As the Foreign Entity of Concern (FEOC) regulation under the U.S. Inflation Reduction Act (IRA) is set to be implemented from Jan. 1 next year, the potential benefits for domestic battery material companies are drawing attention.
On Dec. 11, the battery material industry is closely monitoring the possibility of additional orders for electrolyte and separator companies due to the FEOC regulation. Automakers and battery manufacturers in the U.S. must use battery core components from companies other than FEOCs starting next year to meet the criteria for the US$7,500 electric vehicle tax credit under the IRA. Immediate restrictions on using Chinese companies’ electrolytes and separators, classified as core components, are to begin next year. This situation inevitably leads battery companies to sign purchasing agreements with Korean and Japanese material companies.
Particular attention is being paid to the material supply contracts of Ultium Cells, a battery joint venture between General Motors (GM) and LG Energy Solution. Ultium Cells signed a separator purchase contract with China’s Changxin New Material in 2021 and an electrolyte supply contract with Shenzhen Capchem Technology. Contracts with Changxin are scheduled until 2024 and with Capchem until 2025. The industry believes it will be difficult for Ultium Cells to sign additional contracts with these companies due to the FEOC regulations. LG Energy Solution’s Michigan plant in the U.S. is reportedly receiving electrolytes from China’s Guotai Huarong. Tesla is said to receive electrolytes from China’s Tianci Material for its Fremont and Texas plants.
POSCO Chemical established Ultium CAM, a cathode joint venture with GM in Canada, in May 2022 and signed a 21 trillion won total cathode supply contract. In December of the same year, it signed a 939.3 billion won synthetic graphite anode material supply contract.
Domestic separator companies include SKIET, LG Chem, and World Class Products (WCP). SKIET and WCP have been considering expanding into North America. SKIET plans to announce its North American separator plant establishment plan within the first quarter of next year, aiming for operation by 2028. Before completing the North American plant, SKIET intends to use its Poland plant as a forward base to respond to European and North American demand. WCP, which mainly supplies products to Samsung SDI, is considering establishing a separator production base in North America.
LG Chem, which partnered with Japan’s Toray to operate a separator plant in Hungary starting this year, is focusing on expanding the production capacity of its Hungarian plant.
Dongwha Electrolyte’s new electrolyte plant in Clarksville, Tennessee, will cover approximately 162,000 square meters with an annual production capacity of 86,000 tons. The company aims to start construction in the second quarter, complete it by the third quarter of next year, and start mass production of electrolytes in the fourth quarter. ENCHEM, which has a production plant in Georgia, in the U.S., is focusing on expanding its electrolyte production capacity in the North American market. ENCHEM plans to increase the production capacity of its Georgia plant to 40,000 tons.