POSCO, Korea Zinc, Vale to close Korean nickel JV

POSCO Holdings Inc. and Korea Zinc Co. will close Korea Nickel Corp. set up jointly with Brazilian mining giant Vale Ltd. as the two Korean companies are building their own supply chains for the key rechargeable battery material, according to people familiar with the matter on Monday.

The profit-making venture, founded in 1987, processed nickel ore supplied by Vale and sold the refined nickel to POSCO.

Korea Nickel embarked on its liquidation process last year, ending supply contracts with both Vale and POSCO. It shuttered its nickel processing plant as well.

The JV also bought treasury shares held by Vale (25%), POSCO Holdings (14%) and POSTECH (5%) last October.

Korea Nickel will likely be shut down by the end of this year, pending shareholder approval at its general meeting later this month.

It is now under Youngpoong Group, the parent of Korea Zinc, which controls a combined 61% of the unlisted JV. It is valued between $150 million to $300 million, or 10 to 20 times its earnings before interest, tax, depreciation and amortization in 2022.

In 2022, Korea Nickel posted 18.4 billion won ($141 million) in operating profit on sales of 66.7 billion won.

Its other shareholders include Korea Zinc Chairman Choi Yun-Birm and Youngpoong Group’s cultural foundation.

Closing the JV comes as both POSCO and Korea Zinc are going their own way to diversify their suppliers and secure a steady supply of battery minerals.

Korea Zinc, the world’s largest lead and zinc smelter, will procure nickel ore from its shareholder Trafigura, the world’s No. 2 base metal trading company, as well as from its electronic waste recycling unit and LG Chem’s suppliers.

Singapore-based Trafigura holds a 4.35% stake in Korea Zinc.

To strengthen its nickel processing business, the smelting company will tighten its partnership with LG Chem, which is also its JV partner for Korea Energy Materials Co. (KEMCO) and Korea Precursor Co.

KEMCO, founded in 2017, produces and supplies nickel sulfate to Korea Precursor. It is 35% owned by Korea Zinc and 10% by LG Chem.

For Korea Precursor, LG Chem owns 49% and KEMCO holds the remainder.

Last year, Korea Zinc swapped its treasury shares equivalent to a 6.02% stake with a 0.47% stake in LG Chem.

POSCO plans to bump up nickel production to 220,000 tons by 2030, including 60,000 tons from a nickel plant in Indonesia to be constructed jointly with China’s resources trading and mining company Ningbo Liqin.

Sixty-thousand tons of nickel is enough to produce batteries for 1.2 million electric vehicles.

POSCO also plans to build a nickel refining plant in New Caledonia by the second half of this year. Once completed, the facility will have the capacity to refine 20,000 tons of nickel per year.

In Australia, the steelmaker acquired a 30% stake in the nickel mining and refining company Ravensthrope Nickel Operation for $240 million in 2021.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Yeonhee Kim edited this article