Supply chain crisis raises awareness of 'resources diplomacy'
By Park Jae-hyuk
The incoming government is facing growing calls to help Korean firms secure natural resources from other countries to stabilize the supply of important raw materials at home, according to energy industry analysts.
Amid the global supply bottlenecks of key minerals ― in the wake of the COVID-19 pandemic and Russia's invasion of Ukraine ― energy experts have called on President-elect Yoon Suk-yeol to resume the so-called "resources diplomacy" that has been virtually suspended over the past 10 years.
"Korea's exploration of natural resources overseas should not be swayed by each administration's policies anymore. It should be pursued consistently from a long-term perspective," Korea Industry Alliance Forum (KIAF) Chairman Jung Ma-ki said in an online seminar, March 23. "Considering the risks inherent in the exploitation of resources overseas, the government should play its role in subsidizing companies and training experts to make up for market failures."
Under the presidencies of Kim Dae-jung, Roh Moo-hyun and Lee Myung-bak, Korea was aggressive in securing natural resources abroad.
However, falling raw material prices in the early 2010s, which caused significant losses to state-run enterprises dealing with natural resources, prompted the Park Geun-hye administration to halt such efforts and lawmakers to start investigating corruption allegations involving her immediate predecessor's resources diplomacy.
The incumbent Moon Jae-in administration even described Lee's resources diplomacy as a "deep-rooted evil," forcing the state-run Korea Mine Rehabilitation and Mineral Resources Corp. (KOMIR) to sell its stakes in 26 mines in other countries to improve its financial soundness.
As a result, KOMIR sold off its stakes in 11 overseas mines under Moon's presidency.
What reversed the trend was the recent "weaponization" of natural resources.
Following the global supply chain crisis, China, Russia and several developing countries rich in resources have been adopting protectionist policies lately to maximize their profits and exercise a stronger influence in the international community.
As Korean businesses and consumers began suffering from raw materials shortages and their skyrocketing prices, the government decided to reconsider its plan to sell the remaining stakes in overseas mines, although the Ministry of Trade, Industry and Energy has yet to suspend the sale procedures.
"If public institutions' overseas assets are considered important in terms of supply chain, it must be reviewed whether it is appropriate to sell them from the viewpoint of the national interest," Moon said on Feb. 14, during an economic and security strategy meeting on international issues.
At this moment, it is impossible for the government to retract the sale procedures or make additional investments in mines overseas, because the Act on KOMIR specifies "divestment from mining projects overseas" as one of the state-run company's business purposes.
POSCO Group's demonstration plant near the Salar del Hombre Muerto salt lake in Argentina is seen in this file photo. Courtesy of POSCO Chemical
Private sector's efforts
The private sector has already resumed aggressive investments in natural resources abroad.
POSCO Group Chairman Choi Jeong-woo met with Argentina's President Alberto Fernandez at the latter's office in Buenos Aires, March 21, two days before the Korean company broke ground for a new brine lithium plant near the Salar del Hombre Muerto salt lake located at an altitude of 4,000 meters in the South American country's province of Salta.
"By securing a large amount of lithium used for cathode materials, POSCO Group has been able to strengthen the entire value chain of secondary battery materials," Choi said during the groundbreaking ceremony.
The group plans to make additional investments in Argentina for the new factory to have an annual capacity of 50,000 tons by 2024.
"POSCO Lithium Solution's factory in Gwangyang, South Jeolla Province, will start producing 43,000 tons of lithium in 2023," a POSCO Chemical official said. "In 2024, POSCO Group will be able to supply the entire 91,000 tons of lithium we need for our annual capacity of 225,000 tons of cathode materials."
POSCO International, which formed a consortium with KOMIR and STX in 2006 to buy a 4 percent stake in the Ambatovy nickel mine in Madagascar for 346.9 billion won ($283 million), is also said to be reconsidering its plan to sell the stake, although the company has reiterated that nothing has been confirmed regarding this issue.
LX International, which was rebranded from LG International last year with the launch of LX Group, indicated its intention to accelerate efforts to acquire a nickel mine in Indonesia.
"We will accelerate investment in mining nickel, the core material for secondary batteries," LX International CEO Yoon Chun-sung told shareholders in their general meeting on March 24.
Energy & Mineral Resources Development Association of Korea Managing Director Lee Churl-gyu emphasized that the government should be more practical in supporting the private sector's efforts.
He pointed out that the government has mainly focused on lending money to companies exploiting natural resources overseas, while failing to provide sufficient financial support for technical development, personnel training and information system construction.
"The government should reform the special loan system and reintroduce tax incentives to revitalize the nation's exploitation of resources overseas," Lee said. "It should also expand the projects to train experts in natural resources."
Yoon's policies
The president-elect has yet to express a specific opinion about resources diplomacy, although he promised to focus on stabilizing the supply chain of core materials."
Securing raw materials has been important, and the global supply chain's paradigm has shifted focus to stability from efficiency," his election manifesto reads.
In addition, the presidential transition committee reportedly discussed the supply chain crisis with the trade ministry, during a policy briefing on March 24.
The committee, however, has been urged to take more tangible measures, such as including the exploitation of overseas resources as one of the incoming government's major projects.
Park Jae-hyuk
[email protected]
https://m.koreatimes.co.kr/pages/326320.html?gosh
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