Last week, we ran a post covering a a key raw material supply investment made by Toyota. But number four steel producer, Posco has also made some big headlines by doing the same. According to Simon Moores, Deputy Editor and Mark Watts, in their story, “Industrial Giants Invest in Lithium in this month’s issue of Industrial Minerals magazine, they examine Posco’s rather surprising move in the field of rare earth metals. We re-post here, with permission, several details from their article (link above)
“POSCO has invested $4.8m into PAL, a new company which is aiming to produce 10,000 tpa lithium carbonate from a geothermal brine resources in Mexico and 10,000 tpa from an Andean brine in Region III of Chile where the industry’s top two producers, SQM SA and Chemetall GmbH operate.
POSCO Ëœwon’t be passive’
When POSCO struck its deal with PAL in mid-January many eyebrows were raised, none more so than in the steel industry which could not fathom why such a large producer would be interested in a commodity that is yet to register on the radar of many in the metals business.
“We’re looking for a potential off-take partner, and it’s likely that POSCO won’t be passive, explained Damien Lowry, PAL’s investor relations manager, “Â¦it looks like they’re looking to secure a source of lithium that they would sell to their own market.
The driver behind this deal is the South Korean government, which has been the most active and aware of the risk its lack of domestic lithium production poses. It has quickly realized the need to secure large lithium carbonate tonnages as plans to mass produce hybrid and electric vehicles mature. This message has filtered down to some of its biggest corporations.
We aren’t surprised by Posco’s foray into some of the metals driving the green tech/clean tech revolution. ArcelorMittal has also publicly implemented a strategy to make more strategic investments in key end-user segments as well as technologies to make their own operations more carbon friendly and efficient. Perhaps the most interesting footnote on the Posco story involves some statements made by Warren Buffett. Buffett, who has a 4.5% share of Posco, supposedly said to Posco that he should have purchased more Posco shares last year. Given Buffett’s 10% ownership stake in BYD, a Chinese hybrid-electric battery maker, (which uses lithium in its batteries), one can see why Buffett has an interest in Posco.
In a follow-up post we’ll examine some of Posco’s other strategic investments.