LG Chem has signed an agreement with Piedmont Lithium (Piedmont) to acquire a US$75M equity share in the company and commit to an offtake of 200Kt of 6% spodumene concentrate (SC6) over 4 years.

The equity share translates to a 5.7% ownership of Piedmont Lithium. Piedmont’s joint venture with Sayona Mining, Sayona Quebec, allows Piedmont to purchase SC6 from the Canadian-based operation at a floor price of US$500/t and a ceiling price of US$900/t. This material will form the feedstock for the LG Chem offtake agreement, with LG Chem paying a market price based on the Fastmarkets index price at the time of purchase. Additionally, LG Chem will get priority over 10kt per year of lithium hydroxide produced at Piedmont Lithium’s proposed lithium refineries in North Carolina and Tennessee.

Just days before, LG Chem CEO Shin Hak-Cheol had stated that prices of battery material feedstock would be second in priority to reliable offtake agreements. With this offtake agreement with Piedmont, the South Korean chemicals company has aimed to lock in a North American-based provider of feedstock for its planned Tennessee-based cathode manufacturing plant. This plant, and the planned feedstock sources, may allow LG Chem to fulfil the criteria stated by the United States Inflation Reduction Act (IRA), which will allow US-based customers to claim tax credits on newly purchased electric vehicles.

To qualify for the full EV tax credit, a manufacturer must demonstrate that a specific percentage of the value of an EV battery was manufactured in North America and a specific percentage of critical materials must be extracted or processed in the US or with free trade partners. The percentages required will vary depending on when the vehicle was placed in service. However, according to Project Blue’s estimates, the 50kt SC6 per year offtake agreement with Piedmont will only account for just under 14% of LG Chem’s feedstock requirements for its Tennessee cathode facility when running at full capacity. This figure is well under the required thresholds for offering a full EV tax credit to customers. Therefore, LG Chem will be required to find other sources of raw material feedstocks to make up for the shortfall. This may result in further investments in the mining sphere as LG Chem aims to gain further supply of US or US-adjacent raw material sources.