South Korean steel giant Posco Group said Friday that it held a ground-breaking ceremony for its new plants dedicated to nickel and precursor production, as part of efforts to secure a stable supply chain for secondary battery materials.

For this project, Posco partnered with CNGR, a Chinese company renowned for its global leadership in precursor production.

In January, Posco Holdings and CNGR established Posco CNGR Nickel Solution, their 60:40 joint venture specializing in nickel refining. Additionally, Posco Future M and CNGR formed C&P New Material Technology, specializing in precursor production, with a 20:80 investment ratio, during the same period.

The nickel refining plant will process nickel matte supplied by CNGR to produce nickel with approximately 99.9 percent purity. The plant's annual production capacity is estimated to be 50,000 metric tons, sufficient for around 1.2 million electric vehicles.

Meanwhile, the precursor plant will have an annual production capacity of 110,000 tons, utilizing the high-purity nickel from Posco CNGR Nickel Solution. In addition, Posco Future M will use these precursors to manufacture cathode materials.

With a total investment of 1.5 trillion won ($1.09 billion), these two plants are set to commence production in 2026.

Posco explained that the decision to build these new plants aims to strengthen its business competitiveness by increasing the localization of nickel and precursors, two crucial materials for electric vehicles that are experiencing increasing demand but are currently highly dependent on imports.

The ground-breaking ceremony was held Friday in Pohang, North Gyeongsang Province, and was attended by Pohang Mayor Lee Kang-deok, Kim Jun-hyung, head of secondary battery materials at Posco Holdings, Yoo Byung-ok, CEO of Posco Future M, Wu Xiaoge, vice president of CNGR and around 300 other officials.

“Posco Group and CNGR will leverage their business expertise and technological capabilities to establish a stable supply chain for secondary battery materials and enhance synergies between their businesses,” Kim said during the ceremony.

Posco said it will further invest in securing stable supplies of secondary battery materials, including nickel and lithium, as well as anode and cathode materials, recycling, and other next-generation materials.