Korea's battery materials corporations have begun in earnest to target the lithium iron phosphate (LFP) cathode materials market. As battery cell makers rush to prepare mass production of LFP batteries for energy storage systems (ESS), materials companies are also moving to supply LFP cathode materials. Because Chinese companies all but monopolize the LFP cathode materials market, attention is on the results that domestic battery materials corporations will deliver.
According to the industry on the 18th, POSCO FUTURE M recently won its first supply contract related to cathode materials for LFP. POSCO FUTURE M announced on Aug. 6 that it had agreed with a domestic battery company on a long-term supply of cathode materials for LFP. POSCO FUTURE M will supply more than 190,000 tons of cathode materials for LFP batteries over six years from 2027 to 2032. The formal contract is set to be signed in the third quarter.
POSCO FUTURE M converted part of the high-nickel production facilities at its Pohang cathode materials plant into LFP cathode materials production facilities to supply LFP cathode materials. POSCO FUTURE M plans to begin mass production of LFP cathode materials at the Pohang plant at the end of this year. In addition, C&P New Materials Technology, which POSCO FUTURE M established as a joint venture with Chinese precursor company CNGR and CNGR's Korean subsidiary Fino, has begun construction of an LFP cathode materials plant in the Yeongilman 4 General Industrial Complex in Pohang. The goal is to mass-produce LFP cathode materials at this plant starting in 2027.
Another battery materials company, L&F, has also signed a series of LFP cathode materials supply contracts. L&F signed a mid- to long-term supply contract for LFP cathode materials with Samsung SDI in March. The contract is worth about 1.6 trillion won, and L&F will supply LFP cathode materials to Samsung SDI for three years starting in 2027. In addition, in July, it agreed to supply LFP cathode materials to U.S. battery company CoreShell Technology.
L&F has also completed preparations to supply LFP cathode materials. In May, L&F completed the construction of L&F Plus, a wholly owned subsidiary that will be responsible for producing and selling cathode materials. At the Daegu L&F Plus plant, L&F plans to begin mass production of LFP cathode materials at an annual scale of 30,000 tons at the end of the third quarter this year and to gradually build a production system with an annual scale of 60,000 tons by the first half of 2027. Through this, it plans to begin in earnest the supply of LFP cathode materials for ESS targeting the North American market.
◇ U.S. policy to exclude China, which dominates the LFP market, is a boon for domestic battery materials companies
Domestic battery materials corporations are active in mass-producing LFP cathode materials because of changes in the battery market. Until now, domestic battery materials corporations focused on ternary batteries such as nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminum (NCA). By contrast, China led the LFP market.
However, with the spread of artificial intelligence (AI) data centers boosting ESS demand and the expansion of budget electric vehicles, demand for LFP batteries has grown. LFP batteries have lower output than ternary batteries, but they are cheaper and have longer lifespans.
According to energy market research firm SNE Research, of the 4.95 million tons of cathode materials to be shipped in 2025, LFP will account for 3.47 million tons, or 72%. LFP's share of cathode materials shipped in all of 2023 was 53%, but it rose 19 percentage points in two years.
Even the figures for the first half of this year show LFP cathode materials overwhelming ternary cathode materials. Of the cathode materials shipped from January to June, LFP accounted for 63.6%. That was up 3.8 percentage points from the same period a year earlier. In addition, while the loading of ternary cathode materials in the first half rose 10.1% year over year, LFP cathode materials increased 29.4% over the same period.
Still, because LFP cathode materials have until now been the exclusive domain of Chinese corporations, it is expected to take time for domestic battery materials corporations to break into the market. As of the first half of this year, all of the top 10 companies by global LFP cathode materials shipments were Chinese corporations.
Even so, U.S. policy to exclude China from the battery supply chain is a positive for domestic battery materials companies. For a battery company in the United States to receive the advanced manufacturing production tax credit (AMPC) under the Inflation Reduction Act (IRA), it must reduce the share of cathode materials linked to prohibited foreign entities (PEE) such as China. In line with this, Korean battery companies with plants in the United States may look to domestic battery materials companies instead of China.
In a recent report, SNE Research said, "Demand for LFP cathode materials outside China increased 32.2% in the first half of this year alone compared with the same period last year," and added, "The key variables going forward are how quickly companies can secure production bases and product lines that comply with regional supply chain rules."