SK Nexilis, LG Energy revive supply ties as US seeks China decoupling

SK Nexilis Co., the world’s largest copper foil maker, has decided to move past a years-long rift with former key client LG Energy Solution Ltd., caused by disputes over alleged leaks of trade secrets, as the two South Korean companies seek to court US carmakers looking to reduce reliance on China.

According to battery industry officials on Thursday, SK Nexilis agreed to supply 1 trillion-3 trillion won ($726 million-$2.2 billion) worth of copper foil to LG Energy Solution, South Korea’s largest rechargeable battery maker, over the next five to six years.

The agreement marks their first supply deal in about five years after LG Energy and LG Chem Ltd. severed trade ties with battery maker SK On Co., SK Nexilis and SK IE Technology Co. (SKIET), a manufacturer of battery separators, in 2020.

“Their relationship has improved under the current management,” said a battery industry official. “The Trump administration’s supply chain policy of decoupling from China led them to renew their supply deal.”

An SK Nexilis official said it had held supply talks with LG Energy, but declined to disclose details of their agreement.

The recovery in their relationship comes as LG Energy’s major US clients such as General Motors Co. scale back purchases from Chinese parts makers to align with the Trump administration’s supply chain policy aimed at decoupling from China.

LG Energy had initially planned to continue to source copper foils from China-based Jiujiang Defu Technology.

The two companies have maintained a stable supply relationship since 2021, when LG Chem Ltd., the parent of LG Energy, invested 40 billion won in equities in Jiujiang Defu Technology.

As one of its new US battery plants is scheduled to come online later this year, however, LG Energy decided to revive business ties with SK Nexilis, which pledged to offer quality products at competitive prices.

LG Energy's US output is expected to more than double to 342 Gigawatt-hours (GWh) by next year. The material from SK Nexilis will be used not only for EV batteries, but also for energy storage systems.

Copper foil is a thin layer used as the base for anode materials, a key component in secondary batteries and controls the flow of electricity. It accounts for about 10% of the cost of a battery cell.

In terms of volume, their supply deal covers 50,000-100,000 tons of copper foil, enough to produce batteries for 2.5 million-50 million electric vehicles.

On an annual basis, the amount represents about 10-20% of SK Nexilis’ total output of 100,000-110,000 tons annually.

SK Nexilis will produce copper foil for LG Energy at its plants in both Malaysia and South Korea.

SK NEXILIS EXPECTED TO TURN AROUND

The new supply to LG is expected to help SK Nexilis return to profitability, positioning it as LG Energy's top supplier of copper foil.

The unit of SK Group fell into the red in 2023 following the breakdown of its business ties with LG Energy.

The conflict between SK and LG dates back to 2019, when LG Energy filed a complaint against SK On with the International Trade Center over alleged patent infringement related to battery manufacturing technology.

The dispute ended in 2021 as SK On agreed to pay 2 trillion won in compensation to settle with LG Energy.

Write to Sang-Hoon Sung and Woo-Sub Kim at uphoon@hankyung.com

Yeonhee Kim edited this article.