SK On will secure additional lithium hydroxide, a key raw material for electric vehicle batteries, domestically. The company aims to increase purchasing competitiveness through diversification of its supply chain and respond proactively to the U.S. Inflation Reduction Act (IRA).

SK On announced on the 17th that it has signed a lithium hydroxide supply contract with Ecopro. Through this contract, SK On will receive up to 6,000 tons of domestically produced lithium hydroxide from Ecopro by the end of this year. This amount corresponds to approximately 100,000 electric vehicles and will be supplied to SK On's U.S. factory via the domestic cathode materials plant.

Park Jong-jin (left), Head of Strategic Purchasing at SK On, and Kim Yoon-tae, CEO of Ecopro, take a commemorative photo immediately after signing a lithium hydroxide supply contract at SK On Green Campus in Jongno-gu, Seoul, on the 16th morning. /Courtesy of SK On

Lithium hydroxide, a key raw material for nickel-cobalt-manganese (NCM) cathode materials, is primarily supplied from overseas, including China. According to the Korea Mine Rehabilitation and Mineral Resources Association, 82.7% of the lithium hydroxide imports last year were from China.

SK On plans to enhance supply chain stability and improve pricing competitiveness through the procurement of domestic raw materials. Domestically produced lithium hydroxide plays a key role in securing cost competitiveness for U.S. batteries as it meets the criteria for the IRA Advanced Manufacturing Production Credit (AMPC).

In the U.S., on the 3rd (local time), a bill titled 'One Big Beautiful Bill Act' (OBBBA), which includes amendments to the IRA, passed through Congress. According to the newly established Prohibited Foreign Entity (PFE) regulation, to receive AMPC from 2026, companies must satisfy the Material Assistance Cost Ratio (MACR).

MACR refers to the proportion of direct material expenses that non-PFE direct material costs, such as those used in cathode materials and anode materials, account for in battery production. The MACR percentage will begin at 60% in 2026 and increase by 5 percentage points annually (10 percentage points in 2028), reaching 85% from 2030.

Using domestic raw materials is said to result in cost savings from customs fees, transportation fees, and other expenses, according to the company. SK On also signed a supply contract for domestic lithium hydroxide with POSCO Future M in November last year. This year, SK On plans to enter into a contract with Ecopro for additional supply of lithium hydroxide for the next 2 to 3 years.

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