[Click eStock] "Posco Chemical Accelerates North American Entry with GM Cathode JV Investment"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating and a target price of 170,000 KRW for POSCO Chemical on the 30th.

POSCO Chemical announced on the 27th its JV investment in cathode materials with GM. The investment scale is approximately 30,000 tons per year of high-nickel cathode materials, with a total investment amount of 800 billion KRW. The joint venture company, Ultium CAM, is composed of 85% POSCO Chemical and 15% GM. The investment site is the Becancour Industrial Park in Quebec, Canada, with completion scheduled for September 2024 and full-scale mass production planned for 2025.

The supplier is Ultium CAM, the Canada-based cathode materials JV between POSCO Chemical and GM, with a contract amount of 8 trillion KRW and a volume of about 240,000 tons. The contract period is from 2025 to the end of 2032, and the sales and supply regions are Ultium Cells and the United States.

Jeon Chang-hyun, a researcher at Daishin Securities, stated, “The supply of cathode materials to Ultium Cells will be dual-sourced from the existing Gwangyang NCMA capacity of 60,000 tons and the GM Canada JV NCMA capacity of 30,000 tons,” adding, “The Gwangyang plant’s production will be delivered to Ultium Cells’ Ohio Plant 1, and the GM JV production will be supplied to Tennessee Plant 2.”

In the case of POSCO Chemical, while there is no change in the performance guidance until 2024, it is evaluated that a stable foundation for mid- to long-term growth has been secured from 2025 onward. This is because a North American EV and battery value chain has been formed through strengthened cooperation with the largest North American EV customer, linking POSCO Chemical (cathode materials), LG Energy Solution (battery), and GM (EV).

Furthermore, it is estimated that mid- to long-term North American sales visibility has been secured through an 8-year contract worth 8 trillion KRW from 2025 to the end of 2032. Researcher Jeon explained, “Given the importance of securing supply references in the automotive industry, the first-mover advantage is expected to be favorable for winning additional contracts.”

Along with sales expansion, profitability improvement is also expected due to an increased proportion of high-margin high-nickel mass production in the product mix. The product competitiveness has improved with high-nickel (86-87%) products that have a higher nickel content compared to the existing 83%.

POSCO Chemical’s mid- to long-term cathode material capacity guidance is 155,000 tons in 2023 (130,000 tons domestic, 25,000 tons overseas), 345,000 tons in 2025 (170,000 tons domestic, 175,000 tons overseas), and 610,000 tons in 2030 (210,000 tons domestic, 400,000 tons overseas), with one-third of the total capacity by 2030, or 200,000 tons, to be established in North America. Researcher Jeon analyzed, “This is an area where momentum for additional North American capacity expansion announcements is expected in the future.”

This content was produced with the assistance of AI translation services.