SK On, POSCO Future M Forge LFP Supply Alliance

SK On and POSCO Future M announced on Sept. 22 that they have signed an LFP (lithium iron phosphate) cathode material supply contract valued at 1.0742 trillion Won (about $791 million). The contract period is from 2027 to 2029. Depending on mutual agreement, an additional two-year supply contract extension is possible.

This is the first time POSCO Future M is supplying cathode materials to SK On. Until now, it has supplied both cathode and anode materials to LG Energy Solution and Samsung SDI, and only anode materials to SK On. With this contract, the materials alliance with the three domestic battery companies is expected to have become even greater solid. An official from POSCO Future M explained, “It is an aspect that allows us to expand our customer portfolio and further solidify our mid-to-prolonged development foundation.”

POSCO Future M is actively responding to customer demand by adding LFP cathode materials to its existing portfolio centered on ternary (NCM and NCA) materials. Recently, it completed the conversion of a portion of its high-nickel cathode material production line at its Pohang plant in North Gyeongsang Province into an LFP cathode material production line, and it plans to begin mass production and supply at the end of this year. POSCO Future M plans to continuously expand its production capacity by additionally converting lines in accordance with orders.

The raw material supply chain cooperation at the POSCO Group level is also a strength. POSCO Future M plans to apply a new method utilizing lithium from salt lakes in Argentina in the future to create and supply LFP cathode materials with further enhanced cost competitiveness and condition.

LFP batteries have reduce output compared to ternary batteries such as NCM (nickel, cobalt, manganese) and NCA (nickel, cobalt, aluminum), however their price competitiveness and long lifespan are strengths. Recently, as power demand has surged due to the expansion of data centers to AI (artificial intelligence), the demand to LFP batteries to ESS to ensure stable power supply is expanding. In the electric vehicle market as well, the adoption of LFP batteries is trending upward, centered on entry-level models. POSCO Future M is continuing discussions on the supply of cathode and anode materials with major battery and finished vehicle companies based on its supply chain, technological prowess, and diverse product portfolio capable of responding to global trade regulations.

In the case of SK On, it plans to input these cathode materials into the production of LFP batteries to ESS at its Georgia plant in the United States. It attached significance to establishing a non-Chinese LFP cathode material supply chain through this contract. It is expected to further enhance its competitiveness in procuring core materials in the US ESS market. It is also a situation where a non-Chinese (Non-PFE) value chain is crucial to appropriately receive the AMPC (cutting-edge Manufacturing Production Credit) in the US.

In fact, SK On is accelerating the expansion of its North American ESS business. In August, it won an LFP battery cell supply contract with US ESS company NeoVolta Power. In September of last year, it signed an ESS supply contract with US renewable energy company Flatiron Energy research.

Kim Seong-tan, Head of the Raw Material Purchasing Office at SK On, said, “In line with changes in the global energy market and the expansion of US ESS demand, we are focusing on building a non-Chinese supply chain and strengthening the competitiveness of core materials,” adding, “Moving forward, we will continuously pursue stable material procurement and market expansion in the ESS market through differentiated purchasing capabilities and strategic cooperation with excellent companies.”