(Yicai Global) March 27 -- GEM, a Chinese battery manufacturer, will team up with South Korean partners to invest up to USD931 million to construct a plant in South Korea to bypass trade restrictions and supply raw materials to clients in the United States and Europe.

The Chinese firm has penned a memorandum of understanding with South Korean allies SK On and EcoPro Materials to establish a joint venture factory in the port city of Gunsan, the Shenzhen-based company said in a statement recently.

The facility will produce next-generation cathode precursor materials, as well as nickel, cobalt, and manganese compounds. Within 18 months after the JV is formed, the plant will have a capacity of 43,000 tons with an investment of USD459 million. Eventually, the capacity will be raised to at least 100,000 tons.

The investment was expected. Last September, GEM announced that it will build a JV plant for ternary lithium battery materials in South Korea to circumvent the restrictions that the US Inflation Reduction Act will impose on made-in-China lithium battery materials. It said that EcoPro and the city of Pohang in South Korea are some of its potential partners.

The new project aims to comply with the restrictions set by the US Inflation Reduction Act and the related regulations of the European Union regarding battery materials entering the markets while consolidating GEM's market share abroad, including South Korea, per the more recent statement.

GEM will be the largest shareholder of the JV but its stake is less than 49 percent. Battery maker SK On and precursor producer EcoPro will each hold 25.5-percent stakes or higher. GEM is a supplier to EcoPro.

The Chinese partner will oversee the construction, raw material purchasing, and daily operation and management of the plant. It will also contribute intellectual property to the JV.

The new venture failed to boost GEM's stock price [SHE: 002340] as it closed 0.8 percent lower at CNY7.52 (USD1.10).

Editor: Emmi Laine, Xiao Yi