SQM signs lithium supply agreement with LG Energy Solutions

Under this agreement, SQM will supply battery-grade lithium carbonate and lithium hydroxide to South Korean battery maker LG Energy Solutions for cathode manufacturing from 2021 to 2029 with a total volume of around 55,000 tonnes of lithium carbonate equivalent (LCE).

SQM said the signing of this large-scale long-term supply agreement is an important milestone for the company not only because it is part of its growth strategy to increase market share in the lithium sector, but also because it solidifies its prominent position as a high-quality lithium supplier for the production of batteries of electric vehicles (EVs).

The companies did not disclose prices for the lithium compounds or other details this time.

LG Energy Solution is the wholly-owned subsidiary of LG Chem, a South Korean battery maker for EVs, that was set up on December 1, 2020, to develop the group’s battery-related business.

“This seems a constructive development as it enables LG Energy Solutions to secure supply from a low-cost producer while at the same time it provides SQM with a secured buyer that will help SQM plan and invest in future capacity. We expect to see more deals like this as the downstream part of the supply chain will likely want to secure supply given the billions they are investing in EV production capacity,” head of base metals and battery research at Fastmarkets William Adams said.

The cif China, Japan and Korea battery-grade lithium market has been stable for several months since it moved down to its current levels in mid-September.

Fastmarkets assessed the lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price cif China, Japan and Korea at $6-7.50 per kg on Thursday December 17. The price fell from $6.50-8 per kg on September 17.

The lithium hydroxide monohydrate, 56.5% LiOH.H2O min, battery grade, spot price, cif China, Japan and Korea has maintained $8.50-9.50 per kg since September 17, when it fell from $8.80-10 per kg.

But some market participants have increased their offer prices for lithium carbonate, supported by rising China’s prices on the back of supply restraints and a pick-up in downstream demand.