Chemistry at Work

Lotte Energy Material’s Investment Stimulates Delaware’s Chemical Cluster

Korea Asia

Lotte Energy Material's $516 million investment in Delaware accentuates the state’s prominence in the US chemical realm, bolstering the US battery supply chain and deepening the economic alliance between the US and South Korea.

South Korean battery materials producer Lotte Energy Materials Corp. is set to invest $516 million in Delaware to establish a copper foil plant, responding to growing demand from North American EV (Electric Vehicle) manufacturers. The company is in talks with the Delaware government to set up a US subsidiary, and is considering other potential locations like Michigan, Kentucky, Tennessee, and Georgia due to their strategic significance to both American and Korean EV makers. The construction of the plant catering to the rising demand for copper foils — essential for producing safe, high-density rechargeable batteries — is expected to begin next year, and the plant’s location will be finalized by the end of the year.

Delaware Reaping Benefit: Expansion of the Chemical Cluster

Lotte’s investment is poised to significantly benefit Delaware, creating numerous job opportunities and enhancing the local employment landscape. Beyond immediate economic stimulation, this substantial capital infusion provides the foundational support necessary for Delaware to expand its already considerable chemical industry cluster. Historically a chemical industry stronghold with giants like DuPont headquartered within its borders, Delaware offers a unique combination of a skilled workforce and strategic location. These factors provide easy access to major markets and create an environment conducive to the growth and success of the chemical sector.

Lotte Energy Material’s investment will be a catalyst, allowing Delaware to solidify and expand its existing chemical industry cluster. By attracting additional businesses and investments in the sector, the state is set to foster an ecosystem characterized by collaboration, innovation, and shared resources, further entrenching its status as a pivotal player in the chemical industry. At the same time, the expansion in the chemical cluster will induce a multiplier effect, benefiting various ancillary businesses and services in the state.

National Implications

From a national standpoint, the significant investment made by Lotte Energy Materials Corp. is not just transformative but also a game-changer. This influx of capital is vital in reinforcing the United States' supply chain for EV batteries, a market segment that is experiencing around 80% growth amidst the ongoing global transition towards electric mobility and sustainable energy solutions.

The investment is paramount for securing a steady and reliable supply of essential materials required for EV batteries production. This move is strategic, ensuring that the United States has consistent access to these crucial components, thereby decreasing the reliance on foreign suppliers. This reduction in dependence on external sources is not only strategic but also a crucial factor in strengthening the nation’s security infrastructure. By having a domestic supply, the United States can mitigate risks associated with international supply chains, including potential disruptions due to geopolitical conflicts or other global crises. This aligns with the Biden Administration’s goal of strengthening US supply chain resilience.

At the same time, the Inflation Reduction Act (IRA) is integral to facilitating this substantial investment from Lotte. The IRA is designed to promote green development and offer various benefits and subsidies to EV and battery companies that choose to invest in the United States. This framework is enticing for foreign enterprises, leading to an increase in international investments, creating their own supply chain.

These incentives provided under the IRA have resulted in a noticeable surge of investments from Korean companies in the United States, marking a trend that is promising for the US economy. Thus, these types of provisions from the IRA make destinations like Delaware particularly attractive for significant international business ventures, stimulating the growth of substantial foreign investment and the US-South Korea economic alliance.

SeungHwan (Shane) Kim is a Young Professional at the East-West Center in Washington. He is a graduate student at the School of Advanced International Studies (SAIS), Johns Hopkins University, where he is focusing on security and statecraft in the Indo-Pacific region.