LG Chem – SK Innovations commercial agreement is a boon for the electric vehicle industry

On April 11, LG Chem, Ltd. and SK Innovation Co., Ltd., two leading South Korean manufacturers of electric vehicle (EV) batteries, settled a long-standing trade dispute in which LG accused SK of trade secret misappropriation. SK has agreed to pay LG approximately US $ 1.8 billion in a combination of lump sum payments and royalties over a period of several years. The parties also agreed to withdraw all lawsuits on this matter in South Korea and other jurisdictions and not to initiate legal action against each other for ten years.

LG had filed a complaint in June 2019 with the US International Trade Commission (ITC), an independent agency created to protect US markets against unfair trade practices, that SK systematically stole trade secret information by poaching former LG employees, including scientists and engineers. . On February 10, 2021, the ITC ruled in LG’s favor and instituted a 10-year import ban on SK’s batteries into the United States because of its “extraordinary” efforts to destroy the evidence. The ITC also said that SK could only operate a plant it is building in the U.S. state of Georgia for just four years before shutting it down.

U.S. President Biden, a strong proponent of electric vehicle development, had until April 11 to decide whether to overturn the ITC decision or let it take effect, so the timing of the regulations saved him from having to make that decision. Indeed, the US trade representative noted that the LG-SK deal followed a “significant commitment” by the US administration.

The main consideration for President Biden is that the legal dispute has endangered the construction of a battery assembly plant by SK in the US state of Georgia. The plant is expected to produce EV batteries for Ford Motor Co.’s new F-150 electric pickup truck and Volkswagen AG’s new ID.4 SUV. Equally important, the SK facility, costing a total of around US $ 5 billion, would create around 6,000 jobs in perhaps the most politically divided state in the country. (Voters in Georgia elected two U.S. Democratic senators in the January 2021 run-off election following the November 2020 general election, allowing President Biden’s Democratic Party to control the U.S. presidency and both houses of Congress. )

The LG-SK deal is positive for the growth of electric vehicles in the United States and therefore positive for producers of key minerals used in EV batteries, such as lithium, cobalt, nickel and manganese. Miners of these small-cap metals listed in Canada include Lithium Americas Corp. (TSX: LAC), First Cobalt Corp. (TSXV: FCC) and. See figures below showing the International Energy Agency’s projected growth in demand for lithium and cobalt.

Annual LITHIUM Demand for Electric Vehicle Batteries, Thousands of Tons, 2019-2030
COBALT annual demand for batteries for electric vehicles, in thousands of tonnes, 2019-2030

Despite the giant media and investor attention that Tesla is attracting, total sales of plug-in electric vehicle units in the United States stood at 327,000 in 2019, which was only 2% of new light-duty vehicle sales this year. that year (according to www.usafacts.org). Benchmark Mineral Intelligence, a London-based consulting firm, estimated that the closure of the SK plant in Georgia would reduce the supply of EV batteries to the United States by 15% in 2021, and still by 8% in 2030.

President Biden’s infrastructure bill prioritizes electric vehicles

In late March 2021, President Biden presented a massive US $ 2 trillion infrastructure plan that includes $ 174 billion in spending to boost the US electric vehicle industry. This proposal includes the construction of a national EV charging network.

President Biden also pledged to strengthen the ability of the United States to manufacture lithium-ion batteries for electric vehicles. According to Ford Motor’s March 16, 2021 testimony from Jonathan Jennings to the US Senate Finance Committee, China produces 73% of all these batteries, which eclipses the US production share of 12%.

Information for this briefing was found through Sedar and the companies mentioned. The author has no title or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author does not hold any license.

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