A part of wood that binds tree fibers together, lignin accounts for 20-30% of a tree and used to be burned for energy. After years of research and development, it could be turned into new products by forestry giants letting go of paper.

"Our lignin-based hard carbon...will secure the strategic European supply of anode raw material," head of Stora's biomaterials unit Johanna Hagelberg said in a statement outlining a development agreement between the companies.

Northvolt in February bought an old Swedish paper mill from Stora to turn it into a cathode material factory by late 2024 with an annual production capacity of over 100 gigawatt hours.

German carmaker Volkswagen has been investing hundreds of millions of dollars in Northvolt in order to secure battery supply for its electric vehicles.

In March 2017, Stora's head of innovation Mikael Hannus told Reuters that commercial production of lignin-based products would be 5-10 years away.

(Reporting by Essi Lehto; Editing by Marguerita Choy)