Understanding South Korea’s Approach to Diversifying Critical Minerals and Lessening Reliance on China
In response to growing geopolitical tensions and concerns over China’s control of critical minerals, South Korea is making significant efforts to reduce its dependence on Chinese imports. Recent developments in the country’s supply chain showcase a strategic shift towards diversification and highlight South Korea’s commitment to establishing a more resilient and diversified network.
One key player in this endeavor is POSCO International, a part of the POSCO Group and a major player in South Korea’s venture into the electric vehicle (EV) battery material sector. The company has secured deals worth billions of dollars to supply neodymium-iron-boron (NdFeB) magnets, essential for EV motors, to leading automotive manufacturers in North America and Europe. These contracts mark a significant shift away from China as the dominant supplier of these crucial magnets.
POSCO International has strategically sourced rare earth materials for NdFeB magnets from countries such as the United States, Australia, and Vietnam, bypassing the Chinese market. This move challenges China’s stronghold over the rare earth industry and emphasizes South Korea’s commitment to diversifying its supply chain. The magnets will be produced by Star Group, South Korea’s sole manufacturer of rare earth permanent magnets.
Rare earth elements are vital for various modern technologies, including semiconductors and electric vehicle batteries. Despite China’s dominance in this industry, South Korea’s recent agreements suggest a potential shift in global supply chain dynamics.
POSCO has also made significant strides in securing its lithium supply chain, a crucial component for the booming EV battery industry. The company established a lithium hydroxide production facility in South Jeolla Province with an annual output capacity of 21,500 tons. This achievement represents a significant milestone in achieving self-sufficiency in lithium hydroxide production, which previously relied entirely on imports.
Strategic procurement of raw lithium from Australia, facilitated by a free trade agreement with the United States, has allowed POSCO to benefit from EV subsidies. The company is also planning to develop a lithium carbonate production facility in Argentina, further diversifying its supply base and strengthening its position in the global market.
LG Energy Solution, South Korea’s leading battery manufacturer, has also taken steps to secure its lithium supplies by entering into a supply agreement with an Australian mining company. This deal underscores the urgency with which South Korean companies are seeking stable and diversified sources for critical materials.
Trade data reveals a significant increase in South Korea’s lithium hydroxide imports, with a decrease in imports from China and an increase from Chile as the second-largest source. This reflects a deliberate strategy to mitigate supply chain vulnerabilities and reduce reliance on Chinese suppliers.
While South Korea has made progress in diversifying its critical mineral sources, there is still a heavy reliance on China for graphite, a key component in electric vehicle battery anodes. This dependency is concerning given recent global trade and resource management shifts.
To address this challenge, POsCO FutureM, a subsidiary of the Pohang Iron and Steel Group, has finalized an agreement with an Australian mining firm to import natural graphite from Mozambique. This agreement marks a crucial move towards mitigating the risks associated with single-source dependency, especially considering the previous total reliance on Chinese graphite.
The South Korean government has also taken comprehensive measures to address supply chain vulnerabilities. The “Critical Mineral Security Strategy” aims to reduce the country’s dependence on China for 33 critical minerals by 2030. This strategy emphasizes securing stable supplies of strategic core minerals, including lithium, nickel, cobalt, manganese, graphite, and rare earths.
A forward-looking analysis by the Korea Energy Economics Institute highlights the projected surge in demand for core minerals within South Korea. This surge is driven by the expected expansion of the EV market and wind energy sector. The report emphasizes the need for South Korea to diversify import sources and enhance resource recycling efforts to mitigate supply risks.
By recycling resources from spent EV batteries, South Korea can reduce its reliance on imported raw materials and align with international regulatory frameworks. This dual approach of diversification and resource recycling will not only reduce supply chain vulnerabilities but also support South Korea’s technological advancements and energy transition goals.
South Korea’s approach to diversifying critical minerals and lessening its reliance on China showcases the country’s commitment to establishing a resilient and diversified supply chain. These efforts will not only secure the necessary resources for its technological advancements but also position South Korea as a key player in the global market.
