Steel-to-chemical material firm Posco Holdings and lithium-ion battery cell manufacturer LG Energy Solution signed a more comprehensive agreement for electric vehicle battery material supply, the companies announced Monday.

Based on the nonbinding agreement signed on Friday, Posco Holding is to ink a long-term deal to supply cathode materials and anode materials to LG Energy Solution before the end of 2022, according to South Korea's largest battery cell maker by batteries supplied to cars.

The two companies will also collaborate to develop battery recycling technology and next-generation anode material through a working group.

The latest update builds on a partnership between the two companies, which started in 2012 with Posco's supply of cathode materials to LG Energy Solution.

LG Energy Solution said the memorandum of understanding will allow both companies to navigate uncertainties in electric vehicle supply chain, with new trade rules building in the wake of the the Inflation Reduction Act, signed by US President Joe Biden in August, as well as the United States-Mexico-Canada Agreement, which came into force in 2020.

Especially, the Inflation Reduction Act, under which buyers of EVs not using Chinese components or materials can get tax credit, puts battery cell makers on alert as procuring critical materials from China and other "foreign entities of concern" prescribed by the US will disqualify the EVs from the tax break.

"The collaboration will allow (both companies) to keep a competitive edge, addressing consequences from the US signing of IRA," LG Energy Solution Chief Executive Officer and Vice Chairman Kwon Young-soo said in a statement.