By Jung Suk-yee
April 28, 2023,
Synopsis
LG Chem is considering acquiring all shares from its Chinese partner, Huayou Cobalt, in their joint venture if the joint venture is included in the list of foreign entities of concern under the U.S. Inflation Reduction Act. LG Chem is proceeding with the joint venture despite the IRA risk due to advantages in securing raw materials from Huayou Cobalt. The company will respond flexibly to the FEOC issue by changing the shareholding structure if the regulations are finalized, but a stable supply contract for raw material supply will be a prerequisite.
LG Chem said that it will consider acquiring all of its Chinese partner’s shares in its joint venture if the joint venture is included in the list of foreign entities of concern (FEOCs) under the U.S. Inflation Reduction Act (IRA). This marked the first time a battery maker with joint ventures with a Chinese company has showed a specific response.
“We are considering acquiring all of the shares from Huayou Cobalt if the FEOC provision means that any Chinese stake should be completely excluded,” LG Chem said in an earnings call on April 27, referring to its joint venture with China’s Huayou Cobalt.
LG Chem laid out a plan to build a precursor plant in Saemangeum National Industrial Complex in Korea in partnership with Huayou Cobalt on April 17. This has raised concerns among some analysts that the joint venture may not be eligible for IRA subsidies depending on the scope of FEOCs that the U.S. will announce in the coming days. The U.S. designated China, Russia, and Iran as FEOCs in an IRA white paper released late last year, but has not yet announced the specific scope of the FEOCs.
“The reason why we are pursuing a joint venture with Huayou Cobalt even at the IRA risk is because Huayou Cobalt give us advantages in securing raw materials,” an LG Chem official said. “We will respond flexibly to the FEOC issue by changing the shareholding structure if the regulations are finalized. However, a stable supply contract for raw material supply will be a prerequisite. The FEOC method of restraining Chinese companies will give us an advantage in terms of lowering the intensity of competition.”
Source: www.businesskorea.co.kr
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