{"id":2200392,"date":"2023-03-13T19:18:22","date_gmt":"2023-03-13T10:18:22","guid":{"rendered":"https:\/\/koreapro.org\/?p=2200392"},"modified":"2023-04-05T16:07:58","modified_gmt":"2023-04-05T07:07:58","slug":"south-korean-exporters-face-uphill-battle-as-eu-mulls-raw-materials-law","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/03\/south-korean-exporters-face-uphill-battle-as-eu-mulls-raw-materials-law\/","title":{"rendered":"South Korean exporters face uphill battle as EU mulls raw materials law"},"content":{"rendered":"

Beset by China\u2019s dominance of the world\u2019s rare earths market, the Russian invasion of Ukraine and the normalization of <\/span>protectionist trade policies<\/span><\/a> in the U.S., the European Commission is expected to present the details of the <\/span>Critical Raw Materials Act<\/span><\/a> (CRMA) on March 14.\u00a0<\/span><\/p>\n

But this effort to boost European autonomy will likely cause headaches for South Korea as it still learning to adjust to new vehicle and chip restrictions in the U.S. market.<\/span><\/p>\n

Like those restrictions initiated by the Inflation Reduction Act (IRA) and the CHIPS Act, the EU\u2019s CRMA is designed to decrease supply risks by strengthening all stages of the strategic raw materials value chain, including extraction, processing, and recycling.<\/span><\/p>\n

The ROK\u2019s electric vehicle (EV) and battery industries are highly dependent on China in terms of raw materials, and South Korean battery manufacturers secure about 80% of their lithium through China. If CRMA passes, these firms will have to drastically reorganize their supply chains to keep exporting to the EU.<\/span><\/p>\n

South Korea has already been working to diversify its mineral supply chain to the <\/span>U.S.<\/span><\/a>, <\/span>Australia<\/span><\/a>, <\/span>Bolivia<\/span><\/a> and <\/span>Chile<\/span><\/a> since last year. However, that might not be enough to offset the minerals it imports from China.\u00a0<\/span><\/p>\n

\u201cThe lead-in times for construction and operations give the ROK some time, but this looks bad,\u201d said Peter Ward, a senior researcher at Kookmin University in Seoul told <\/span>Korea Pro<\/span><\/i>.<\/span><\/p>\n

Taken together, the IRA, CHIPS Act and CRMA could force South Korean batteries out of major Western markets entirely, even as President Yoon Suk-yeol has <\/span>designated<\/span><\/a> battery production as one of the country\u2019s \u201cnational strategic skills.\u201d<\/span><\/p>\n

SOUTH KOREAN WOES<\/b><\/p>\n

The CRMA will likely call for increasing the procurement of critical raw materials within the EU by at least <\/span>10%<\/span><\/a> and demanding that at least 40% of processing occur in EU countries.\u00a0<\/span><\/p>\n

It will also strengthen carbon neutrality by mandating that a certain amount of material must come from recycling. Further, the law will also likely require an increased amount of processing of materials it deems critical within the bloc.<\/span><\/p>\n

A <\/span>report<\/span><\/a> by the German Institute for Economic Research (DIW) showed that the EU depends on foreign suppliers in 14 out of 27 critical raw materials and is 95% dependent on an additional three critical raw materials,\u00a0<\/span><\/p>\n

The structure of the new European law will be felt most strongly in South Korea by small- and medium-sized firms. Larger corporations such as Hyundai can invest in EU-based production lines and might be spared the brunt of the law\u2019s effects. But few firms can afford such a massive shift in facilities and supply lines.<\/span><\/p>\n

The automobile industry will also likely monitor the situation as the CRMA will strengthen pressure for eco-friendly cars to be manufactured with European materials.<\/span><\/p>\n

\"\"

Assembly line at Hyundai Motor’s factory in Ulsan, South Korea, July 6, 2006 via Wikimedia Commons<\/a><\/em><\/p><\/div>\n

OPPORTUNITIES<\/b><\/p>\n

However, the CRMA will also provide the impetus for the growth of new industries. Due to CRMA and the IRA requiring producers to use less material from China, an increasing number of South Korean companies will likely enter the <\/span>battery recycling business<\/span><\/a> to extract rare metals such as lithium, nickel and cobalt from waste batteries.<\/span><\/p>\n

As an <\/span>increasing number<\/span><\/a> of EVs are scrapped worldwide, battery waste from these vehicles will likely increase. In terms of monetary value, the battery recycling market will increase from $4.6 billion (6 trillion won) in 2025 to $50.7 billion (66 trillion won) in 2040.<\/span><\/p>\n

South Korean companies are well-positioned to enter this market due to their dominance in the battery industry. For instance, SK Innovation, which applied for <\/span>54 patents<\/span><\/a> in battery recycling in 2021, is expected to be one of the sector\u2019s leading companies, as its technology will allow it to extract more high-purity nickel and cobalt.<\/span><\/p>\n

LG Energy Solution is another company that will likely do well. In April 2022, it <\/span>partnered<\/span><\/a> with <\/span>Li-Cycle Holdings Corp.<\/span><\/a>, the leading lithium-ion battery recycler in North America, to receive supplies of manufacturing scrap for recycling for the sale of nickel sulfate.<\/span><\/p>\n

Further, South Korea and Germany <\/span>agreed<\/span><\/a> to look for ways to enhance cooperation in the recycling of EV batteries.<\/span><\/p>\n

Although the draft bill will be made public on March 14th, it will take time for EU parliamentarians to hammer out the details to turn the CRMA into legislation.\u00a0<\/span><\/p>\n

European countries with different capacities will need additional time to adjust to the new law. Seoul will likely use that time to negotiate with the EU to ensure that the CRMA does not violate the EU\u2013South Korea Free Trade Agreement.<\/span><\/p>\n

Edited by Arius Derr<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

Beset by China\u2019s dominance of the world\u2019s rare earths market, the Russian invasion of Ukraine and the normalization of protectionist trade policies in the U.S., the European Commission is expected to present the details of the Critical Raw Materials Act (CRMA) on March 14.\u00a0 But this effort to boost European autonomy will likely cause headaches […]<\/p>\n","protected":false},"author":10407,"featured_media":2200393,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[24,28],"class_list":["post-2200392","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","tag-business-economy","tag-inter-korean-foreign-relations"],"yoast_head":"\nSouth Korean exporters face uphill battle as EU mulls raw materials law - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2023\/03\/south-korean-exporters-face-uphill-battle-as-eu-mulls-raw-materials-law\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korean exporters face uphill battle as EU mulls raw materials law - 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