South Korea's POSCO buys stake in Aussie lithium producer, signs supply deal

POSCO, South Korea's largest steel producer, has inked a deal to buy up to 240,000 tonnes of lithium concentrate per year from Australia's Pilbara Minerals (ASX:PLS), securing this way a constant supply of the key material used in the making of electric vehicle batteries.

As part of the agreement, the Australian unit of POSCO will pay A$79.6 million (about $62.5 million) for a 4.8% stake in Pilbara, an emerging producer that owns 100% of the Pilgangoora lithium-tantalum project in Western Australia.

By focusing on its lithium business, POSCO is trying to secure new business opportunities and future competitiveness.

The deal, said POSCO, would provide it a basis to extract 30,000 tonnes of lithium hydroxide and lithium carbonate per year at a lithium factory to be built, beginning in 2020 in cooperation with the Australian junior.

It also implies that Pilbara would eventually by 30% stake in POSCO’s planned lithium plant.

By focusing on its lithium business, POSCO is trying to secure new business opportunities and future competitiveness, it noted.

Pilbara plans to produce 300,000 tonnes of lithium concentrate a year beginning in the second half of this year, and to increase production to 800,000 tonnes in stages.

Experts, such as UK-based consultancy CRU, predict that the lithium supply/demand is will tighten in the next few years.

In a recently published report, it projects that lithium supply would grow sharply in the next five years, with new production hitting 25% of total supply by 2022. In absolute terms, lithium output is estimated to reach 500,000 tonnes by 2020, a more than twofold increase from the current rate of 200,000 tonnes.

While that is an impressive growth rate, CRU also expects electric vehicles production to jump — annual production is forecast to reach 500,000 such cars by 2020.

South Korea's POSCO buys stake in Aussie lithium producer, signs supply deal