South Korean chemical company LG Chem announced on Wednesday that it will set up two joint ventures with a Chinese supplier of cobalt products to produce materials for lithium-ion batteries in order to meet growing demand associated with electric vehicles.
Starting in 2020, the China-based ventures with Zhejiang Huayou Cobalt will produce precursor and cathode materials for lithium-ion batteries, with an initial capacity of about 40,000 tons per year.
LG Chem said it would invest 239.4 billion won ($225 million) in the ventures, and that their output would be used for its battery plants in China and Poland.
The company's plan is to strengthen its cost competitiveness by securing raw materials. It acquired a cathode material business from an affiliate of South Korean conglomerate GS in 2016, and obtained a 10% stake in nickel sulfate supplier Kemco, another Korean company, in 2017.
The deal also comes amid a global trend of companies trying to secure cobalt supplies in the face of rising prices and demand. In March, Chinese battery material manufacturer GEM signed a long-term supply agreement with Swiss cobalt producer Glencore.