[Korea Zinc vs Yeongpung] Yeongpung Lawsuit Shakes Electric Vehicle Material Supply... Hyundai Motor and LG Chem Also Affected

Yeongpung Files Lawsuit to Nullify New Share Issuance Earlier This Month
"Nickel Supply to Hyundai Motor and LG Chem... Concerns Over Investment Disruptions"

Editor's NoteAfter 75 years of partnership, Korea Zinc and Youngpoong are now engaged in a battle for management rights. They are clashing over dividend payments in shareholder meetings and even resorting to legal disputes to regain control of their affiliate, Seorin Trading. Analysts suggest that the conflict stems from differing management philosophies between the two companies' leadership. The issue is that their dispute could harm not only other companies but also innocent investors. This article aims to examine the multifaceted impact of the conflict between Korea Zinc and Youngpoong.

The flames of conflict between Korea Zinc and Youngpoong, who have been partners for 75 years, are showing signs of spreading to the surrounding areas. There are concerns that companies and individual investors who decided to invest based on future growth potential could also suffer damage.

According to the electronic disclosure system on the 29th, Korea Zinc invested 147.8 billion KRW in the first phase of the Ulsan Ulju-gun Onsan All-in-One Nickel Refinery by the end of last year. They plan to invest a total of 506.3 billion KRW by the end of May next year. The refinery broke ground in November last year and has attracted attention for producing high-purity nickel domestically, which is essential for material processing, amid a global atmosphere of tightened mineral export controls.

At the groundbreaking ceremony, Prime Minister Han Duck-soo commented, "With the U.S. Inflation Reduction Act (IRA) regulations and export controls by key mineral-holding countries increasing the importance of mineral refining and material processing, establishing a foundation to produce high-purity nickel using purely domestic technology is highly significant."

To secure this funding, Korea Zinc raised 527.2 billion KRW through a third-party allotment paid-in capital increase to ‘HMG Global,’ an overseas affiliate of Hyundai Motor Group, in September last year. Korea Zinc plans to produce 42,600 tons of nickel annually at the Onsan refinery starting in 2026, and Hyundai Motor Group is one of the major companies set to receive this supply.

Last November, Prime Minister Han Duck-soo (fifth from the left) attended the groundbreaking ceremony of the nickel smelter held at Korea Zinc in Ulju-gun, Ulsan on the afternoon of the 15th, performing a ceremony with guests to mark the start of construction. (From the fourth left) Choi Yoon-beom, Chairman of Korea Zinc; Prime Minister Han; Kim Doo-gyeom, Mayor of Ulsan; Park Seong-min, member of the People Power Party.
[Photo by Yonhap News]

Youngpoong Moves to Block Funding... Concerns Over Supply Chain-Wide Damage

However, earlier this month, Youngpoong filed a complaint with the Seoul Central District Court requesting the invalidation of the new share issuance to HMG Global, putting the plan at risk. Youngpoong claims that the new shares were allocated to a third party to achieve the purpose of defending management or control rights, thereby halting the investment. If the investment is suspended, the plan to supply approximately 65,000 tons of nickel annually from 2026, together with its subsidiary Kemco (annual production of 22,300 tons), to Hyundai Motor and LG Chem will inevitably be delayed. A company official stated, "The lawsuit raises concerns about potential investment setbacks."

Invested companies are worried that the conflict between the Choi and Jang families surrounding Korea Zinc could spread damage across the entire electric vehicle battery material supply chain. Hyundai Motor Group, which acquired a 5% stake in Korea Zinc through a paid-in capital increase to secure stable material supply, is closely monitoring the sudden variable. A Hyundai Motor official said, "The nickel supply is scheduled for 2026, so there is no direct impact yet," but added, "We did not anticipate such a situation when the cooperation was established and are watching the progress closely."

From Hyundai Motor's perspective, Korea Zinc is considered a key supplier of materials. At a recent shareholders' meeting, Hyundai Motor President Jang Jae-hoon stated, "We acquired shares in Korea Zinc because we saw sufficient advantages related to nickel," and added, "We will explore ways to be more helpful through collaboration centered on nickel."

There are even suggestions of potential international disputes. Global raw material trading company Trafigura also invested 184.9 billion KRW in the All-in-One Nickel Refinery. Trafigura supplies raw nickel and holds rights to 20% of the refinery's nickel sulfate production. Delays in the refinery's completion could escalate into a dispute.

On September 6 last year in Jakarta, Indonesia, Choi Yoon-beom, Chairman of Korea Zinc (far right), is seen having a conversation with Bahlil Lahadalia, Minister of Investment of Indonesia (far left).
[Photo by Ministry of Investment of Indonesia]

Korea Zinc Chooses Paid-in Capital Increase to Secure New Business Funding... Youngpoong Absent from Board Meeting

Korea Zinc has been securing investment funds through paid-in capital increases to invest in the ‘Troika Drive’ business. Led by Chairman Choi Yoon-beom, Troika Drive represents Korea Zinc's future new businesses, including renewable and green hydrogen energy, resource circulation through recycling, and secondary battery materials.

In 2022, Korea Zinc raised 471.7 billion KRW through a paid-in capital increase targeting Hanwha's overseas affiliate ‘Hanwha H2 Energy USA.’ These funds were used entirely for the first expansion of the K-JAM copper foil plant, new facility investments for the Onsan refinery’s fumer (a byproduct recovery facility in the refining process), and acquisition of shares in the U.S. electronic waste recycling company Igneo Holdings.

An industry insider said, "When the first paid-in capital increase was pursued in 2022, Youngpoong advisor Jang Hyung-jin did not attend the board meeting at that time, which seemed to express some discomfort."