SK On signs 5-year lithium hydroxide supply contract with SQM

Battery maker SK On has signed a lithium hydroxide supply agreement with Chile’s SQM, a move that will further strengthen SK On’s supply chain for critical battery materials to weather “Inflation Reduction Act” (IRA) following its recent agreements with Australian lithium developers.

Under the agreement, SK On will purchase up to 57,000 tonnes of high-grade lithium hydroxide for five years starting in 2023. This quantity is enough to produce batteries for around 1.2 million electric vehicles. (VE).

In addition to the supply agreement, SK On and SQM have agreed to discuss a medium to long-term partnership to strengthen their cooperative relationship, including additional lithium supply, potential investment in production plants and the recycling of used batteries.

The deal with SQM is expected to boost SK On’s efforts to meet IRA requirements, as Chile is a free trade agreement (FTA) partner with the United States. The IRA offers a tax credit to consumers when they purchase an electric vehicle with batteries equipped with a certain percentage of critical minerals mined or processed in the United States. or in countries whose FTA with the United States is in force. (Previous post.)

Founded in 1968 and listed on the Santiago and New York stock exchanges, SQM is the only lithium hydroxide producer in Chile. SQM is currently one of the lithium producing companies with the lowest carbon and water footprint in the world. SQM joined the Initiative for Responsible Mining Assurance (IRMA) in 2020 to ensure ethical and environmentally responsible lithium mining. In accordance with IRMA standards, the Atacama site performs independent third-party audits in areas such as worker health and safety, human rights, community engagement and pollution control.

SK On has continuously strengthened its supply chain for key battery materials. Last month, it signed a lithium supply agreement with Lake Resources to receive battery-grade lithium for up to 10 years from the fourth quarter of 2024 after acquiring a 10% stake in the Australian company. (Previous post.)

In addition, SK On has entered into various contracts on key battery materials with global suppliers, including a lithium supply MoU with Australia’s Global Lithium Resources, a cobalt supply contract with Switzerland’s Glencore and a memorandum of understanding with Korea’s POSCO Holdings on commercial cooperation in the battery sector.

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