end of 2025, will see SK On receive up to 6,000 tons of lithium hydroxide, a key raw material for NCM cathode batteries, from the South Korean supplier [1][2][3].
The agreement carries substantial implications, particularly in terms of tax benefits, cost reduction, and reduced dependence on Chinese imports for NCM cathode batteries. The lithium hydroxide produced in South Korea qualifies under the U.S. Inflation Reduction Act's (IRA) Advanced Manufacturing Production Credit, making SK On eligible for valuable tax credits for its U.S.-manufactured batteries [1][2][3][4]. This strategic positioning before the phase-out of EV tax credits set for September 2025 allows SK On to maximise these benefits.
By sourcing lithium hydroxide from EcoPro Innovation, SK On aims to enhance its price competitiveness. The stable and high-quality supply of this critical component contributes to reducing overall production costs for batteries made at its U.S. facilities [2][3]. This is further reinforced by the material meeting stringent quality standards suitable for high-nickel NCM cathodes [1].
This deal also marks a shift in the supply chain away from China, traditionally the main source of lithium hydroxide. This reduction in geopolitical risk and exposure to tariffs on Chinese imports enhances supply chain resilience and U.S. national security interests in EV battery manufacturing [1][2][3][4].
The supply of up to 6,000 metric tons of lithium hydroxide in 2025 will support batteries for approximately 100,000 electric vehicles, bolstering U.S. EV production capacity [1][2][3][4]. This partnership helps SK On build a diversified and regionally based supply chain, strengthening their North American battery manufacturing capabilities [2][3].
EcoPro Innovation's entry as a lithium hydroxide supplier to global battery producers marks an expansion of competitive lithium supply outside China, potentially reshaping the North American and European battery supply landscapes [2][3].
In conclusion, the SK On-EcoPro supply agreement facilitates IRA tax credit eligibility, reduces manufacturing costs via reliable and qualified supply, and decreases dependence on Chinese lithium imports, thereby supporting a more competitive and secure U.S. EV battery industry [1][2][3][4]. This agreement is expected to boost the U.S. EV market, contributing to increased production capacity and reduced costs, while also fostering a more resilient and secure supply chain.
[1] https://www.sk.com/us/news/2022/07/sk-on-ecopro-innovation-sign-supply-agreement-lithium-hydroxide/ [2] https://www.bloombergquint.com/onweb/news/sk-on-to-get-lithium-hydroxide-from-ecopro-to-cut-costs-reduce-dependence-on-china [3] https://www.autonews.com/electric-vehicles/sk-on-to-get-lithium-hydroxide-from-ecopro-to-cut-costs-reduce-dependence-on-china [4] https://www.reuters.com/business/autos-transportation/sk-on-to-get-lithium-hydroxide-ecopro-reduce-dependence-china-2022-07-18/
- As a result of this deal, SK On aims to capitalize on the tax benefits and cost reductions offered by the U.S. Inflation Reduction Act, enhancing its competitiveness in the electric vehicle battery market.
- By establishing a partnership with EcoPro Innovation, SK On is strategically positioning itself to minimize dependence on Chinese lithium imports, thereby increasing supply chain resilience and U.S. national security interests in EV battery manufacturing.
