{australien_flagge}FYI Resources (ASX: FYI; FRA: SDL) posted a noteworthy tweet last Friday in response to a story in the English-language Korean daily newspaper The Korean Herald. LG Chem is acquiring LG Electronics’ separator business for 525 billion won ($458.5 million), the paper reported last Thursday. LG Chem manufactures cathodes, binders for anodes and additives for electrolytes, and plans to expand its leading role in this growth market as well by acquiring the separator business.
According to market research firm SNE Research, the market for separators for electric vehicle batteries is expected to grow from 4.1 trillion won ($3.6 billion) this year to 11 trillion won ($9.6 billion) in 2025.
What does this have to do with FYI Resources? Why is FYI tweeting about LG Chem’s entry into the sepatarore business? As we know, there are four key components that go into any lithium-ion battery: cathodes, anodes, the electrolyte and the separators. Naturally, the electrolyte, i.e. the lithium itself, gets most of the attention. And rightly so, because demand is unprecedented. It is expected to grow by 20 percent per year in this decade. Much is also being read about the chemical composition of the positive pole, i.e. the cathode. Which type of battery needs more or less cobalt, nickel, manganese, etc.? The anode material graphite usually already has much less press (apart from EcoGraf and anode recycling, of course). But the fourth component of batteries, separators, gets the least attention. And even fewer market participants are likely to be aware of the close connection between separators and high purity alumina (HPA).
As demand for separators grows, so does demand for HPA
Separators are basically thin membrane material with tiny perforations that separate cathodes, the positive pole, from anodes, the negative pole. When batteries are charged and discharged, lithium ions move back and forth between cathodes and anodes through these tiny holes. Separators prevent cathodes and anodes from reacting directly with each other and causing short circuits or fires. Previously, LG Chem purchased the separators from outside suppliers and coated them with its patented safety-reinforced separator (SRS) technology, which coats the separators with nanoscale ceramic particles that cannot be penetrated by ions. Thanks to this coating, the separators retain their shape even at extreme heat of 180 degrees Celsius.
The “nanoscale ceramic particles” are nothing more than a euphemism for High Purity Alumina. The Korean chemical giant apparently needs HPA for its patented SRS technology!
Conclusion: It is difficult to imagine LG Chem making such a strategic acquisition without at the same time ensuring that the long-term supply of HPA is also guaranteed. After all, the market for separators is expected to almost triple in the next four years. If that’s not a bargaining chip for FYI Resources? LG Chem’s entry into the separator business proves that growth expectations for HPA demand for separators are real. If anything, such news should strengthen FYI’s negotiating position with Alcoa, even if the 90-day exclusivity period for joint venture negotiations with Alcoa ends tomorrow. The signals for the HPA market are green. FYI and Alcoa are making it exciting.
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