[Public Voices] The Success of K-Batteries Depends on Uniting National Capabilities

Countries around the world are experiencing an unprecedented supply chain crisis. The instability of the global supply chain is greater than ever due to logistics difficulties caused by COVID-19, China's lockdown measures, and rising raw material and energy prices resulting from the Russia-Ukraine war. In particular, the US-China hegemonic competition has accelerated the polarization and bloc formation of supply chains. Additionally, in line with the era's trend toward carbon neutrality and energy transition, innovation in traditional manufacturing supply chains based on fossil fuels is also necessary.

Amid these paradigm shifts, major countries such as the United States and the European Union (EU) are internalizing supply chains in industries like batteries by offering massive subsidies and tax benefits to protect and nurture domestic industries, secure critical minerals, and gain technological supremacy. Countries worldwide are emphasizing bilateral and multilateral cooperation to secure key minerals such as lithium, nickel, and cobalt, including rare earth elements, while also declaring resource nationalization, leading to conflicts. Consequently, perspectives on supply chains have expanded beyond efficient production and distribution process management by companies to emphasize national security and securing a foundation for sustainable growth.

As the global supply chain, which has expanded with the advancement of globalization, enters a period of full-scale restructuring, Korean companies face the challenge of establishing stable supply chains while securing new markets. Especially, recent supply chain issues are difficult for companies or governments to address alone, making the establishment of close networks between the government and the private sector essential.

On the 20th of last month, President Yoon Suk-yeol stated at the National Strategy Meeting to strengthen the competitiveness of the secondary battery industry, "The government will spare no support to foster the battery industry." Cathode materials account for about 40% of battery costs. The precursor, an intermediate material for cathode materials, accounts for 60-70% of cathode material costs. Notably, among key battery minerals, the import dependence on China for cobalt oxide, manganese sulfate, and lithium hydroxide reaches 70-80%. Spherical graphite for anode materials depends on China for 95%. Therefore, it is necessary to reduce dependence on China and diversify import sources to other resource-rich countries such as Australia, Indonesia, and Chile.

According to the detailed guidelines for electric vehicle batteries under the Inflation Reduction Act (IRA) disclosed by the US Treasury Department, the scope of the "concerned group" to be announced in the future is important. From 2024, parts supplied by the concerned group and from 2025, critical minerals supplied by the concerned group will be excluded from subsidy eligibility. If Chinese companies or Korea-China joint ventures are included in the concerned group, domestic companies may face significant burdens as they will not receive subsidies.

However, to respond to the surging global demand for electric vehicles, cooperation with Chinese companies is inevitable, as they can supply minerals stably at relatively low prices. To resolve this dilemma, it is essential to break away from the critical mineral supply chains dominated by China. Since there are cases of securing critical minerals without relying on China, how to respond is crucial. Korea Zinc is one such example. Korea Zinc has built a value chain capable of supplying most battery materials, including nickel refining, battery recycling, precursor, and copper foil manufacturing.

In a situation where the domestic battery industry depends on Chinese companies for about 85% of nickel and precursor materials, market research firm SNE Research forecasts that the cathode material market size will grow from $17.3 billion (approximately 22.8 trillion KRW) in 2021 to $78.3 billion (approximately 103.3 trillion KRW) by 2030.

To diversify supply chains and develop ultra-gap technologies, bold government support for research and development (R&D) and expanded tax and financial support for supply chain investments are necessary. To nurture the battery industry and others as new engines of the Korean economy, national capabilities must be united.

Chun-Koo Kang, Invited Professor, Department of Energy Resources Engineering, Inha University