LG Energy Solution (LGES), the South Korean battery manufacturer, has entered into a letter of intent with Chinese Yahua Industrial Group to manufacture lithium hydroxide in Morocco. Details about the planned production schedule and volume remain unknown. LGES has expressed a desire to enhance its lithium hydroxide supply chain through this agreement, according to Korean media reports.
Morocco is strategically selected as it has free trade agreements with both the US and the EU, making it an attractive choice. Recently, the US government issued regulations outlining the criteria that electric vehicles (EVs) must meet to qualify for tax incentives of up to $7,500 under the Inflation Reduction Act (IRA), including regulations governing the origin of battery raw materials. According to the IRA, only EVs that utilize a certain percentage of critical minerals from the US or a country with a free trade agreement with the US are eligible for subsidies. The EU is also considering similar requirements for key material origins through the Critical Raw Materials Act, and Morocco would meet the criteria for funding in both markets.
Lithium hydroxide, a lithium compound utilized in batteries, will be produced. Lithium carbonate is another option, but lithium hydroxide is easily synthesized with nickel, a crucial raw material for high-nickel, high-capacity EV batteries.
LGES has also signed contracts with Australia, Chile and Germany with critical material producers to establish a global supply chain of lithium.
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