EGR short term target $2, page-236

Good news for graphite companies having working relationships with Korea. EGR, BKT and etc.. also for the objector near 34.92750°S 138.60000°E /-34.92750; 138.60000

[Contributed] New government needs to establish a raw material supply chain in preparation for China-Taiwan armed conflict

• Donghwan Kim, Director, Institute for International Strategic Resources
• Approval 2022.03.31 14:14
• 1 comment

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[Energy News] One month after Russia invaded Ukraine, the prices of raw materials for secondary batteries soared every day, and some minerals are recording record highs.

Fortunately, the price of battery minerals imported into Korea is still insignificant. Most of them are imported from China, Australia, and South America. But you can't just be safe.

This is because, among these countries, there is China, which has a relationship as precarious as Russia-Ukraine.

What if there is an armed conflict between China and Taiwan? It is clear that an economic shock different from the past will occur. In particular, it is bound to become a 'disaster' for the domestic secondary battery industry.

More than 80% of the raw materials required for secondary battery production are imported from China. The proportion of imports from China, such as graphite and manganese, reached 88% and 99%, respectively.

Graphite and manganese are one of the key raw materials used to manufacture anode and cathode materials in secondary batteries. In addition to this, dependence on China for other secondary battery raw materials, such as lithium hydroxide 79.1%, cobalt hydroxide 88.5%, and cobalt sulfate 81.5%, also reaches around 80%.

If the supply chain for such important items is not distributed and relied on only one place, the shock wave will be borne in the event of a supply chain crisis. Therefore, if an armed conflict occurs between China and Taiwan, there is a possibility that the import of secondary battery raw materials from China may be difficult or completely blocked, depending on the intervention of the United States and the level of sanctions from the international community. It is said that it could suffer a more severe 'supply and demand' situation than a 'price surge'.

Therefore, the next government, which will start soon, should understand the importance of 'resource security' above all else and build its own raw material supply chain in preparation for the long-term 'shortage of supply' rather than short-term 'profitability' in overseas mining development.

Manganese and graphite are distributed all over the world, including South Africa, South America, and Australia, in addition to China, so public and private companies can invest and develop mines according to the new government's support policy.

Currently, despite the Russia-Ukraine crisis, South Korea does not have a future strategy to enhance its resource security capabilities.

In particular, over the past 10 years, the government's investment and interest in resource development has been low. In fact, the investment in overseas resource development of public corporations such as the Mineral Resources Corporation fell by one-tenth from 8.5 trillion won in 2011 to 850 billion won in 2020.

The budget for resource development loans in the private sector has also decreased from 309.3 billion won in 2010 to 34.9 billion won in 2021. The number of new overseas resource development cases reached 33 in 2012, two in 2020 and one in the first half of 2021, on the verge of extinction.

In order to de-sinicize and build a new supply chain, the new government must start by re-examining overseas assets. Except for the 11 that have already been sold, the remaining 15 overseas assets need to be reviewed from the beginning before deciding to sell, and then the gemstones need to be sorted out.

In particular, the sale of the Ambatovy Nickel and Cobalt Mine in Madagascar, the Cobre Panama Copper Mine in Panama and the Boleo Copper Mine in Mexico should be stopped.

Among them, Cobre Panama in Panama is the world's largest copper mine. It is an important mine that can produce up to 350,000 tons of copper, a key raw material for automobile parts and secondary batteries per year for over 35 years, and is highly valuable as a raw material supply essential to our industry.

Of course, it is necessary to prepare a strong legal mechanism to prevent the repetition of the case of public corporations, which wasted blood tax and became a symbol of corruption through 'don't ask'-style investment in overseas resource development in the past.

It is expected that the new government will faithfully serve as a strong shield to protect Korean businesses and the economy from the various shocks of the rapidly changing international situation.

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