POSCO Future M and LG Energy Solution Sign MOU for 720,000 Tons of Cathode and Anode Materials Over Seven Years
Collaboration Expands to Target ESS and Affordable EVs; Formal Contract and LFP Supply Targeted for Early Next Year
South Korean battery material manufacturers are shifting their focus away from high-performance electric vehicle segments toward energy storage systems (ESS) and affordable EV markets. POSCO Future M is converting a portion of its high-nickel cathode production lines at its Pohang plant for lithium iron phosphate (LFP) use and expanding long-term supply cooperation with LG Energy Solution. This structural shift in production facilities underscores how rapidly changing demand in the battery market is reshaping the industry.
POSCO Future M announced on October 30 that it has signed a memorandum of understanding (MOU) on "future cooperation" with LG Energy Solution. The tentative agreement spans a seven-year period from 2027 to 2033, covering a combined 720,000 tons of cathode and anode materials. The deal encompasses LFP, ternary (NCM) cathodes, and synthetic graphite anodes, significantly broadening a partnership previously concentrated on ternary cathodes.
Detailed terms—including product-specific volumes and supply schedules—will be finalized through further negotiations ahead of a definitive contract later this year. Because the 720,000-ton figure represents an aggregate plan across multiple material types and remains at the MOU stage, it cannot yet be treated as a confirmed order or definitive contract value.
Converting High-Nickel Lines to LFP to Target the ESS Market
The collaboration goes beyond new material supplies to include the restructuring of existing manufacturing lines. POSCO Future M plans to convert part of its high-nickel ternary cathode production lines at the Pohang plant to LFP production, with supplies to LG Energy Solution slated to begin in early 2027.
While LFP offers lower energy density than high-nickel ternary cathodes, its lower cost and longer lifespan make it widely applicable for ESS and entry-level EVs. As South Korean battery firms—historically focused on high-performance EV materials—expand into cost-sensitive markets, the operational utilization of their production infrastructure is evolving.
The exact scope of equipment modifications and additional capital expenditure required to convert high-nickel lines to LFP remain to be finalized. Conversion costs and mass-production timelines will depend heavily on the extent to which existing assets can be repurposed.
However, this does not signal an abandonment of high-nickel technology. The companies have agreed to cooperate on the supply and technological development of next-generation products, including ultra-high-nickel cathodes, sodium-ion battery materials, and silicon anodes. This dual-track approach allows the firms to maintain their technological edge in high-performance EV materials while expanding their product portfolios for ESS and affordable EVs.
The partnership is also expanding from cathodes to anodes and recycled raw materials. POSCO Future M plans to supply synthetic graphite anodes produced at its domestic facilities and an upcoming Vietnamese plant to LG Energy Solution, while also exploring the use of metals extracted from spent batteries in NCM cathode manufacturing.
To diversify production bases and raw material procurement channels, the companies have agreed to jointly respond to shifting supply chain regulations across different markets. In long-term supply agreements, production geography and raw material sourcing methods are becoming as critical as quality and manufacturing capacity. In particular, because the production location and sourcing of synthetic graphite anodes directly impact compliance with supply chain regulations, the commercial timeline and actual supply terms of the Vietnam plant will be closely watched.
Government Support Measures Under Review Amid Rising ESS Demand
As the growth trajectory of the EV market moderates, the battery sector is accelerating efforts to secure ESS as a new demand driver. During the 6th Battery Industry Day held on October 29, key industry tasks discussed included penetrating the ESS market, securing next-generation technologies, and establishing stable supply chains for core materials.
The South Korean government is also preparing a comprehensive strategy to strengthen the competitiveness of the domestic battery industry by year-end, which includes reviewing support measures such as domestic production tax incentives. Specific targets and application criteria have yet to be finalized.
POSCO Future M and LG Energy Solution aim to sign a definitive contract within the year. The actual business scale will become clearer once specific breakdowns are established—such as the respective shares of LFP, ternary cathodes, and synthetic graphite anodes within the 720,000-ton supply plan, alongside product-specific delivery schedules and contractual terms.
Mass production of LFP at the Pohang plant is scheduled to commence in early 2027. The extent to which this venture contributes to POSCO Future M’s top-line growth will depend on conversion costs for legacy high-nickel facilities, production stability, and actual order volumes from LG Energy Solution. Translating this long-term supply partnership into tangible financial performance will hinge on successfully clearing two remaining hurdles: executing the definitive contract and completing the production line conversion.
