To that end, it’s made some bold investments, including building a nickel refinery at home, buying mining rights to a salt lake with lithium deposits in Argentina, constructing a battery recycling plant in Poland and snapping up a stake in a graphite mine in Tanzania.
Bloomberg sat down with the vice president of Posco’s lithium business strategy, Park Kwang-Seok, who said the company was looking extensively for lithium reserves in US, “even the low-grade ones we didn’t glance at previously.”
President Joe Biden’s Inflation Reduction Act, which requires EV makers secure battery minerals from countries with free trade agreements with the US in order to be eligible for a $7,500-a-car subsidy, is also high on Park’s mind. Here’s an edited transcript of the interview.
What is Posco’s overriding strategy when it comes to battery materials?
We have a goal to build a full value chain in mining and upstream for EV battery minerals, from securing the rocks to manufacturing cathode-active and anode materials and then onto battery recycling. We believe we’re the only company in the world to have such an ecosystem.
What’s your technology around lithium refining?
We focus on extracting lithium from rocks or lakes at higher yields than rivals can. In terms of ESG, we use less water when extracting lithium from lakes. Using less water is important because many of these lithium lakes are located in high mountainous areas where local residents need that water.
Posco bought a lithium lake in Argentina but the country doesn’t have a free trade agreement with the US. Is this a concern for you?
We don’t think the IRA is fixed yet. We expect more details to come in November or December and we might need to revise our strategy after that. One thing we’re considering to meet the current requirements would be bringing lithium from Argentina to Korea, producing lithium hydroxide there and then exporting it to the US, because Korea has a free trade agreement with the US.
One thing we are worried about the IRA is that most of the countries that have natural resources don’t have FTAs with the US. It’s only Australia, Chile and Canada. Chile imposes an up to 20% royalty on mining, compared to about 3% in Argentina. However companies are making a lot of suggestions and I think the US will listen to them and make a wise decision. Depending on the details, the IRA can be an opportunity for us.
Do you think the IRA will have an impact on your joint ventures with Chinese companies, like Huayou Cobalt? (Posco last year outlined plans to set up a recycling business for lithium-ion batteries with Huayou Cobalt. The pair already have a 65:35 JV called Posco Hy Clean Metal.)
Huayou is a private company in China, not a state-run firm, and I’m not sure the IRA will affect private firms.
What’s the most difficult thing about being in the battery minerals business?
Securing minerals. It’s not something you can do with only money, or technology. You need support from your government and industry players that are reliable. We have Zoom meetings with mining companies every day, day and night. As a steelmaker, Posco has a pretty good reputation, everyone knows we don’t suddenly delay or scrap deals. But the competition is pretty tough and mining companies want deals on better terms for them. We’re also hoping South Korea signs an FTA with [South American trade bloc] Mercosur, which would be a great opportunity for Posco.
What’s your forecast for lithium prices?
Prices can climb further to around $80,000 per ton, but they won’t go higher as more supply will come online. Posco is looking at low-grade lithium sources, which we haven’t before. Battery recycling can also cover about 20% to 30% of the demand for lithium by end of this decade, when we expect lithium prices to fall to around $30,000.
Do high inflation and a weaker Korean won hinder your investment plans in the US and abroad at all?
We always have to think about the economics and cost efficiencies of our projects. We’re preparing hedging plans around the weak won because our overseas investments are made in US dollars.
(By Heejin Kim)