Posco Chemical Co., a refractory and secondary battery materials making unit of South Korea’s steel giant Posco, has signed a 1.85 trillion won ($1.59 billion) deal to supply cathode materials to the country’s top battery maker LG Chem Ltd.

Under the contract, Posco Chemical will provide 1.85 trillion won worth of high-nickel NCM (nickel, cobalt, and manganese) cathode materials to LG Chem for three years starting 2020, according to Posco Chemical on Tuesday.

Industry experts estimated the contracted supplies would be enough to produce 1 million units of secondary batteries to power electric vehicles.

Cathode material, which is a core material in making a secondary battery, takes up nearly 40 percent of the production price for a lithium-ion battery. About 2 kilograms of cathode materials are used to make a 1-kWh EV battery.

Nickel-rich NCM cathode materials improve the battery efficiency and are used mostly to make EV batteries. On the burgeoning demand for electric vehicles, the high-nickel type is estimated to take up 70 percent of the global output of all cathode materials by 2025, according to experts.

With the latest deal, LG Chem has further enhanced its partnership with Posco Chemical amid growing demand from electric vehicle makers. Their partnership was made earlier in 2017 when they signed a three-year supply deal for anode materials worth 300 billion won.

By Won Ho-sup and Lee Ha-yeon

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