[Column] Key minerals acquisition holds the key

Kang Cheon-gu

The author is a visiting professor of energy resources engineering at Inha University.

China is mulling the idea of banning or restricting the export of its predominant capability of refining rare earths on security concerns. If Beijing chooses to weaponize its monopoly on 90 percent of rare earths processing and refining technology, it will deal a critical blow to the global supply chains heavily relying on the critical materials needed to produce everyday items like smartphones, chips and electric vehicles.

Russia is also considering banning exports of minerals like nickel and palladium to the United States in a tit-for-tat move against heavy U.S. taxes on Russian aluminum. Russian supplies make up 11 percent and 35 percent of U.S. imports of nickel and palladium, respectively.
The Russian action could have enormous repercussions. Nickel is vital for secondary batteries, the aerospace industry and EVs. Palladium is a key component of emission control devices in cars. The move is in response to Washington’s plan to raise tariffs on Russian aluminum imports to 200 percent as a part of its sanctions against Russia.

Mexico has recently nationalized its lithium industry through a law enabling the state’s exclusive right over the world’s 10th largest reserve and production of the core battery metal. Chile, Argentina and Bolivia — dubbed the lithium triangle for their concentration of 60 to 70 percent of global lithium reserves — may follow suit. Lithium is the core fuel for EV batteries.

A resource war is panning out across the world. Indonesia, a major metal ore exporter, stopped nickel ore exports in 2020 and will do the same on the shipments of bauxite and copper ores and other metal ores within this year. Indonesia is lobbying for the creation of an OPEC-like group for top nickel miners amid an escalating demand for key battery metals.

South Korea relies on foreign countries for 95 percent of its imports of minerals and metals, the highest among the OECD countries. Its dependence on key Chinese minerals was 99.4 percent for nickel, 93.1 percent for graphite, 73.7 percent for cobalt, and 63.2 percent for lithium from January to October last year. Korea has neglected overseas resource development over the last decade. Mineral resource development rate that was at 24.9 percent until 2014 plunged to 0.2 percent in 2021.

Korea’s overseas resource development was initiated under the Kim Dae-jung administration and peaked during the Lee Myung-bak administration. The ecosystem collapsed under the following Park Geun-hye and Moon Jae-in administrations. Any left resources overseas were wiped out under the Moon Jae-in administration that found overseas resource development as the “evil ills of the past,” forcing public entities to sell off overseas mines at fire-sale prices. While Korea was eliminated from the game, the competition over global resources heated up. Resource-rich nations reinforced their “resource nationalism” amid global supply chain disruptions from the intensified U.S.-China power struggle and the Russian war with Ukraine.

Korea’s key battery and battery components producers like Posco and LG Energy Solutions have been strengthening efforts to widen their command of essential minerals. But there are too many risks for private companies. To secure a stable supply of core minerals, public and private companies must move as one team. Japan, which also is deficient in natural resources, has combined public entities on oil, gas and minerals to launch the Japan Organization for Metals and Energy Security. It has made big strides in overseas development.

In order not to repeat the shame of begging for resources, Seoul must devise a long-term strategy to secure strategically important minerals. The Yoon Suk Yeol administration on March 27 announced a plan to sustain supplies of 10 core minerals, including lithium, nickel, cobalt, manganese, graphite and rare earths. The outline sets the objective of lowering Korea’s reliance on certain countries like China and enhancing the recycling of used minerals. According to the International Energy Agency, demand for critical minerals for clean energy sourcing is expected to soar more than tenfold by 2040.

Supply chains are another urgent issue. Resource diplomacy is essential to secure key materials. Seoul must partner with resource-rich nations through diplomatic channels. Korea joined the U.S., Canada and nine other countries on the Minerals Security Partnership in June last year to wean off Chinese minerals and bolster Korea’s critical mineral supply chains.

Korea’s overseas resource development trajectory of less than 50 years had more failures than success stories to tell. Resource development carries that much of high risks. But nothing can be achieved when failures are dreaded. Overseas resource development requires a long-term plan as it takes many years from exploration to development to production. The mission must be approached with farsighted perspectives. The future industry and the country’s future depend on the capability to secure key minerals.

Translation by the Korea JoongAng Ilbo.