South Korean EV battery maker SK On Company has signed a long-term lithium sourcing contract with local steel and chemicals giant Posco Holdings, as it looks to reduce its dependence on Chinese EV battery supply chains.

Under the agreement, Posco has agreed to supply SK On with up to 25,000 tons of lithium concentrate per year from its salt lake operations in the Hombre Muerto region of Argentina, operated by its local subsidiary Posco Argentina. This is enough for the production of around 400,000 electric vehicle (EV) batteries per year. Lithium is a key ingredient in battery cathodes, which are estimated to account for up to 40% of EV batteries materials, with lithium accounting for a significant proportion of this cost.

SK On confirmed that the lithium supplied by Posco Argentina will be used to produce batteries at its plants in Europe and North America, to help it meet local sourcing regulations requiring battery materials to be increasingly sourced outside China. Currently, most of the world’s lithium processing capacity is located in China.

Park Jong-jin, head of strategic procurement at SK On, said in a statement: “This agreement is part of our supply chain diversification strategy to strengthen mid- to long-term raw material stability and sourcing competitiveness. We will also continue to expand SK On’s raw material sourcing capabilities beyond EVs and into the energy storage system (ESS) sector.”