Korean battery material firms pivot to LFP as US rules curb Chinese supply

South Korean battery material makers Posco Future M and L&F are expanding lithium-iron-phosphate production and signing multitrillion-won supply contracts to meet rising US energy-storage demand under new tax-credit restrictions on Chinese inputs.

Rising demand for energy-storage systems in the United States, driven by AI data-center growth, is opening a market for Korean battery material producers as Washington tightens tax-credit rules that penalise reliance on Chinese suppliers. Posco Future M, the battery-materials arm of Posco Group, finalized a 6 trillion-won long-term contract to supply LFP cathode active material to Samsung SDI from 2027 to 2032, and a 1.1 trillion-won deal with SK On for 2027-2029, with an option to extend.

To meet these orders, the firm has repurposed part of its high-nickel line in Pohang for LFP and is constructing a dedicated plant with Chinese precursor maker CNGR, aiming for up to 50,000 tons annual capacity. L&F follows a similar path, having signed a 1.6 trillion-won agreement with Samsung SDI and a 160 billion-won supply pact with SK On, while its LFP-focused subsidiary L&F Plus opened a Daegu plant that will double output to 60,000 tons by mid-next year.

Although Korean LFP costs remain higher than Chinese alternatives, the new U.S. Section 45X thresholds—requiring at least 60 % non-PFE material costs in 2026, rising to 85 % by 2030—make Korean supply chains attractive for manufacturers seeking the credit. Experts warn the advantage may be temporary unless Korean firms lower costs and improve technology.