South Korea’s largest steelmaker Posco will set up two joint ventures with China’s leading cobalt supplier Huayou Cobalt Co. dedicated to battery materials production to expand footprint in the world’s largest lithium-ion battery market.

Posco said on Wednesday that it has voted for the plan at a board of directors meeting that involves signing an agreement with Huayou Cobalt to set up two production entities for precursors and cathodes in China. Precursors are converted to cathode materials that are used in lithium-ion batteries.

In a separate filing, the steelmaker also reported 4.62 trillion won ($4.3 billion) in operating profit on a consolidated basis last year, up 62.5 percent from a year ago. Sales increased 14.3 percent to 60.7 trillion won and net profit 183.7 percent to 2.97 trillion won during the same period, the company said.

Shares of Posco finished Wednesday 1.8 percent up at 387,000 won.

China’s Huayou Cobalt is world’s largest cobalt producer capable of supplying 50 percent of demand from lithium-ion battery producers. The company also owns a nickel mine.

Under the agreement, Posco and Huayou Cobalt will establish two new companies - one focusing on precursors and the other cathodes - in Tongxiang City in China’s Zhejiang Province. Huayou Cobalt will own a 60 percent stake in the joint venture for precursors and Posco the remaining 40 percent while Posco will own 60 percent stake for cathodes and Huayou Cobalt 40 percent. The joint ventures will aim to start production of precursors and cathodes with up to 4,600 ton annual capacity from the second half of 2020.

An unnamed official from Posco said that the joint ventures in China will help the company solidify its position in the vast market by being engaged in direct production and sales of cathodes.

By Moon Ji-woong and Lee Eun-joo

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