Lithium Agreement Signed Between SK On and EcoPro for Enhanced Compliance with the IRA
In a significant move to bolster the US electric vehicle (EV) battery supply chain and reduce geopolitical risk, SK On, a leading global battery manufacturer, has signed a lithium hydroxide supply agreement with EcoPro Innovation. This deal will see the delivery of up to 6,000 metric tons of lithium hydroxide, a critical ingredient in nickel-cobalt-manganese cathodes, by the end of this year.
The lithium hydroxide, enough to power approximately 100,000 EVs, will be processed domestically and shipped to SK On’s battery plants in the US, supporting their battery production operations there. Park Jong-jin, head of strategic purchasing at SK On, stated that the deal is part of building a stable supply chain.
One of the key benefits of this agreement is the reduction of dependence on Chinese suppliers. Traditionally, lithium hydroxide has been sourced from overseas, primarily from China, accounting for over 82% of lithium hydroxide imports to South Korea in recent years. This supply diversification enhances the reliability and geopolitical security of SK On’s battery raw materials sourcing.
Another significant advantage is the qualification of EcoPro Innovation's lithium hydroxide under the IRA's Advanced Manufacturing Production Credit. This enables SK On to access valuable tax credits, improving the cost competitiveness of batteries made in the US and helping meet US government requirements for domestic content in EV batteries.
The deal also helps diversify SK On's partners, boosting its North American capabilities. For EcoPro Innovation, the supply deal represents its first contract with a global battery manufacturer and a foothold in North American and European supply chains. EcoPro is expanding production capacity in Korea, Europe, and the US, which signals growing domestic capacity for lithium hydroxide and related materials critical for EV batteries.
In summary, the deal helps shore up SK On’s critical lithium supply for US EV battery production, enhances supply chain security by reducing reliance on China, leverages IRA incentives to lower costs, and supports the development of a more robust domestic lithium materials industry aligned with US strategic interests. This move is expected to accelerate EV production growth and support US goals for clean energy transition and supply chain localization.
The lithium hydroxide, sourced domestically from EcoPro Innovation, will be used in SK On's battery plants within the US, thereby supporting the technological advancement of their operations in the industry, and with the added benefit of finance savings through the utilization of IRA incentives. This partnership within the technology sector will also reduce SK On's dependence on Chinese suppliers in the finance domain, contributing to a more secure supply chain and promoting the growth of the domestic lithium materials industry.
