Hanwha Solutions said Tuesday it will spend 338 billion won ($283.3 million) to add 270,000 tons of production capacity of caustic soda, a key raw material for electric vehicle batteries.

According to the chemical and energy unit of South Korean conglomerate Hanwha Group, the investment will allow the company to ramp up the annual production capacity of caustic soda at its petrochemical plant in Yeosu, South Jeolla Province, to 1.11 million tons from the current 840,000 tons.

“Hanwha Solutions, the largest producer of caustic soda in Korea, decided to invest as demand for EV batteries is spiking,” a company official said.

Caustic soda is a key material used for the production of cathodes, black metal powders that go inside the plus side of EV batteries. The soda helps remove impurities when black metal powders are produced. Also, caustic soda is used to extract aluminum from rocks.

The domestic demand for caustic soda, which stood at 1.28 million tons last year, is expected to grow 5 percent every year and reach 1.6 million tons by 2025. Hanwha Solutions expects the global shortage of caustic soda to continue as factories in China, which use fossil fuels, face stronger environmental regulations. Also, those located in North America have reached their lifespan and closed their doors, according to the company.