Ford’s battery partner plans to expand in Korea after boosted by Biden's green subsidies

After guidelines this week clarified provisions around the US' historic climate bill, Ecopro Group, a battery materials manufacturer that supplies Ford Motor Co. and Samsung SDI Co., aims to increase its manufacturing footprint in South Korea, according to people with knowledge of the situation.

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Currently, Ecopro owns and operates a 5.3 million square foot plant in Korea's southeastern metals hub of Pohang, where it expects to invest around 3.2 trillion won ($2.4 billion) to produce 270,000 tons of cathode-active materials for use in electric-car batteries every year. It has been reported that the company is considering another site of around 7 million square feet. The person asked not to be identified because the information is confidential.

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In a similar way to Ecopro's first footprint, the company's second footprint will have a battery recycling facility and will produce upstream products such as precursors, according to one of the people. There are reports that a budget of about 2 trillion won will be allocated for this project.

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A spokesperson for Ecopro, located at Cheongju-si, Seoul in the south of South Korea, declined to comment on the matter. Ecopro's shares rose as much as 6.5% during the period.

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The company was holding off on expanding its investment plan while it waited on clarity from American officials on aspects of President Biden's Inflation Reduction Act, which he recently signed into law, according to one of the people who spoke with the company. There are a number of important provisions regarding electric vehicles and batteries in the signature green bill. 

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IRA aims at reducing EV makers' reliance on "foreign entities of concern" in global supply chains, including China, through its goal of reducing the dependency on these entities. The proposal splits a previously mooted tax credit in half, with $3,750 being offered to vehicles that make up at least half of their battery components from North America, and the remainder of the credits available to vehicles that get at least half of their battery components from North America. In order for the remaining 40% of the raw material value of the battery to be eligible, it must be extracted or processed domestically, or it must come from a country with a free trade agreement with the United States, as South Korea does.

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In accordance with guidance issued last Friday in the US, cathodes, and anodes are now considered to be critical minerals and not components. Thus, companies like Ecopro will be able to continue manufacturing in South Korea and supplying automakers in the US in the future, Hanwha Investment & Securities Co. Analyst Yongwook Lee wrote in an April 4 note. 

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It was the clarity of the situation that made Ecopro comfortable with moving ahead with developing a new plant, according to one of the people with knowledge of the matter.