Domestic battery makers are diversifying their supply chains to reduce dependence on China as they seek to comply with restrictions on foreign-made batteries from the U.S. Inflation Reduction Act(IRA).

SK On announced on Wednesday that it has signed a memorandum of understanding(MOU) with Australia's Global Lithium Resources to secure a long-term supply of spodumene, from which lithium can be extracted, from mines owned and developed by the Australia-based firm.

SK On will also have an opportunity to secure a stake in a production project pursued by the company.

Earlier, LG Energy Solution signed MOUs with three Canadian companies – Electra Battery Materials, Avalon Advanced Materials and Snow Lake Lithium – to source lithium and cobalt, key elements in electric vehicle(EV) battery production.

LG Energy will source seven-thousand tons of cobalt sulfate from Electra for three years from 2023, over 50-thousand tons of lithium hydroxide from Avalon for five years, and another 200-thousand tons from Snow Lake for ten years from 2025.

The IRA dictates that 40 percent of the key minerals in EV batteries must come from the U.S. or countries with which it has signed a free trade agreement in order for EVs to qualify for the U.S. tax credit in 2023, with the percentage increasing to 80 by 2027.