By Kim Seung-yeon
SEOUL, April 27 (Yonhap) — LG Chem Ltd. said Thursday it may consider adjusting its stake in a planned joint venture with Huayou Cobalt Co., a Chinese mining company, if the new U.S. law on green energy designates Chinese firms as concerned foreign entities.
The comment came as the U.S. Inflation Reduction Act (IRA), a newly enacted law that aims to boost its domestic production in green energy, is feared to disadvantage South Korean component makers that have business ties with China.
The U.S. plans to announce more details on the scope of the Foreign Entities of Concern (FEOC) subject to an exemption from the IRA tax credits given to electric vehicle (EV) makers and related industries, including batteries and battery components.
The IRA white paper released late last year designated China, Russia and Iran as FEOCs, but has not laid out detailed provisions.
Industry watchers have bet that Chinese companies will be included in the list.
LG Chem, the country’s top chemical company, said last week it is forming a joint venture with Huayou to build a battery precursor factory in South Korea.
“We will respond flexibly to the FEOC issue, such as by changing the stake structure, as the regulations materialize,” Lee Young-seok, head of the advanced materials department, said in an earnings call.
He said the company is pushing for the joint venture even while taking IRA risks because it has advantages in securing raw materials.
“If the FEOC is stipulated to the extent that stakes in Chinese firms should completely be excluded, we could consider acquiring the whole stake in Huayou Cobalt venture, if necessary,” Lee said.
LG Chem said its U.S. investment plans remain unchanged, given the increasing demand for cathodes, a key EV battery component that determines the power of EVs.
LG Chem is spending US$3 billion to build its first U.S. cathode plant in Tennessee, with an aim to produce 120,000 tons a year by 2027.
LG Chem is also considering producing the cathodes for the cheaper lithium iron phosphate (LFP) batteries that have increasingly gained attention amid an accelerating move by automakers to expand the EV lineups to the low to mid end.
“We’re in talks with potential partners over establishing the raw material supply chain (for the LFP cathodes),” LG Chem said.
elly@yna.co.kr
(YONHAP NEWS)