Chairman Choi Jeong-woo of POSCO.

Korea’s largest steelmaker POSCO dedicated its first overseas cathode material plant in China, which has been touted as one of the next growth engines for the steelmaker.

POSCO completed the plant in Tongxiang, Zhejiang Province, in a j.v. with Huayou Cobalt of China. The joint venture is called Zhejiang Posco-Huayou ESM or ZPHE, with the Korean steelmaker holding a 60 percent stake and Huayou Cobalt sharing the rest. The plant has an annual capacity to turn out 5,000 tons of cathode materials, enough for 50,000 to 60,000 electric vehicles.

At the dedication ceremony for the plant, POSCO Senior EVP Oh Gyu-seok said, “ZPHE is POSCO’s first overseas cathode material production plant and it represents the company’s strategy to put the business into new growth sectors. We will continue to work with Huayou Cobalt to enhance global competitiveness for the business.”

The two companies initially planned to receive approval for their products from the Chinese government and start mass production in the second half of next year. However, commercial production at the plant will be pulled up to the end of 2019, a year earlier than the initial plan, in order to enter the Chinese market as early as possible.

Huayou Cobalt is the world’s largest supplier of cobalt, one of the key ingredients for lithium ion batteries. The company supplies about half of global demand for the material from its own cobalt mine.

POSCO will be able to stably supply materials and secure price competitiveness in the global market thanks to the joint-venture. The two firms have also established another joint venture to produce precursors, which is an upstream process for cathode material production, and are building a plant nearby the cathode plant.

A view of the Cathode Material Plant which POSCO built in Tongxiang, Zhejiang Province, China, and officially dedicated in a ceremony on Aug. 22. (Photos: POSCO)

Huayou Cobalt holds a 60 percent stake in this joint venture, with the rest being held by POSCO. Huayou Cobalt is also planning to supply raw materials, including cobalt, to domestic plants of POSCO Chemical, another cathode material manufacturer with POSCO Group.

With the completion of ZPHE, POSCO is now capable of producing 20,000 tons of cathodes a year in and outside Korea. The group’s annual production capacity will also increase to 45,000 tons when POSCO Chemical adds 25,000 tons of output next year.

In addition, POSCO is planning to build additional facilities at the ZPHE plant in order to gain ground in China depending on market conditions. POSCO Chairman Choi Jeong-woo aims to secure 20 percent of the global market for anode and cathode materials and generate 17 trillion won ($14 billion) in sales by 2030.

South Korean steelmaker POSCO said recently that it plans to more than double its investment spending over the next five years to 45 trillion won ($40.4 billion), as it looks to strengthen its competitiveness.

Under the plan, POSCO will invest 26 trillion won to 2023 in upgrading and adding steel facilities, another 10 trillion won in new business sectors, including lithium batteries, and the rest on its energy business, the company said in a statement. The plan will lift total spending over the five-year period by 27 trillion won to 45 trillion won, some two-and-a-half times the 18 trillion won it spent over the previous five years.

It might be too early to declare that the electric vehicle battery sector, especially lithium-ion, is South Korea’s new growth engine - on par with semiconductors that propelled the economy forward - but analysts here are highly optimistic.

In 2018, the top three EV battery manufacturers - LG Chem, Samsung SDI and SK Innovation - secured orders worth 110 trillion won ($96 billion) from global automakers. They are expected to bag even more new contracts this year.