Samsung SDI has begun to inject capital into its joint venture EcoPro EM with battery material supplier EcoPro BM, which means that the construction of the cathode material project has entered a new stage.
In February of this year, Samsung SDI and ECOPRO BM signed an agreement to establish a joint venture to produce the next generation of cathode materials. At the same time, Samsung SDI also plans to invest in ECOPRO BM to establish a strategic partnership. According to the agreement, ECOPRO BM will invest 72 billion won (59 million USD) in the joint venture to hold 60% of the shares, and Samsung SDI will invest 48 billion won (39 million USD) to hold 40% of the shares.
The joint venture will begin construction of a cathode material factory in Pohang, Gyeongsangbuk-do within this year. It is expected to produce NCM811 material in the first quarter of 2022, and will have an annual production capacity of 50,000 tons after construction.
It is reported that the cathode materials produced by this joint venture will exclusively supply Samsung SDI, and the two companies will maintain a technological monopoly through the joint venture.Samsung SDI and EcoPro BM set up a joint venture company to produce positive electrode materials. For Samsung SDI, Samsung SDI’s capital injection to the joint venture company indicates that it is accelerating its effort to secure cathode materials in order to obtain a stable source for its global expansion of battery production capacity.
Currently, Samsung SDI plans to reduce costs and achieve self-sufficiency through self-produced cathode materials, thereby reducing its dependence on external material procurement. The goal is to increase its cathode material self-supplied ratio from the current 20% to 50% by 2030.
At the same time, Samsung SDI also signed long-term procurement agreements with companies such as Glencore and Umicore to secure a stable supply of raw materials.
For EcoPro BM, the joint construction of the cathode material project with Samsung SDI is conducive to further enhancing and consolidating its market share of cathode materials, and on the other hand, it is also conducive to expanding production capacity and reducing manufacturing costs.
The goal of EcoPro BM is to increase the production capacity of cathode materials including joint ventures by 150,000 tons, and to produce a total of 180,000 tons of cathode materials in 2023. The current core customers of EcoPro BM include Samsung SDI, Murata and SK Innovation. In February this year, foreign media reported that SK Innovations and EcoPro BM signed a four-year purchase agreement. EcoPro BM will supply SK Innovation with cathode materials to a value of USD 2.32 billion with 80% nickel content by the end of December 2023.
In addition, EcoPro BM will build a cathode material plant with an annual output of 26,000 tons for SK Innovation to support SK Innovations in expanding battery production capacity in China, the United States and Europe.
In order to meet the needs of the above customers for cathode materials, EcoPro BM is also actively expanding production capacity. In February of this year, EcoPro BM and GEM (Chinese recycler and cathode precursors producer) signed an agreement. During 2020-2026, ECOPRO BM will purchase from GEM a total of not less than 100,000 tons of high-nickel NCM8 and 9 series precursors.
In April, EcoPro BM and GEM signed an investment memorandum, the two sides plan to establish a joint venture company to produce NCA & NCM high-nickel precursor materials, with a target capacity of 24,000 tons in 2022 and 48,000 tons in 2024. GEM subsidiary Fu’an Qingmei holds 51% of the shares, and will actively assist in the supply of nickel wet smelting intermediate products (MHP), nickel sulfate crystals, cobalt sulfate crystals and other raw materials.
In addition to Samsung SDI and SK Innovation, LG Chem is another Korean battery major also purchasing battery materials on a large scale. In February, LG Chem and POSCO Chemical signed a supply contract to supply LG Chem with a total of 125,000 tons of anode materials from 2020 to 2022. The contract value is USD 1.6 billion.
Last September, LG Chem and Umicore signed a supply contract for the purchase of a total of 125,000 tons of cathode materials. The supply will begin in 2020.
It is worth noting that, in addition to Korean materials companies, Chinese lithium battery material companies have also become the object of competition for supplies to the South Korean battery industry.
At present, Korean battery companies have already cooperated with GEM, Tianqi Lithium, Ganfeng Lithium, Shanghai Energy New Materials Technology,Shenzhen Xingyuan Materials Technology,Shenzhen Capchem Technology,Guangzhou Tinci Materials Technology, SHanghai Zhongwei New Materials and some others.
This shows that with the rise of China’s lithium battery industry chain, a number of lithium battery material companies have entered the supply chain of South Korean battery companies, and Chinese lithium battery material companies have begun to play a more important role in the international market.
In general, Samsung SDI, LG Chem and SK Innovation, three Korean battery companies are currently expanding power battery production capacity on a large scale globally, and thus accelerating their battery materials purchase programs therefore ensuring the stability of their raw material supply and costs reduction.
Judging from the expansion pace and procurement plans of the three battery companies, 2020 is the breakthrough period for the battery materials business, which has formulated expansion and sales plans for the next few years, with full confidence in the power battery industry.
However, due to the spread of the coronavirus epidemic, the current new energy vehicle industry in Europe and the United States has suffered a serious setback. After a substantial increase in the installed capacity of power batteries in the first quarter, the battery business of Samsung SDI, LG Chem and SK Innovation will inevitably suffer a blow in the second quarter and may continue into the third quarter. Under this circumstance, there are huge pressures and challenges for Korean battery companies to achieve their 2020 goals.