GEM, a Chinese lithium-ion battery recycling company, has announced plans to establish a joint venture with South Korea’s SK On and Eco Pro. The partnership, worth KRW 1.21tn, aims to build an ultra-high nickel multi-component precursor (PCAM) plant and support a nickel-cobalt-manganese cathode materials supply chain in Jeollabuk-do, South Korea. The products will be exported to the North American market.
GEM views this investment as a strategic measure to comply with and satisfy regulations such as the US IRA and EU battery passport. These policies impose restrictions on the entry of key raw materials for batteries into the US and EU markets. South Korea, being an FTA signatory with the United States, allows GEM to bypass these restrictions and help its products enter the American and European markets.
In November last year, another leading ternary precursor, Zhongwei Co., also established operations in South Korea. The company signed a Memorandum of Understanding with the Pohang City Government to build a lithium battery cathode materials precursor and battery-grade nickel sulfate plant in the Yingriwan Industrial Park.
Overseas investments and factory construction have become an essential route for Chinese lithium battery companies to circumvent new regulations. China dominates the global supply of ternary precursors, accounting for over 80% of the total output in 2022.
South Korea’s lithium battery industry is highly dependent on the Chinese supply chain. Its existing production capacity struggles to provide subsidy-compliant battery products that meet the stringent terms of the IRA. Chinese companies’ research and development in high-nickel precursors started early and is more mature, making Chinese products attractive to Korean firms like Eco Pro, POSCO, and LG Energy Solutions.
The integrated layout of Chinese companies, such as GEM and Huayou Cobalt, in Indonesian nickel mine projects offers cost advantages in a high nickel price environment. The reduced cost of nickel for batteries, resulting from breakthroughs in high-pressure acid leaching mass production, will further benefit Chinese precursor companies and allow them to capitalize on the growing demand for downstream high-nickel batteries.