Supply deal covers 2027–2029, extendable to 2031

Contract equals 37% of Posco Future M's last year's sales

LFP cathode material to feed SK On's Georgia ESS battery production

An aerial view of SK Battery America's factory in Georgia. [SK On]
An aerial view of SK Battery America's factory in Georgia. [SK On]

SK On and Posco Future M have joined forces in a deal worth over 1 trillion won ($722 million) to supply lithium iron phosphate (LFP) cathode material, with the aim of building a non-China supply chain for the US energy storage system market. LFP cathode material produced by Posco Future M in South Korea will go into ESS battery production at SK On's factory in Georgia.

Posco Future M disclosed Tuesday that it had signed a supply contract with SK On for LFP cathode material for secondary batteries valued at 1.07 trillion won in total. The three-year contract runs from Jan. 1, 2027, to Dec. 31, 2029, with the United States among the designated supply regions. The two companies may extend the contract by up to two years, through the end of 2031, by mutual agreement.

The contract value represents 36.6 percent of Posco Future M's consolidated sales of 2.94 trillion won last year.

Through the deal, SK On secures a large-scale domestic source of LFP cathode material — a key input for its US ESS business. The cathode material supplied by Posco Future M is set to feed LFP battery cell production for ESS at SK On's Georgia plant starting in 2027.

SK On has been accelerating its push into the North American ESS market. In August, it signed an LFP battery cell supply agreement with US ESS company Neovolta Power, and in September last year it concluded an ESS supply contract with US renewable energy firm Flatiron Energy Development. The deal with Posco Future M is intended to extend SK On's non-China supply chain beyond battery production to cover key materials as well.

Kim Seong-tan, head of SK On's raw materials procurement division, said the company is focused on building a non-China supply chain and strengthening its competitiveness in core materials in line with shifts in the global energy market and growing US ESS demand. "We will continue to pursue stable materials procurement and market expansion in the ESS sector through differentiated purchasing capabilities and strategic partnerships with leading companies," he added.

An aerial view of Posco Future M's cathode material factory in Pohang, located in the Yeongil Bay Fourth Industrial Complex. [Posco Future M]
An aerial view of Posco Future M's cathode material factory in Pohang, located in the Yeongil Bay Fourth Industrial Complex. [Posco Future M]

For Posco Future M, the deal marks a formal entry into the LFP cathode market. While the company has long supplied anode material to SK On, this is the first cathode material supply agreement it has signed with the battery maker. The contract also means Posco Future M now supplies both cathode and anode materials to all three of South Korea's major battery manufacturers.

Large LFP orders have been coming in rapid succession. Last month, Posco Future M agreed to supply more than 190,000 tons of LFP cathode material to a major domestic battery maker over six years from 2027 to 2032, and has now added the 1 trillion won-plus contract with SK On roughly a month later.

Production preparations are also under way. Posco Future M recently converted part of its high-nickel production lines at its Pohang cathode factory to LFP use and plans to begin mass production by the end of this year. It intends to convert additional cathode lines to expand production capacity in step with growing orders.

A dedicated production facility is also being built. A joint venture involving Posco Future M, Pino and China's CNGR is constructing an LFP cathode factory at the Yeongil Bay Industrial Complex in Pohang, with mass production targeted for 2027 and capacity to be expanded in stages as demand grows.

Posco Future M is also revamping its LFP production process to secure cost competitiveness. The company plans to use lithium sourced by the Posco Group from salt lakes in Argentina and iron raw materials generated during steelmaking. Over the longer term, it intends to apply precursor-free processing — which eliminates the iron phosphate precursor manufacturing stage — as well as a ferric chloride method using waste acid from steel mills.

LFP offers lower energy density than ternary materials such as nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminum (NCA), but is relatively cheaper and longer-lasting. The LFP battery market is expanding rapidly as ESS demand rises on the back of growing AI data center buildouts and the expansion of renewable energy.

The deal gives SK On a stable source of key materials for its US ESS operations while adding a major LFP customer for Posco Future M. The two companies plan to discuss extending the supply agreement beyond 2029.


kwater@heraldcorp.com