LG Chem has announced that it is actively considering adjusting its stake in a cathode materials plant in Gumi, which was established in partnership with a Chinese company. This move comes in response to regulations under the U.S. Inflation Reduction Act (IRA).
During the second-quarter earnings conference call on Thursday, LG Chem explained that securing a China-free supply chain is expected to become increasingly crucial.
The U.S. IRA designates entities as foreign entities of concern (FEOC) if companies from countries of concern, such as China, hold more than 25% of the stakes or exert substantial control over the supply chain for batteries and critical minerals. This rule was applied to battery components last year and will extend to cathode materials and other critical minerals starting this year.
LG Chem has established a joint venture (JV) with Zhejiang Huayou Cobalt, China’s leading cobalt refining company, and has completed construction of the cathode materials plant in Gumi, North Gyeongsang Province. LG Chem holds a 51% stake, while B&M Technology, a subsidiary of Huayou Cobalt, owns 49%.
The company is proactively considering stake adjustments in anticipation of the potential designation of the Gumi plant as an FEOC.
LG Chem stated that, from a conservative standpoint, they will prioritize the use of non-Chinese materials across their entire supply chain and reassess their strategies for raw material procurement and production locations.