Korean battery firms race to secure non-Chinese suppliers

South Korean battery material makers are accelerating efforts to build traceable, non-Chinese supply chains as tighter US rules threaten federal clean energy incentives for products linked to China.

LS-L&F Battery Solution, a joint venture between LS Group and L&F, has begun qualification tests to make precursor materials — blends of metals used in cathodes —using metal sulfates produced by LS Group affiliate LS MnM, according to reports Thursday.

If testing is completed as planned, LLBS could begin commercial production as early as the fourth quarter and move into full-scale operations next year. Initial annual capacity is set at 40,000 metric tons, with output targeted to reach 120,000 tons by 2029.

The partnership, established in 2023, is building an integrated supply chain running from LS MnM’s nickel sulfate to LLBS precursors and L&F cathode materials. The structure is intended to reduce reliance on China and meet sourcing requirements under the US One Big Beautiful Bill Act.

LS MnM is also investing in an Indonesian smelter to secure nickel from outside China. It plans to begin mass-producing mixed hydroxide precipitate, an intermediate nickel feedstock used in battery production, next year.

The LS-L&F alliance is seeking full compliance with US restrictions on prohibited foreign entities, or PFEs. To qualify for incentives, companies must keep the share of materials and components sourced from designated entities in countries including China and Russia below prescribed limits.

For North American battery energy storage system projects, the required share of non-PFE materials and equipment starts at 55 percent this year and will rise to 75 percent by 2030.

Other Korean suppliers are making similar moves.

Posco Future M is diversifying its graphite supply chain as Chinese companies continue to dominate the global anode material market. China accounted for 95.7 percent of the market in the second quarter, compared with 1.9 percent for Korean suppliers, according to SNE Research.

The company is sourcing natural graphite from Tanzania and Australia while producing synthetic graphite anodes from steelmaking byproducts at facilities in Pohang, North Gyeongsang Province, and Vietnam.

EcoPro BM, meanwhile, is procuring nickel from Indonesia for cathode production in Pohang and Debrecen, Hungary. Its Debrecen plant began operating its first line in June and plans to bring a second line online by the end of this month to serve European customers.

The shift reflects Washington’s broader effort to reduce the use of Chinese components and meterials in US power infrastructure, including battery storage systems.

“Reducing reliance on China is clearly the right move,” a researcher at a major Korean battery company said. “Raw materials account for most battery production costs, making non-Chinese supply chains essential for navigating US trade barriers.”

The researcher said tighter US rules could shield Korean suppliers from Chinese price competition while encouraging a two-track strategy: reserving compliant, non-Chinese materials for North America and using lower-cost Chinese inputs in less restrictive markets such as Europe and Southeast Asia.