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LG Chem and China’s Zhejiang Huayou Cobalt Company have agreed to invest KRW1.2trn (US$915m) in a new joint venture in South Korea to produce precursors for electric vehicle (EV) batteries.

A new plant would be built in the Saemangeum Industrial Complex in Gunsan, southwest of Seoul, intended to reduce LG Chem’s dependence on raw material supplies from China.

LG Chem is the parent company of LG Energy Solution, the world’s second largest EV battery manufacturer which is expanding rapidly in the US and other markets.

According to local reports, an initial investment agreement was expected to be signed this week by representatives of the two companies and the Saemangeum Development and Investment Agency.

Construction was scheduled to begin by the end of 2023 with the plant expected to be completed in 2028 with capacity for 50,000 tons per year, enough to produce cathodes for around 600,000 EVs.

LG Chem is a major global supplier of battery components, including cathode, anode and precursor materials. The company was hoping the new plant would qualify for tax incentives under the US Inflation Reduction Act which favours batteries made both in the US itslef and within its trading partner countries.

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By GlobalData

An LG Chem official said: “If the joint venture is judged ineligible for US EV subsidies because of Huayou Cobalt, we can ship precursors produced at the plant to other regions such as Europe.”

LG Chem and Huayou Cobalt already have two joint venture plants in China, in Zhejiang and Wuxi provinces, producing cathodes and precursor materials respectively.

Last year, LGES agreed to establish a JV with Huayou Cobalt to build two recycling plants in China to extract and process nickel, cobalt and lithium from scrapped lithium ion EV batteries.