SK On Builds Non-Chinese LFP Supply Chain With POSCO Future M, L&F

[Korea Financial Times, Kim JaeHun] SK On is stepping up efforts to build a supply chain free of Chinese dependence for cathode materials, the core component of lithium iron phosphate (LFP) batteries. It is partnering with leading Korean battery materials makers, including POSCO Future M and L&F. The company's strategy is to significantly strengthen its price and technological competitiveness in the energy storage system (ESS) market by securing high-quality Korean-made materials ahead of competitors.

This move to strengthen its domestic supply chain is expected to give SK On a major competitive advantage in the race for leadership in ESS markets at home and abroad, where the push to reduce reliance on China is intensifying.

Back-to-Back Deals With POSCO Future M and L&F

SK On said on Sept. 23 that it had signed a contract with POSCO Future M for the supply of approximately KRW 1.1 trillion worth of LFP cathode materials for ESS over three years, from 2027 through 2029. The cathode materials secured under the contract will be fed into the ESS LFP battery cell production line at SK On's plant in Georgia, U.S.

The contract is SK On's second large procurement deal in a week, following its supply agreement with L&F. On Sept. 17, SK On signed a contract with L&F to procure approximately KRW 160 billion worth of LFP cathode materials for ESS over three years, from 2026 through 2028.

Within a short period, SK On has locked in large-scale LFP cathode supply totaling KRW 1.26 trillion from two major Korean cathode manufacturers. In doing so, it has moved away from an LFP cathode procurement structure that Chinese companies had effectively monopolized and has built a fully "non-Chinese LFP supply chain" ahead of its rivals.

The cathode materials POSCO Future M will supply to SK On offer high cost competitiveness and quality. They draw on POSCO Group's in-house raw material sourcing network, including lithium secured from a salt lake in Argentina, as well as new processing technologies. L&F will likewise supply SK On with high-density, third-generation LFP cathode materials mass-produced at its dedicated LFP plant in the national industrial complex in Dalseong County, Daegu.

Korean-Made LFP Boosts ESS Order Competitiveness

Industry observers say SK On's efforts to localize LFP cathode materials and diversify its supply chain have created a "virtuous cycle" that is turning into major order wins. A prime example is the government's national ESS central contract market auction held in the first half of this year.

In the second ESS central contract market auction, whose results were announced in February, SK On secured 284MW, or about 50.3%, of the total 565MW on offer. It outpaced all of its major Korean battery rivals, including LG Energy Solution and Samsung SDI, and claimed a majority of the total awarded volume on its own.

The factors that won the evaluation committee's approval in the selection process were the "domestic supply chain development" and "contribution to the industrial ecosystem" criteria. SK On went beyond battery cell manufacturing and presented a supply chain framework that localizes production starting with LFP cathode materials, a core component. That earned it overwhelmingly high scores in those categories.

SK On did not simply rely on price competitiveness by importing Chinese materials. Instead, it fostered a mutually beneficial ecosystem with Korean materials companies and secured supply stability. That approach reportedly proved decisive in winning the ESS contracts, which are directly tied to national power grid security.

Accelerating ESS Line Conversions at Seosan and Georgia Plants

With a stable domestic materials supply chain in place, SK On is also speeding up the conversion of lines at its key production bases at home and abroad into dedicated ESS lines.

At its plant in Seosan, South Chungcheong Province, SK On is converting 3GWh of the plant's total 7GWh production capacity into lines dedicated to LFP batteries for ESS. The company plans to begin full-scale mass production and deliveries in the first half of next year, using Korean-made LFP cathode materials supplied by L&F.

Its overseas base in Georgia, U.S., will also convert some of its production lines to ESS LFP battery production. LFP cathode materials procured from POSCO Future M starting in 2027 will be fed into the Georgia plant and turned into ESS cells for local customers in North America.

Its results in the U.S. market are also becoming more concrete. In August, SK On signed a contract with U.S. ESS specialist NeoVolta Power to supply 9GWh of LFP battery cells over five years starting in 2027. The two companies are pursuing a large-scale partnership totaling 18GWh, including an additional 9GWh. As the global market shifts away from China, SK On has established itself as one of the few manufacturers able to supply LFP batteries that fully meet the requirements of the U.S. Inflation Reduction Act (IRA).

SK On plans to accelerate its ESS business based on LFP batteries, which offer strong price competitiveness and safety, in order to raise plant utilization rates and improve profitability. Its local production bases, such as "SK On Tennessee," which has transitioned to a standalone U.S. entity, have gained autonomy and efficiency. That is also expected to strengthen its ability to handle global ESS volumes.

"As supply chains in the global ESS battery market move away from China in earnest, we have secured high-quality Korean-made LFP cathode materials ahead of competitors through mid- to long-term contracts with leading Korean companies," said Kim Seong-tan, head of the raw materials procurement office at SK On. "Based on our differentiated raw material procurement capabilities and robust production system at home and abroad, we will continue to build overwhelming competitiveness in the global ESS market."

Kim JaeHun (rlqm93@fntimes.com)