[The Era of Mineral Hegemony] Focus on New Critical Mineral Supply Chains in Canada, Australia, and Southeast Asia

Strengthening Mineral Inorganicization... Accelerating 'De-Chinafication'
Canada Ranks 5th in Nickel Reserves... Adjacent to US Production Plants
Australia 2nd in Lithium and Cobalt Reserves... Advantage of High Quality
Indonesia, East Asia Resource-Rich Country... Export Restrictions as a Variable
Vietnam 2nd in Rare Earth Reserves... Processing Technology is Key

Overview of Narrabri Mine, Australia

#September 22, Toronto, Canada. Among the attendees at the memorandum of understanding (MOU) signing ceremony between battery company LG Energy Solution and three Canadian companies?Electra, Avalon, and Snow Lake?aimed at cooperation in the supply and processing of key battery raw materials such as cobalt sulfate and lithium hydroxide, one figure stood out. It was Lee Chang-yang, Minister of Trade, Industry and Energy, attending as a government representative at a private sector event. This was the result of a joint effort by the government and private companies to secure supply chains for key battery materials following the controversy over the exclusion of Korean electric vehicles from subsidies due to the U.S. Inflation Reduction Act (IRA) that took effect on August 16. After the ceremony, Minister Lee also held talks with the Canadian Minister of Industry to expand bilateral cooperation in future core technologies such as semiconductors, nuclear power, and renewable energy.

As the restructuring of supply chains centered on the U.S. accelerates, brisk steps are being taken toward the ‘de-Chinaization’ of the mineral sector. With the stable supply of key minerals emerging as an essential factor for the development of national core industries, the government and private companies are teaming up to diversify import sources. The core strategy is to diversify supply chains, which are concentrated in China, to resource-rich North America and East Asian countries. This aims to strengthen resource security partnerships with the U.S. while minimizing risks that may arise amid global resource hegemony competition. While the government and domestic battery industry are actively working to secure stable supply chains, the countries recently drawing attention for de-Chinaization are Canada and Australia, both closely allied with the U.S.

According to KOTRA on the 28th, Canada ranks 5th globally in nickel reserves and 3rd in refined cobalt production, making it a major exporter of battery raw materials. It is notable that all 13 provinces produce metals and industrial minerals. As of 2018, before the COVID-19 outbreak, the mining sector’s export volume increased by 7.3% year-on-year to 104.6 billion Canadian dollars, accounting for 19.4% of total exports. Minister Lee’s recent meeting with the Canadian Minister of Industry to discuss bilateral cooperation on key minerals is also seen as a positive signal for supply chain expansion. Canada also offers the advantage of being able to supply raw materials quickly to Korean companies with production plants in North America.

Resource-rich Australia is also rapidly emerging as a key energy security partner. Australia is Korea’s top supplier of mineral resources, accounting for 42% of total general mineral imports last year. Australia ranks 2nd globally in lithium (26%), nickel (22%), and cobalt (20%) reserves, and 6th in rare earth elements (3.5%). Notably, it accounts for 55% (1st place) of global lithium production. Recently, Australia has focused on exporting spodumene, a low-carbon, high-purity lithium mineral. Exports of spodumene are expected to increase to about 3 million tons by 2024, and Australia plans to process it into lithium concentrate and expand sales to East Asia. The Australian government aims to account for about 20% of the world’s lithium hydroxide refining capacity by 2027 by investing corporate cooperation subsidies to develop spodumene processing chemical facilities powered by renewable energy. Korean and Australian mineral and material companies plan to hold a roundtable next month to discuss cooperation measures.

Southeast Asia is also considered a key region for supply chain diversification policies. Indonesia, the world’s largest nickel producer, is a representative example. According to the Korea Institute for International Economic Policy (KIEP), Indonesia’s nickel production last year was 836,000 tons, accounting for 30.8% of global production. Nickel reserves also rank 1st worldwide at 21 million tons. Tin, an industrial raw material, is also one of Indonesia’s representative minerals. Indonesia’s tin reserves are about 800,000 tons, accounting for 16% of the world’s reserves (4.9 million tons). In terms of reserves alone, it ranks 2nd after China (23%).

However, Indonesia’s government plans to impose export tariffs on nickel within the year, which could be a variable due to export restrictions on key minerals. This is to increase the added value of its domestic industry using nickel, a core material for electric vehicle batteries. Accordingly, Hyundai Motor Company is accelerating the establishment of a local production base by building a 10GWh battery factory in Indonesia in partnership with LG Energy Solution.

Vietnam, a rare earth-rich country, is also considered a major resource country in Southeast Asia. Rare earth elements are among the resources China has weaponized and are key materials for advanced industries such as semiconductors. Vietnam’s rare earth reserves are about 22 million tons, ranking 2nd globally after China (44 million tons). This means Vietnam could be a strong alternative if China restricts rare earth imports. However, due to insufficient development and processing technology, Vietnam’s annual rare earth production is about 1,000 tons, ranking 8th worldwide. The government is also focusing efforts on Vietnam. Minister Lee plans to continue discussions on supply chain cooperation with Minister Nguyen at the ‘12th Korea-Vietnam Joint Industrial Committee’ to be held in Vietnam at the end of this year.

The government’s goal through such diversification of mineral supply chains is to minimize risks caused by China’s geopolitical variables or fluctuations in demand and supply. It also plans to reduce China’s share of key minerals, which can exceed 80%, as much as possible. In fact, Korea imported the largest amount of nine mineral raw materials from China last year, including indium (83%), magnesium (85%), tungsten (66%), lithium (58%), rare earths (54%), and cobalt (40%). Dependence on China is even more overwhelming in mineral processing and refining. More than half of lithium (58%), cobalt (64%), and nickel (34%) used in battery cathode materials, as well as graphite (70%) essential for anode materials and rare earths (85%) used in semiconductors and high-efficiency electronic devices, are refined in China.

Gang Cheon-gu, an invited professor at Inha University’s Department of Energy Resources Engineering, said, “The government should consider expanding supply chains to major resource countries based on excellent Korean technology, as countries in Southeast Asia, as well as Canada and Australia, have the advantage of reduced transportation costs due to their geographic proximity.”