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LG Chem and Huayou to Produce Battery Materials in Indonesia and Morocco

On September 23rd, foreign media reported that South Korean company LG Chem Limited (LG Chem) has announced a partnership with Youshan, a subsidiary of China’s Huayou Group, to establish a joint electric vehicle (EV) battery materials factory in Morocco, as part of their efforts to diversify their investment portfolio.

As more Chinese electric vehicle and battery companies seek expansion overseas to reduce proximity to foreign customers and benefit from local incentives, Huayou has joined this trend.

In another statement, Zhejiang Huayou Cobalt Co., Ltd., a publicly listed subsidiary of Huayou, expressed its intention to establish a strategic partnership with LG Chem in Indonesia and Morocco to promote international growth.

LG Chem, a South Korean chemical manufacturer, stated that the Moroccan factory is scheduled to commence production in 2026 with the goal of producing 50,000 tons of lithium iron phosphate (LFP) cathode materials annually. These materials will be sufficient for installation in 500,000 entry-level electric vehicles.

LG Chem, known for producing more expensive nickel-cobalt-manganese (NCM) cathodes, is entering the LFP cathode business to meet the growing demand for cheaper LFP batteries. The automotive industry is seeking to manufacture more affordable electric vehicles, and the most expensive component of electric vehicles is the battery.

LG Chem mentioned that the LFP cathodes produced at the Moroccan factory will be supplied to the North American market, and due to Morocco’s status as a U.S. free trade partner, it is possible to qualify for the Inflation Reduction Act (IRA) subsidies in the United States. IRA aims to reduce dependence on the Chinese electric vehicle supply chain, requiring that at least 40% of the value of critical minerals used in car batteries come from the United States or free trade partners to qualify for a $3,750 tax credit per vehicle. South Korea has a free trade agreement with the United States.

LG Chem stated in its announcement that, according to the U.S. Department of the Treasury’s guidelines on “Foreign Adversaries of Concern,” LG Chem and Youshan will need to adjust their respective ownership stakes, which is a regulation aimed at China.

The U.S. Treasury Department has not provided a precise definition of “Foreign Adversaries of Concern” and how this definition will be applied.

LG Chem also announced an additional investment plan with Huayou Cobalt to establish a lithium conversion plant in Morocco, with the aim of starting large-scale production by 2025, with an annual capacity of 52,000 tons of lithium.

Furthermore, LG Chem mentioned plans to construct two additional facilities in Indonesia – one with an annual capacity of 50,000 tons for precursor materials and another for extracting mixed hydroxide from nickel ores for precursor production.

The investment scale for these four facilities by LG Chem and Huayou Group has not been finalized.

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