POSCO recently established joint ventures with Huayou Cobalt to enter the world’s biggest lithium-ion battery market in China. This partnership allows POSCO to produce precursors and cathode materials in Tongxiang, located in the Zhejiang Province of China. At the shareholders’ general meeting held on the Jan 24 at the POSCO Center POSCO finally approved the contract for the two joint ventures – one for the production of precursors, and the other for cathode materials. (A precursor is made by combining cobalt, nickel and manganese in a blast furnace to manufacture cathode materials. The final product of cathode materials is a combination of precursor and lithium.)
Huayou Cobalt is one of the world’s biggest mining companies that can produce about 50 percent of the cobalt required for manufacturing lithium-ion batteries worldwide. They also have their own nickel mine in addition to a cobalt mine.
The joint venture for precursor production is made up of 60 percent of investments by Huayou Cobalt that can supply cobalt, nickel and manganese, and 40 percent by POSCO. 60 percent of investments for the joint venture for cathode material production comes from POSCO who owns the high-grade cathode material production technology and 40 percent of investments come from Huayou Cobalt. The joint ventures will be operating production lines for 4,600 tons of precursors and cathode materials a year starting from the second half of 2020.
Through these joint ventures, POSCO can now secure its market position in China by directly manufacturing and selling cathode materials locally. In addition, it can gain a competitive edge by securing a stable supply of not only precursors but also materials such as cobalt, nickel and manganese for POSCO ESM’s cathode materials plant in Gumi. Huayou Cobalt can expand its business in manufacturing and sales of cathode materials in addition to that of raw materials.
As the eco-friendly policies of the world continue to be tightened, the demand for electric vehicles, industrial energy storage systems (ESS) and IT bulk batteries has increased rapidly. Thus, the market for cathode materials, which are essential materials for lithium-ion batteries, is also expected to quadruple from 210,000 tons in 2016 to 860,000 tons in 2020.
Accordingly, the price of cobalt, one of the most expensive materials, tripled in the last two years, followed by the price of nickel and manganese. This explains why a stable supply of materials is essential for profitability.
POSCO’s lithium-ion battery material business is headed for future growth, and is expected to gain increased momentum with the joint ventures for precursors and cathode materials. POSCO completed its carbon lithium plant PosLX at Gwangyang Steelworks last year after 7 years of developing its own proprietary technology of directly extracting lithium in 2010. It is currently under commercial production.