Under the agreement announced Wednesday, POSCO Argentina will ship lithium extracted from the Salar del Hombre Muerto salt flat in Argentina's Salta province to SK On's electric vehicle battery projects in Europe and North America.
The volume is enough to produce batteries for about 400,000 EVs, and SK On is also exploring the use of the material in energy storage systems.
The deal marks POSCO's largest lithium supply contract since it launched commercial production in Argentina in 2024. POSCO Group Chairman Jang In-hwa recently outlined a vision to elevate battery materials, LNG, energy and recycling as the group's "Next Core" business pillars.
For SK On, the contract bolsters a "de-China" lithium procurement strategy at a time when the raw material accounts for about 40 percent of cathode costs - the single most expensive component in a battery cell.
The partnership arrives after a bruising 2025 for South Korea's battery sector.
The combined value of terminated contracts in the final months of last year exceeded 17 trillion won ($11.9 billion). Ford Motor scrapped a 9.6 trillion won deal with LG Energy Solution in December, while SK On itself dissolved its BlueOval joint venture with Ford, splitting control of three gigafactories.
The combined global EV battery usage of LG Energy Solution, SK On and Samsung SDI slid to about 15.4 percent during of 2025, down 3.3 percentage points year-on-year, according to SNE Research.
A government-backed study released Tuesday by the Korea Institute for Industrial Economics and Trade reinforced the urgency.
The report found that South Korea has fallen behind China across most next-generation industries, including batteries, where Chinese firms have achieved localization rates exceeding 90 percent across raw materials, components and equipment.
"Competition between Korea and China has now shifted from simple catch-up to structural rivalry," said Cho Eun-kyo, head of KIET's China analysis team. "China has built integrated industrial systems that Korea is struggling to match."
The POSCO-SK On lithium deal is part of a broader wave of domestic collaboration.
In August last year, Hyundai Motor, Kia and all three Korean battery makers signed a memorandum of understanding to jointly develop EV battery safety technologies, including shared patents and fire prevention systems - the first time a Korean automaker and its domestic cell suppliers had pooled resources on safety.
Later in December, Samsung SDI struck a deal with automaker KGM to co-develop battery pack systems based on its 46-millimeter cylindrical cells. The partnership is notable because KGM had previously relied almost exclusively on BYD and other Chinese suppliers for its passenger EV batteries.
On the commercial front, LG Energy Solution secured a cumulative $16 billion worth of battery contracts with Mercedes-Benz over 2024 and 2025, spanning more than 150 gigawatt-hours of next-generation cylindrical cells. Industry sources said the orders were clinched after intense competition with China's CATL and Farasis Energy.
The government has also stepped forward, with Seoul moving to back the industry with both money and policy.
In January 2025, the government unveiled a plan to channel at least 21 trillion won into eco-friendly vehicles and batteries, with 7.9 trillion won earmarked for the secondary battery sector - a 31.7 percent increase from the previous year.
In November, it announced an additional 280 billion won over four years for next-generation battery technologies including all-solid-state and lithium-sulfur cells.
How effective Korean battery solidarity can play to challenge China's dominance remains an open question.
Chinese manufacturers control more than 90 percent of the global ESS market and have built end-to-end supply chains that Korean firms are still assembling piece by piece. But the flurry of domestic alliances signals a strategic recalibration that the industry's survival depends on collective, rather than solitary, strength.
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