Posco Chemical to make foray into North America with partnership with GM Korean chemical company and US carmaker to build $400 mil cathode plant in Canada

Translated by Ryu Ho-joung 공개 2022-03-11 08:08:09

이 기사는 2022년 03월 11일 07:57 더벨 유료페이지에 표출된 기사입니다.

Posco Chemical has partnered with US automaker General Motors to build a cathode processing joint venture in Canada, as the South Korean company seeks to expand its battery materials business beyond Asia to North America.

The two companies unveiled a plan to build a new facility that will produce cathode active materials in Bécancour, Quebec, on Tuesday Seoul time. They will first inject approximately $400 million into the project starting from 2023 and continue to expand investment in phases.

Details of the agreement are still under negotiation, according to Posco Chemical. Thus, information about the new facility’s production capacity and how much stake each company will hold in the joint venture has not been disclosed, although GM’s statement said the majority of the joint venture will be owned by Posco Chemical.

North America is a key market for electric vehicle parts suppliers. According to IHS Markit, the North American electric car market is expected to grow at an annual average rate of 58% from 46 GWh in 2021 to 286 GWh in 2025.

The United States-Mexico-Canada Agreement (USMCA) has also motivated companies outside North America to build plants in the region because the deal, which is set to come into force in July 2025, requires that 75% of auto content be made in North America to receive tariff benefits.

With a goal of becoming the No. 1 electric car maker in North America by 2025, GM has teamed up with battery maker LG Energy Solution to form a joint venture, Ultium Cells, in the US. The two aims to expand its production capacity to 120 GWh per year.

Adding to this, the partnership with Posco Chemical will help further strengthen the US carmaker’s electric vehicle supply chain.

Posco Chemical has a sufficient cash position to fund the investment. Following its 1.27 trillion won ($1.03 billion) rights issue last year, cash and cash equivalents jumped to 1.35 trillion won at the end of 2021 from 126.6 billion won a year ago.

However, Posco Chemical has several other capital expenditure projects to fund over the coming years. It will build a 600 billion won precursor plant with an annual capacity of 100,000 tons in South Jeolla Province. Construction is underway to convert its Sejong plant into a low-expansion anode material manufacturing facility, which is expected to cost 105.4 billion won. The company also announced plans to spend 250 billion won to expand the production capacity of its synthetic graphite anode plant in Pohang by 80 million tons to 160 million tons per year by 2023.

Additionally, Posco Chemical plans to expand its business into Europe and Southeast Asia as well. The company’s growing capital expenditure, along with rising raw materials costs, will increase the need to raise more money in the future.

Posco Chemical reported an operating profit of 121.7 billion won in 2021, the strongest in its history. Thanks to the company’s financial strength, bond investors’ appetite for Posco Chemical remains strong. Its bond sale in September last year was six-time oversubscribed, leading to an increase in the offering from 120 billion won to 200 billion won. (Reporting by Wie-su Kim)
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