SK On said on Tuesday it signed a long-term lithium purchase contract with Posco Group. Under the deal, SK On will receive up to 25,000 tons of lithium from Posco Argentina, Posco Group's lithium production unit in Argentina, from 2026 to 2028.

The amount is enough to produce batteries used in about 400,000 electric vehicles. The lithium will be produced at the Hombre Muerto salt lake in Salta province, Argentina. SK On plans to use it for EV battery projects in Europe and North America and is reviewing use in energy storage systems.

Lithium is an essential material for cathode materials. Cathode materials are one of the four core components of lithium-ion batteries. They account for about 40 percent of total battery costs. Lithium is known to make up about 30 percent of cathode material costs. For this reason, lithium directly affects battery price competitiveness.

SK On said it aims to respond more flexibly to supply and demand volatility in the global raw materials market through the deal. The global lithium processing market is structured with a high share concentrated in a specific country. As a result, supply chain stability is cited as a key factor determining mid- to long-term competitiveness. SK On plans to strengthen raw material procurement competitiveness, including responding to geopolitical risks, through cooperation with Posco Group.

The two sides discussed a joint response strategy for the ESS market, including ways to use Posco Group's Argentina-produced lithium in SK On's ESS products. They also reviewed cooperation on recycling used batteries by using Posco HY Clean Metal, Posco Group's battery recycling subsidiary.

Jong-jin Park (박종진), head of strategic procurement at SK On, said the contract is part of a supply chain diversification strategy to strengthen mid- to long-term stability in raw material supply and procurement competitiveness. He said SK On plans to expand its raw material competitiveness beyond EVs to include ESS.

Jae-young Lee (이재영), head of the energy materials business management division at Posco Holdings, said the contract secured future growth momentum for Posco Group's secondary battery materials business, a core business for the group. He said Posco Group will jointly expand into global markets by strengthening a wide range of business cooperation related to secondary batteries with SK On.