[Special Stock] Union Material Faces 6-Fold Increase in Rare Earth Demand as US Pressures to Exclude Chinese Products

[Asia Economy Reporter Hyungsoo Park] Union Material is showing strong performance. As demand for rare earth elements surges, concerns are growing that the competition to secure rare earths will intensify amid escalating tensions between the United States and China.

At 11:35 a.m. on the 9th, Union Material was trading at 3,735 won, up 19.14% from the previous day.

A state-run media outlet representing the Chinese Communist Party's stance forecasted that the military exercises conducted by the People's Liberation Army of China, which are taking the form of a blockade around Taiwan, will continue until the fundamental issue of "cross-strait (兩岸, China and Taiwan) relations" is resolved.

The Global Times, affiliated with the People's Daily (人民日報), the official newspaper of the Chinese Communist Party, and its English edition, evaluated the extension of the "Taiwan blockade" exercises from the originally scheduled end at noon on the 7th to the 8th as a demonstration of China's unrivaled regional deterrence. They included a forecast from domestic experts that the exercises will not stop until Taiwan's unification becomes a reality.

While China continues to pressure Taiwan, Colin Kahl, U.S. Deputy Secretary of Defense for Policy, stated in a press briefing that the U.S. policy regarding Taiwan remains unchanged and criticized China's response as a "manufactured crisis." Deputy Secretary Kahl said the U.S. military will conduct operations wherever permitted under international law, including the Taiwan Strait, and announced that the U.S. forces will pass through the Taiwan Strait within weeks.

Amid ongoing tensions between the U.S. and China, it is a crucial time to devise measures to secure rare earth elements. According to the "Inflation Reduction Act (IRA)" passed by the U.S. Senate on the 7th, to receive half of the $7,500 electric vehicle subsidy, key materials such as lithium, nickel, and cobalt must be sourced from the U.S. or countries that have free trade agreements (FTA) with the U.S.

According to the report "Clean Energy Transition and the Role of Critical Minerals," prepared by the OECD Korea delegation based on data from the International Energy Agency (IEA), lithium, nickel, cobalt, magnesium, and graphite play important roles in the performance, lifespan, and energy density of secondary batteries. Rare earth elements are essential for permanent magnets used in wind turbines and electric vehicle motors, while large amounts of copper and aluminum are used in power transmission and distribution networks.

To achieve carbon neutrality, the demand for critical minerals is expected to be four times higher by 2040 and six times higher by 2050 compared to 2020. This is because electric vehicles require six times more critical minerals than conventional vehicles, and onshore wind farms require nine times more than natural gas power plants of similar size.

Since last year, prices of major minerals have steadily increased. According to the Korea Resource Information Service, the price of lithium carbonate, which was 48.5 yuan per kilogram at the beginning of last year, surged to 455.5 yuan per kilogram this month, more than nine times higher. Cobalt rose 81.7% from $33,000 per ton to $59,985 per ton this month, and magnesium increased 78.2% from $2,110 per ton to $3,760 per ton.