South Korea’s leading steelmaker Posco has set up a new entity in Europe and will launch another one in Korea to recycle LG Energy Solution’s electric vehicle batteries, according to industry officials.

“The new entity has been established in Poland recently and we are in the process of forming another one in Gwangyang, South Jeolla Province, which is currently awaiting approval,” a Posco official said Friday.

The new entity in Poland will collect defective batteries from the nearby LGES’ 70-gigawatt-hour lithium-ion battery manufacturing plant, the official said.

After extracting cathodes -- one of the four key components of lithium-ion batteries -- Posco will grind them up into fine powder and ship the material to Gwangyang, where one of its major domestic steel plants is located.

The new Gwangyang complex will be in charge of extracting key metals such as nickel, cobalt and manganese.

Typically, the process involves dipping the powder into acid or melting it in high heat to extract critical metals. It hasn’t been decided which method Posco will follow.

Cathodes, which contain highly expensive metal cobalt, account for about 25 percent of the total costs of lithium-ion batteries. Due to the recent boom of electric vehicles, the price of cobalt, which stood at $29,500 on Apr. 29 last year, spiked to $47,140 per metric ton as of Thursday.

Posco and LGES have formed a strong partnership in the battery business. Last December, Posco Group’s refractory and secondary battery materials unit Posco Chemical signed a deal to supply cathode materials to US-based Ultium Cells -- a joint venture between LGES and General Motors.

By Kim Byung-wook (kbw@heraldcorp.com)