South Korea’s largest steel maker Posco this week announced plans to build a new nickel-sulphate refinery to meet rising demand for electric vehicle (EV) batteries.

The company said it would spend KRW230bn (US$201m) on the new factory in the southern South Korean city of Gwangyang with completion scheduled for 2023. The plant will have initial capacity to process 20,000 tons of nickel-sulphate per year – enough for 500,000 EV battery packs.

Posco said it was now working on securing supplies of the raw material as it looks to strengthen its competitiveness in the battery materials market.

The company’s battery materials affiliate, Posco Chemical, uses nickel-sulphate to produce cathode materials for EV batteries. Earlier this month it announced plans to spend KRW600bn (US$524m) to build a new cathode materials plant in the eastern city of Pohang with construction scheduled to begin in 2022.

Global demand for nickel sulphate is expected to increase by 23% annually, driven by growing EV sales, with analysts expecting supplies to tighten significantly by 2025.

Last May, Posco agreed to acquire a 30% stake in the Ravensthorpe Nickel Operation in Australia for US$240m, thus securing the supply of 7,500 tons of nickel annually from 2024.

The company aims to be able to supply 100,000 tons of nickel-sulphate to customers worldwide per year by 2030.