A natural graphite processing plant is being built in Alabama by U.S.-based mineral resources company Westwater Resources. The U.S. company is building the plant to mass-produce graphite material, a core product for anodes in battery cells, this year. SK On said Monday that it signed a contract with the U.S. graphite company to use the latter's natural graphite at its battery manufacturing factories in the United States from 2027 to 2031. Courtesy of SK On

SK On signed a natural graphite supply contract with U.S.-based mineral resources company Westwater Resources, a move seen as necessary to strengthen its response to the U.S. Inflation Reduction Act (IRA), securing key minerals for electric vehicle (EV) batteries locally in the United States, the company said Monday.

Under the agreement, Westwater Resources will supply natural graphite produced at its graphite refining plant in Alabama to SK On's U.S. battery factories from 2027 to 2031.

SK On said that the contract between the two companies is a conditional offtake agreement to purchase a developing material at a pre-agreed price.

"Depending on the pace of the electrification market in North America, up to 34,000 tons can be purchased during the contract period," SK On said.

In May, 2022, the two companies formed a partnership to jointly develop battery anodes. The contract this year will further expand the partnership between the two, SK On added.

"The two companies plan to apply the anode material made with graphite refined by Westwater Resources to the batteries SK On is developing and jointly improve its performance. By expanding cooperation to the purchase of natural graphite, the main material for anodes, it is expected to further enhance the ability to respond to the IRA," SK On said.

According to the IRA, EVs with batteries whose core materials are sourced from a foreign entity of concern (FEOC) will not be eligible for EV subisidies in the U.S. as of 2025.

Given that graphite, a key material for anodes, is almost entirely dependent on Chinese companies, which are designated as FEOCs, the battery industry is calling for a minimum two-year delay to the application of the FEOC rule to graphite until the end of 2026.

Anodes are one of the four major components of lithium-ion batteries, as they influence the life and charging speed of the battery. Graphite is a key raw material that accounts for about 95 percent of anodes. Anodes are especially known as parts with the highest dependence on China, which accounts for about 85 percent of global anode production.

Westwater is currently building a graphite refining plant near the mine in Alabama, where it has the mining rights, to begin mass production as of this year.

"SK On will actively respond to the IRA by continuously promoting collaboration with local leading raw material companies," Park Jong-jin, vice president of strategic purchasing at SK On, said.

In addition to the contract with Westwater Resources, SK On is strengthening its supply diversification for battery materials.

In 2022, SK On signed a memorandum of understanding with Australia's Syrah Resources for the supply of natural graphite, and in January last year, it signed an anodes joint development agreement with U.S. battery material company Urbix.