POSCO Betting Big on Lithium to Drive Future Growth

POSCO has joined a global scramble for lithium, a key material for electrical vehicle batteries. The Korean steelmaker is promoting its lithium business as a next-generation growth engine.

POSCO is pushing hard to acquire a salt lake in Argentina which has large lithium deposits, a move that follows its acquisition in February of a stake in an Australian lithium mining company. If the acquisition of the salt lake is completed, growth of POSCO's lithium business is expected to further accelerate. In addition, POSCO will construct a second cathode material plant in Gwangyang Bay on Korea’s southern coast.

According to major foreign news outlets including Reuters on May 29, POSCO was pursuing the acquisition of Sal de Vida Salt Lake in Argentina from Australian lithium company Galaxy Resources. According to Galaxy Resources, it is estimated that Sal de Vida Salt Lake has 2.5 million tons of lithium. The acquisition price is about US$280 million. POSCO plans to conclude this contract in the third quarter after winning approval from its board of directors. POSCO secured 240,000 tons of lithium concentrates, which refer to processed ores for high quality, a year through a long-term contract with Pilbara of Australia.

In addition, POSCO signed a contract with the Gwangyang Bay Free Economic Zone Authority to purchase a site (165,287㎡) to build a second cathode material plant with an annual capacity of 6,000 tons. To this end, POSCO held a board of directors meeting on May 11 and increased the capital of its subsidiary POSCO ESM by 113 billion won. A core material for lithium secondary batteries, cathode materials are part of the lithium business that POSCO is promoting at the group level.

POSCO is currently producing 8,000 tons of cathode materials annually at its Gumi plant, and plans to expand its capacity to 12,000 tons per year in the future. In addition, the Gwangyang Cathode Material Plant will be expanded to produce 50,000 tons a year by 2022. If the project goes as planned, five years later, POSCO ESM's annual cathode material production will total 62,000 tons a year. This is enough to make about 1 million batteries for electric cars. POSCO ESM would post more than 2 trillion in sales every year and hire more than 1,000 new employees beginning in 2022, when the cathode material plant is completed, an official of POSCO emphasized.

POSCO also plans to construct a lithium plant with an annual production capacity of 30,000 tons of lithium concentrates secured through a supply contract with Pilbara in Australia by February 2020, following the construction of the cathode material plant in Gwangyang. The company also announced that it would build a 20,000-ton nickel plant to make Gwangyang a secondary battery material complex. "We expect to greatly increase synergies among business units such as simplifying processes and reducing logistics costs among plants of lithium, nickel and cathode materials which are raw materials by constructing a secondary battery material complex," a POSCO official said.

On the other hand, POSCO signed a contract on the establishment of a jointly invested cathode material and precursor plant with Huayou Cobalt Oil of China in January, and was finally selected as a cathode material business operator by Chile in March, thereby enhancing the competitiveness of its lithium business in the global market.