LG Chem Ltd. has invested 1 billion won ($897,000) to obtain a 10 percent stake in Kemco, a South Korean supplier of nickel sulfate to secure a stable supply of the core raw material for a high-performance lithium-ion battery, the company said on Wednesday.

The latest stake investment will allow LG Chem, one of leading electric vehicle battery manufacturers in Korea, to have priority over its peers in receiving nickel sulfate from Kemco starting next year, an unnamed official at LG Chem said, adding that it would help the company cope well during a time of shortage of the material in the future.

Kemco is a subsidiary of Korea Zinc Co., the world’s largest producer of zinc, lead, silver, and indium. The company aims to start to produce nickel sulfate at a new factory with an annual capacity of 20,000 tons in March next year. It also plans to gradually up the factory capacity to 80,000 tons per year in the following years.

Nickel sulfate is an essential ingredient of a cathode, one of the four major components of a lithium-ion battery along with an anode, an electrolyte, and a separator. The material makes up about 80 percent of a cathode in a high-performance lithium-ion battery that is used in an electric vehicle.

According to a recent study by energy research and consultancy firm Wood Mackenzie, sales of electric vehicles are expected to reach 14.2 million units in 2025, up from 2.4 million last year. In line with the surge in electric car sales, demand for nickel is also expected to soar from 40,000 tons last year to 220,000 tons in 2025, the study showed.

Amid growing expectations for higher demand for electric vehicles and ongoing recovery in the global economy, the price of nickel that hovered around $9,000 per ton level last year has also jumped 35 percent to $12,000. The price of nickel is expected to continue to rise on the increasing demand, which could lead to a supply shortage, market analysts projected.

LG Chem’s latest investment follows its earlier announcement of tripling the capacity at its cathode production facilities by 2020. The company official said LG Chem is proactively responding to rapid changes in the electric vehicle market and aims to expand its sales of electric car batteries from the current 1.7 trillion won to 7 trillion won by 2020 to become a frontrunner in the market.

By Kang Doo-soon and Lee Eun-joo

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