SEOUL, Feb. 20 (UPI) -- South Korea's LG Chem announced the signing of a $75 million deal with U.S.-based Piedmont Lithium to secure 200,000 metric tons of raw materials toward the production of electric vehicle batteries.
The agreement, announced Friday, allows LG Chem to acquire 6% of Piedmont Lithium, which will provide 50,000 metric tons of spodumene concentrate annually to LG Chem through 2026.
The company expects to be able to extract 30,000 tons of lithium from the basic resource, which the company says would go to producing enough to batteries to equip 500,000 electric vehicles.
LG Chem is the parent company of LG Energy Solution, the world's second-largest electric vehicle battery maker.
The contract with Piedmont would also go toward satisfying the requirements under the U.S. Inflation Reduction Act, a measure signed by U.S. President Joe Biden in August to entice companies to shift production to the United States via tax credits and incentives.
The IRA terms require that at least 40% of the critical mineral's value in any vehicle batteries must be extracted or processed in the United States or from a country that has a free trade agreement with the United States.
That threshold increases by 10% each year to 80% by 2027.
"This agreement allows LG Chem to provide differentiated values to North American customers with products that satisfy IRA standards by pre-emptively securing raw materials in the U.S., our key market," LG Chem CEO Shin Hak-cheol said in a statement.
Piedmont CEO Keith Phillips welcomed LG Chem as a shareholder.
"LG Chem is a global leader with a commitment to U.S. EV battery manufacturing and plans to build one of the world's largest cathode plants in Clarksville, Tenn.," he said in a statement.
Industry experts point out that not only LG Chem but also other South Korean battery makers, including SK Innovation and Samsung SDI, will continue to seek out new suppliers of battery materials.
"50,000 metric tons of spodumene concentrate annually is insufficient to meet IRA requirements, meaning LG Chem has to find additional suppliers," Daelim University automotive Professor Kim Pil-soo told UPI News Korea.
"But trying to contract new U.S. battery material suppliers or with companies in free trade pact nations vis-a-vis the U.S. is not very easy. As such, with no easing of the rules, South Korean businesses will likely continue to struggle with the IRA requirements," he said.