SK on is accelerating efforts to secure domestically sourced lithium hydroxide, a critical material for electric vehicle (EV) batteries, in response to the U.S. Inflation Reduction Act (IRA) and supply chain diversification.
On July 17, SK on announced the signing of a supply agreement with EcoPro Innovation. The signing ceremony took place at SK on Green Campus in Jongno, Seoul, attended by key representatives including Jung-jin Park, SK on’s Strategic Purchasing Director, and Yoon-tae Kim, CEO of EcoPro Innovation.
Under the agreement, SK on will receive up to 6,000 tons of domestically produced lithium hydroxide from EcoPro Innovation by the end of this year. This quantity is enough to manufacture batteries for approximately 100,000 electric vehicles and will be processed through domestic cathode material manufacturing lines before being supplied to SK on’s U.S. battery factories. The two companies also plan to negotiate additional supply contracts over the next two to three years within the same year.
Lithium hydroxide is a core raw material for cathode materials based on nickel, cobalt, and manganese (NCM). Historically, Korea has heavily depended on imports for this key material. According to the Korea International Trade Association, 82.7% of lithium hydroxide imported in Korea in 2023 was from China. By securing this supply, SK on aims to enhance its material self-sufficiency and strengthen its competitiveness against fluctuations in exchange rates and logistics costs.
This procurement is particularly significant as it aligns with the U.S. IRA’s subsidy eligibility requirements. The recently passed IRA amendment, known as the One Big and Beautiful Bill (OBBBA), states that from 2026, to qualify for the Advanced Manufacturing Production Tax Credit (AMPC), the ratio of foreign support from “Prohibited Foreign Entities (PFE)” in battery raw materials must be gradually restricted through the Material Assistance Cost Ratio (MACR).
In response, SK on is reorganizing its global raw material supply chain. Since 2022, it has signed supply agreements for lithium with SQM in Chile, and in 2024, it plans to diversify supplies further with U.S.-based companies Westwater and ExxonMobil for graphite and lithium respectively. Using domestically sourced lithium hydroxide will also reduce customs and transportation costs.
This is SK on’s second domestic lithium hydroxide supply agreement, following a 2023 contract with Posco Fila Bor Lithium Solution.
EcoPro Innovation has been producing lithium hydroxide since 2021 and plans to increase its annual production capacity to 34,000 tons by the end of this year, covering Korea and Europe. It aims to expand its production capacity globally to 79,000 tons by 2028.
Kim Yoon-tae, CEO of EcoPro Innovation, stated, “This contract marks the first time EcoPro Innovation supplies lithium hydroxide to a global battery company like SK on, which will pave the way for expanding our customer base in North America and Europe.”
Jung-jin Park, SK on’s Strategic Purchasing Director, added, “We are rapidly building a stable raw material supply chain in line with the evolving global policy environment, and through various strategic partnerships, we will further strengthen SK on’s competitiveness in the North American market.”
