Korea’s dependence on China for lithium-ion battery materials, such as lithium hydroxide, cobalt, and graphite, has increased, the Korea International Trade Association (KITA) said on Jan. 24.

According to KITA trade statistics released on Jan. 24, China accounted for 87.9 percent of Korea’s lithium hydroxide and lithium oxide imports in 2022, which amounted to US$3.676 billion. The figure represented an increase of 4.1 percentage points from 83.8 percent in 2021.

Lithium hydroxide is mainly used for nickel cobalt manganese (NCM) batteries, the flagship product of the Korean battery industry. As China accounts for 80 percent of the world’s lithium hydroxide production capacity, Korea’s dependence on lithium hydroxide from China is on the rise. As prices soared, Korea’s lithium hydroxide trade deficit with China increased 5.8 times, from US$557 million in 2021 to US$3.227 billion in 2022.

Cobalt (cobalt oxide and cobalt hydroxide) imported from China also accounted for 72.8 percent (US$179 million) of Korea’s total imports of US$246 million in 2022. The share of cobalt imports from China grew by 8.8 percentage points from 64 percent in 2021. The trade deficit also ascended from US$155 million to US$175 million.

China accounted for 93.9 percent (US$123 million) of Korea’s total graphite imports of US$131 million last year. The percentage increased from 79.5 percent in 2017 to 84 percent in 2018 and 93.9 percent in 2022.

Ahead of the implementation of the U.S. Inflation Reduction Act (IRA), Korea’s high dependence on China is being pointed out as a major issue that Korea has to address. According to the IRA, only electric vehicles that meet requirements for raw materials and parts for batteries are eligible for a tax credit of US$7,500. In particular, half of the tax credit is applied only to batteries that use more than 40 percent of core raw materials mined, processed, and recycled in the United States or in countries that have signed free trade agreements with the United States. Beginning from 2027, the requirement will be strengthened to 80 percent of the core raw materials.

Korean battery manufacturers are seeking to diversify their supply chains. In 2022, LG Energy Solution signed a long-term supply contract for lithium carbonate with a U.S. company. SK On also signed long-term mineral supply contracts with lithium companies in Australia and Chile. Samsung SDI is also receiving nickel from an Australian mineral company. POSCO presented a blueprint to produce 20,000 tons of lithium per year in North America beginning from 2025, while promoting lithium production through salt lakes in Argentina and mines in Australia.

However, the Export-Import Bank of Korea’s overseas economic research institute estimated that the Korean battery industry would need to invest more than US$10 billion annually to maintain its current global market share of 26 percent.

Source : businesskorea.co.kr/ For more details