South Korea to cut import dependence in key metals plan

South Korea has announced its strategy to stabilise domestic supply of key metals by reducing import dependence to 50pc and raising recycling rates of key metals to 20pc by 2030.

The country hopes to cut its import dependence on key metals — such as lithium, cobalt, and graphite — from the current 80pc, while boosting the current recycling rate of 2pc, according to South Korea's trade and industry ministry (Motie).

Motie defines key metals as those that have a high possibility of undergoing a price or supply crisis, which will have a "high ripple effect" on domestic industries and the economy.

Demand for key metals has soared in high-tech industries such as semiconductors and secondary batteries, with Motie citing the IEA as forecasting lithium demand in 2040 to rise by 42 times that of 2020 volumes, with cobalt increasing by 21 times, nickel by 19 times, and rare earths by sevenfold.

"Competition to secure key mineral supply chains in global industries and energy markets is getting fiercer as inventories and production of key minerals are concentrated in certain countries and it is difficult to secure alternatives," Motie minister Lee Chang-yang said. "Securing the stability of core minerals is essential to secure sustainable industrial competitiveness for Korea, which relies on imports to fulfil 95pc of its mineral demand."

China accounted for 60pc of global rare earth production and 84pc of worldwide tungsten output in 2021, according to Motie, with the Democratic Republic of Congo contributing 71pc of global cobalt output in the same year.

South Korea was the largest buyer of Chinese lithium-nickel-cobalt-manganese oxide in 2022 at about 67,946t, accounting for 65pc of China's total exports, customs data show. South Korea was also China's largest buyer of lithium hydroxide at 58,829t in 2022, accounting for 63pc of its exports. It was also one of China's largest buyers of rare earth permanent magnetic materials in 2022 with 6,254t or 11pc of total exports.

South Korea's key metals supply is reliant on imports from specific countries, so these measures will stabilise the supply chain by alleviating the country's dependence on these imports and make full use of domestic metal resources, Motie said.

Preparing for demand, supply shocks

First, South Korea has selected 33 key metals that need to be managed in terms of economic security. Of these, the top 10 key strategic metals that are needed to stabilise high-tech industrial supply chains will be intensively managed. These 10 metals are lithium, nickel, cobalt, manganese, graphite, as well as five rare earths — cerium, lanthanum, neodymium, dysprosium and terbium.

Second, the country will develop a global mine map, as well as a supply and demand map of these key metals. The map will include information on mining rights, reserves, and infrastructure by stage.

South Korea will also establish an early warning system to detect risks in the key metals supply chain in advance, allowing domestic companies to prepare for global supply and demand shocks ahead of time and strengthening the country's ability to respond to these crises.

The government will also raise stockpiles of key metals from the current 54 days of consumption to 100 days, and introduce a rapid release system that can provide supplies to companies that require these key metals within eight days. It also plans to conduct a preliminary feasibility study to establish a dedicated mineral base.

Diversifying resources

Third, the government will strengthen bilateral co-operation with countries rich in key metals by signing initial agreements for these metals, and securing opportunities for domestic companies to enter overseas projects by actively utilising multilateral co-operation such as the Minerals Security Partnership.

Fourth, public institutions will pre-emptively pursue high-risk exploration to promote overseas resource development led by private companies. Public institutions will first evaluate the business feasibility of global projects and link promising projects to private enterprise investment.

Fifth, the government will support companies' investment in key metals by establishing local subsidiaries for mine development and facilities. South Korea is also looking to reintroduce the overseas resource development investment tax credit system, which grants tax credit benefits when making investments to acquire mining rights.

Sixth, South Korea will establish a circular economy with related ministries to recycle waste materials generated after use in electric vehicles and secondary batteries into key raw metals in the future. It will also set up a demonstration centre, with a preliminary feasibility study conducted over 2024-25, and a cluster to support the commercialisation of small- and medium-sized enterprises that use such resources.

The country will also provide financial support, such as loans, to companies that recycle key minerals, with preferential tax credit rates applied to the development of key mineral recycling technology.

Lastly, the government will establish a legal basis to support the key metals industry. This includes the designation, management and stockpiling of key metals, as well as establishing a recycling cluster. The country will also pursue advancing eco-friendly beneficiation and smelting, as well as the development of alternative materials for key metals.

By Tng Yong Li