(Bloomberg) -- One of the world’s largest electric-car battery makers struck a deal with recycling firm Li-Cycle Holdings Corp. as surging demand for key raw materials pushes consumers to expand their supply chains.

South Korea’s LG Chem Ltd. and its battery unit LG Energy Solution agreed to buy 20,000 metric tons of battery-grade nickel from Li-Cycle over 10 years starting in 2023 as part of a deal that includes a $50 million investment in the Canadian firm, the companies said Tuesday in a statement. LG Energy Solution, the world’s No. 2 EV battery producer, will also sell nickel-bearing lithium-ion battery scrap and other materials to Li-Cycle under the pact.

Electric automakers, mining companies and chemical supplier are racing to control more supplies of the raw materials that are key to transitioning the world to low-carbon energy sources, including through recycling. Consumers also see a chance to help tame soaring commodity prices that threaten to deliver the first rise in battery costs since at least 2010.

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Nickel is a key component for the cathodes of EV batteries. The metal can help pack more energy into cells, and allows producers to reduce use of cobalt, which is more expensive and typically has a less transparent supply chain. The market for battery-grade nickel could slip into a 128,000-ton deficit as early as 2024, according to BloombergNEF.

The so-called “closed-loop” agreement with LG Energy Solution will see the companies supply each other with materials, and those kind of arrangements could eventually help the industry drive down battery costs by 25% to 50%, Li-Cycle’s co-founder and Chief Executive Officer Ajay Kochhar said in an interview.

It’s “a great way to continue to optimize the cost of the battery,” he said. “Eventually doing more and more of this, we’ll be able to diminish the large cost burden of having to go to the supply chain.”

Using recycled raw materials will also help automakers and battery manufacturers handle stricter regulatory requirements and increasing scrutiny from investors, according to Kochhar. It’ll also reduce greenhouse gas emissions from a company’s supply chain.

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LG Chem and LG Energy Solution agreed to buy about 2.2 million shares in Li-Cycle for $11.32 each in the agreement. The Toronto-based company, which went public by merging with a blank-check firm earlier this year, also received backing from an arm of Koch Investments Group in September. LG Energy Solution is itself seeking to raise as much as $10.8 billion in an initial public offering.

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