[THE INVESTOR] While rival nations are stepping up the hunt for key minerals, which are increasingly in demand in the ‘fourth industrial revolution,’ South Korea, tied to past mistakes, is seen as going in the opposite direction by scaling down related businesses.
Korea is now restructuring organizations and reducing budgets of public organizations related to overseas resource development. There won’t be any government-led overseas resource development for the time being through either consortium or joint investment with public funds, according to the government.
This is because their combined losses since the former Lee Myung-bak administration -- which poured massive money into overseas resource development -- to date is hovering at 17 trillion won (US$ 15.8 billion) due to poor management and continued business failures.
The key minerals coveted by tech-advanced countries include cobalt, lithium, tungsten, nickel and manganese, which are crucial for next-generation technologies, including electric cars, self-driving cars, energy storage systems, drones, robots and chips.
And industry watchers are worried.
“The government need to acquire at least the minimum level of key minerals required for the fourth industrial revolution,” said Kang Chun-goo, vice chairman of local accounting firm Young Jin Advisory Group and who worked for Korea Resources Corporation for more than 30 years.
“As to securing the minerals, it is difficult for a private company to invest alone in overseas resources development due to the uncertainty of politics, policies, environment issues and currency risk in the countries having resources,” he added.
Korean battery maker Samsung SDI is currently participating in the bidding process with seven nations including China to secure business rights to mine and process lithium in Chile. Chile has, by far, the largest reserves of lithium, which is the key ingredient for electric car batteries together with cobalt.
An industry watcher said the Korean government‘s interest in overseas resource development is in fact “zero,” unlike China, and firms like Samsung SDI will have to fight a lonely battle.
Amid the surge in cobalt prices due to the political unrest of Congo, the world’s top cobalt producer, LG Chem reportedly reviewed investing in Congo‘s firms to secure cobalt but faces an uphill battle.
“The company finds it risky to make investment alone because of the Congo’s political uncertainty. It would be better if the government can join in the form of, for instance, a consortium but the government is not in a position to do so (due to the losses).”
As to the battery, which holds the key in future technologies from cars, devices, appliances to wearables, Korea is currently in the lead but they may face critical challenges if they fail in the resource war, said Calvin Lee, an executive at SNE Research, a local research firm specializing in electric car batteries.
On Feb. 21 last week, news reports revealed that iPhone maker Apple is in talks to buy long-term supplies of cobalt for iPhone batteries directly from miners as cobalt prices have skyrocketed as of late.
“The leadership of the battery will depend on how much minerals a company has in the future. Although battery makers are developing batteries less dependent on rare-earth elements, it will still take a long time,” Lee said.
The Korean government, however, said it currently has no plans related to the direct investment of joint consortium with companies.
“We see it important to secure key minerals. However, we are now in a situation to rethink the way of supporting companies due to the massive losses generated in the past years. We plan to support them through an indirect way through loans and market research,“ said Lee Seung-ryeol, a chief of the Industry Ministry’s resource development strategy division.
“Even if a Korean company succeeds in securing business rights to resource development, it doesn’t mean that it will sell the minerals to local firms at a lower price because it can sell it at a higher price in the international market,” a senior government official said,
Still, securing resources stably is the overriding agenda in many advanced nations.
In the past, investing in mineral reserves in Africa and South America were dominated by the US and Europe. But now, countries like China, Japan and India have joined.
Chinese companies’ cobalt refined products account for 77 percent of the total products in the global market and the figure is expected to rise to 90 percent soon, according to the UK-based research firm CRU Group.
China‘s mining firm CMOC International acquired Congo’s mine for copper and cobalt from the US firm Freeport-McMoran in 2006. China Nonferrous Metal Mining and Congo‘s state-run mining firm are jointly developing a mine for cobalt and copper with a 51:49 joint venture. China’s electric car company Great Wall Motor invested in a 3.5 percent stake of Australia‘s lithium producer Pilbara Minerals to stably secure lithium to be mined this year.
Japanese Prime Minister Shinzo Abe visited Chile in 2014 to meet with the President Michelle Bachelet and they agreed to strengthen partnership in resource development. Now, around half of Japan’s imported copper is from Chile.
Japan’s largest carmaker Toyota acquired an approval for lithium development in the northwest of Argentina and set a joint venture with Australian mining firm Orocobre. Toyota and Orocobre is now able to mine lithium up to 17,000 tons annually at the mine lot in Olaroz, Argentina for the next 25 years.
By Shin Ji-hye/The Korea Herald (firstname.lastname@example.org)