On February 27, the Ministry of Trade, Industry and Energy announced the plan after holding a meeting with representatives of automakers and secondary battery producers, including Hyundai Motor Co., Samsung SDI, LG Energy Solution, and SK on.
"It is imperative to establish stable supply chains for minerals as the country relies heavily on imports for the supply of up to 95 percent of key minerals," Trade, Industry and Energy Minister Lee Chang-yang said.
The reduction plan is aimed at diversifying the country's sources of minerals, especially after U.S. President Joe Biden signed the Inflation Reduction Act (IRA) into law last August that calls for the exclusion of electric vehicle batteries made of Chinese minerals from tax incentives.
The ministry said that it will designate 33 minerals as key strategic items and choose 30 countries that can stably supply such minerals to South Korea. It will provide support for private companies to invest in mining projects in those countries or sign long-term supply contracts with mining firms there.
The government has decided to reintroduce a tax credit for investments in exploring natural resources overseas. (The tax credit was abolished in 2013.) In case of failure in such exploration projects, investment losses will be recognized as expenses that can lead to a reduction in corporate tax.
South Korea is also seeking to step up cooperation with the U.S.-led Mineral Security Partnership and the International Energy Agency to help domestic firms to join overseas mineral exploration projects. The country plans to ensure a stable supply of 10 key minerals, including lithium, nickel, graphite and rare earth, to local EV battery makers, through the projects.
The measures reflect a growing sense of crisis among officials and businesspeople that the country may not survive a global competition to secure major minerals without reducing its reliance on China amid the intensifying superpower rivalry between the Asian giant and the U.S.
According to the ministry, South Korea currently imports 84 percent of lithium hydroxide, 69 percent of cobalt hydroxide, and 72 percent of natural graphite from China. Those materials are indispensable for the production of EV batteries.
Besides, the government will push for restructuring of the state-run Korea Mine Rehabilitation and Mineral Resources Corp. to actively engage in natural resources exploration projects overseas.
The government also plans to increase reserves of core minerals. Under the plan, reserves of rare minerals will be raised from the current 54 days of supply to 100 days. For this, the industry ministry will set up new storage facilities for core minerals in the Saemangeum industrial complex.
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