SEOUL– SK On, a South Korean car battery maker, said Sunday it has signed a deal to purchase lithium from Chilean firm SQM in its import diversification strategy.

Under the deal, SQM will supply a total of 57,000 tons of lithium to SK On for five years starting 2023. The amount is enough to produce batteries for 1.2 million electric vehicles, SK On said in a statement.

“The deal with SQM is a part of our business strategy to support global production expansion and proactively respond to changes in the external environment,” SK On Chief Operating Officer Jin Kyo-won said in the statement.

SK On expects the deal with the Chilean lithium mining firm will help its efforts to meet the U.S. Inflation Reduction Act (IRA) requirements as Chile is a free trade agreement (FTA) partner with the United States.

The IRA allows a tax credit to consumers when they purchase an EV with batteries that contain at least 40 percent of critical minerals extracted or processed in the U.S. and in its FTA partner countries in 2023. The required percentage would gradually increase to 80 percent by 2027.

“We will create synergy by carrying out various cooperation in the value chain beyond the supply of lithium hydroxide to SK On,” SQM Executive Vice President Carlos Diaz said.

SK On has strengthened its supply chain for key battery materials in recent years.

Last month, it signed a 10-year lithium supply deal with Lake Resources after acquiring a 10 percent stake in the Australian company.

In addition, SK On signed a memorandum of understanding (MOU) on lithium supply with Australia’s Global Lithium Resources and a cobalt supply deal with Switzerland’s Glencore, the statement said.

SK On is a key affiliate of South Korea’s refinery-to-semiconductor conglomerate SK Group.

Source: Yonhap News Agency