Securing critical mineral supply chains

By Song Kyung-jin

Securing supply chains for critical minerals has emerged as one of the most challenging economic security issues. Critical minerals are essential for sustainable industrial competitiveness given industrial structures that need critical materials. Take for example semiconductors and batteries. Semiconductors need critical minerals such as gallium and germanium. For battery manufacturing, lithium, nickel, cobalt, manganese and graphite are crucial. Critical minerals are also essential for carbon neutrality and the clean energy transition.

Sustainable and resilient supply chains are particularly critical for a resource-poor country like
Korea which imports almost 95 percent of critical minerals. Hence, it is greatly exposed to supply shocks and vulnerabilities in the critical minerals market, at the whims and fancies of the supplier countries. Furthermore, resource nationalism is intensifying and so is competition for critical minerals.

Against this background, the Korean government announced, Feb. 27, its strategy for securing critical minerals with two very ambitious objectives. One is to lower import dependence on lithium, cobalt, graphite and other critical minerals from the current 80 percent to 50 percent by 2030. The other is to expand the recycling of critical minerals from the current 2 percent to 20 percent by 2030. The two stated objectives are quite ambitious but they can be regarded as a set of indicative guidelines.

The strategy identified, among others, 33 critical minerals that are in close alignment with economic security. Of them, 10 are categorized as strategic critical minerals, due to their respective economic impact on the Korean economy and supply risks. The Korean government is also committed to mapping global critical minerals and developing an early warning system. This requires international collaboration, both bilateral and multilateral, especially with resource-rich countries and heavy resource-import countries like Japan and Singapore. No one country can possibly ensure the resilience of critical mineral supply chains.

On the bilateral front, Korea needs to establish more diplomatic missions in resource-rich countries to collect first-hand on-site information and build rapport with the mining industry. For instance, Australia has all the critical minerals required for advanced technologies, with a heavy concentration in Western Australia. Global capital has invested in infrastructure and mining operations in Western Australia. Because of its strategic, economic and supply chain salience, 34 countries operate diplomatic missions in its capital city of Perth. A major critical minerals importer that is missing from the list is Korea. Korea needs to establish one as soon as possible.

President Yoon Suk Yeol recently pledged to open more diplomatic missions in Africa. It is a move in the right direction given its lower number of diplomatic missions as compared to friends and partners and the rich natural resources and critical minerals Africa has. Korea and Africa stand to benefit mutually through Korea's input and investment for the value-added mining future in Africa on top of other crucial collaborations.

Meanwhile, an important development was made on the multilateral front. The 14-member Indo-Pacific Economic Framework for Prosperity (IPEF) announced, May 27, a substantial conclusion of the negotiations on an international supply chain agreement. Once it is approved by each member and takes effect, not only will it symbolize the IPEF's initial success but provide much impetus that the IPEF needs to sustain itself beyond the Biden administration and beyond the Executive Order it is bound to in the United States. Also, it will prove the world still needs multilateralism to address global challenges. So the world needs an IPEF success story as soon as possible.

Some members including Korea, the U.S., Australia and Japan can play a role by expediting the domestic procedures for enforcement when supply chain negotiations are finalized and leading by example for other member countries.

For resilient critical mineral supply chains and a clean energy transition, technology innovation is required to optimize the use of critical minerals and develop alternatives to critical minerals and clean energy. Given plenty of time and enormous investments, technology research and development calls for more international collaboration and partnerships.

Creating a joint R&D center would be a good initiative for securing critical mineral supply chains in the Indo-Pacific region. Participating countries can pool resources together with relevant businesses for common goals, which can become a genuine public-private partnership initiative.

I would propose the R&D center be housed in Korea, for three reasons at least. First of all, the country is an outright resource-poor country. For this alone, Korea has all the justifications to set it up in one of its own cities. Second, it has human resources in material science, metallurgy and chemical engineering. Third, it offers a clean and safe environment and an affordable cost of living. The center can also invite non-IPEF countries to join as partners by sending their R&D researchers.

The above-proposed ideas can be made global initiatives of the Yoon Suk Yeol administration, which aspires to become a global pivotal state. It also makes economic and climate sense.

Dr. Song Kyung-jin (kj_song@hotmail.com) led the Institute for Global Economics (IGE), based in Seoul and served as special adviser to the chairman of the Presidential Committee for the Seoul G20 Summit in the Office of the President. Now, she is executive director of the Innovative Economy Forum.