[The Editors' Verdict] Rising Mineral Prices: A Mountain of Challenges

On August 9, China decided to raise the prices of rare earth elements produced domestically. Rare earth elements are used in various fields such as smartphones, electric vehicles, semiconductors, wind turbines, lasers, and fighter jets. China accounts for about 85% of the global supply of these rare earth elements, and in the first half of this year alone, rare earth exports increased by about 28% year-on-year to approximately 51,000 tons. The problem is that countries like South Korea and the United States, which source more than 80% of their total imports from China, are suffering significant impacts. As demand for strategic minerals increases, mineral prices are also rising accordingly. Global battery companies are facing emergencies in securing raw materials for batteries such as lithium, nickel, cobalt, and graphite.

According to the Korea Resources Corporation, as of August 30, nickel was priced at $19,505 per ton, up $5,715 (42%) compared to the previous year's average. Cobalt prices rose to $52,330, an increase of $20,910 (66.55%) from the previous year's average. Lithium also increased by 58.70 yuan to 96 yuan per kilogram, showing a 157% rise compared to the previous year's average.

Major countries have already begun competing to secure rare metals. The United States is implementing a strategy to strengthen the supply chain of four core items, including rare earth elements, with rare earths being promoted as the highest strategic resource directly managed by the Department of Defense. China, meanwhile, has established and is enforcing extraordinary measures that designate not only rare earths but also key minerals as subject to export restrictions. Our government also announced last month the “Rare Metal Industry Development Plan 2.0,” which aims to expand stockpiles of 19 rare metals that form the industrial ecosystem, albeit belatedly. The plan includes identifying and nurturing 100 core rare metal projects by 2025.

Rare metals significantly influence the quality and characteristics of materials even in small quantities and are essential for advanced and new energy industries. Here, the government should pay attention to one point: the rare metal industry must be connected to the materials, parts, and equipment industry, which is the core of the foundational industry. To respond to Japan’s export restrictions that began in 2019, the government decided to support the domestic materials, parts, and equipment (SoBuJang) industry to greatly reduce dependence on Japan and recently held a “SoBuJang Performance Report Meeting.” The government announced that it invested 924.1 billion won over the past two years, generating 32.7 billion won in sales and 72.6 billion won in investments. However, the actual amount that translated into corporate sales was not disclosed.

The ultimate goal of the SoBuJang industry policy is “localization” through securing raw materials. Producing intermediate goods with domestic materials and parts and selling them in the global market are entirely different matters. Currently, SoBuJang companies most urgently need to secure raw materials. Only this can prevent disruptions in product manufacturing. The manufacturing value chain begins with raw material supply.

The government’s recently announced rare metal industry development plan emphasizes strengthening a triple safety net of “securing?stockpiling?circulation.” It aims to build a strong rare metal ecosystem and domestic and international supply safety nets so that the SoBuJang supply chain can be completed, allowing the industrial sector to feel secure. However, from the companies’ perspective, the import volumes of existing raw materials and intermediate goods have not improved. Furthermore, production of key materials for secondary batteries such as lithium, nickel, cobalt, manganese, and graphite is impossible without procurement from China.

According to the International Energy Agency (IEA), due to the global push for carbon neutrality, demand for key minerals is expected to expand to four times the 2020 level by 2040. Due to their nature, rare metals always carry supply instability risks. It must be recognized that stable procurement is the key to future competitiveness in new industries and the successful transition to a carbon-neutral industrial structure.

Kang Cheon-gu, Invited Professor, Department of Energy Resources Engineering, Inha University

This content was produced with the assistance of AI translation services.