Morocco: LG Energy Solution has announced its plan to collaborate with a Chinese company for Lithium Hydroxide production in Morocco. The country boasts of a strategic location in North Africa, having signed a free trade agreement with the United States and serving as a gateway to the European market. However, LG Energy Solution may face ineligibility for IRA subsidies from the U.S. government if the details of the Inflation Reduction Act become stricter to restrain China's influence.
LG Energy Solution has entered into a business agreement (MOU) with Yahua, a prominent Chinese Lithium compound producer, to facilitate the production of Lithium Hydroxide in Morocco. This compound is a crucial raw material for high-nickel, high-capacity batteries used in electric vehicles. Nickel, being an essential raw material for cathode materials, facilitates the easy synthesis of Lithium Hydroxide. As the proportion of nickel in a battery increases, the energy density and mileage of the electric vehicle increase. Therefore, securing a consistent and reliable supply chain of Lithium Hydroxide is pivotal for battery manufacturers.
Morocco has established Free Trade Agreements with both the United States and the European Union, making it strategically located near markets in the Middle East, Africa, and EU. As a result, the nation can facilitate seamless logistics exchanges with its neighboring countries rich in Lithium resources.
Yahua, a prominent Chinese manufacturer of Lithium Hydroxide, has entered a Memorandum of Understanding (MOU) with LG Energy Solution. By incorporating Yahua's cutting-edge technology into its stable raw material supply chain, LG Energy Solution aims to procure premium Lithium Hydroxide.
Lithium Hydroxide production might not be able to meet the growing demand by 2027, resulting in an excess of demand over supply. In preparation for such a scenario, LG Energy Solution is diversifying its supply chain. For example, the South Korean battery manufacturer has entered into an agreement with German Lithium producer, Vulcan Energy, to supply 45,000 tons of Lithium Hydroxide for five years, as well as securing the supply of 700,000 tons of Lithium concentrate from Liontown, Australia for five years. Lithium concentrate is a critical raw material in Lithium Hydroxide production. Additionally, LG Energy Solution has signed a contract with the Chilean firm SQM for the delivery of 55,000 tons of Lithium Hydroxide and carbonate for nine years.
Although LG Energy Solution is looking forward to collaborations with Chinese companies, it is holding off for now due to uncertainties regarding the impact of detailed IRA regulations. This is because certain restrictions regarding battery makers' cooperation with Chinese companies have not been clearly defined yet in the IRA's guidelines. Therefore, LG Energy Solution has adopted a cautious approach and is waiting to see how things develop.