"Restructuring of US and European Battery Supply Chains Presents Opportunities for Our Companies"

Korea International Trade Association International Trade and Commerce Research Institute, Report on "Opportunities and Challenges Arising from Changes in the Secondary Battery Supply Chain"

[Asia Economy Reporter Kim Heung-soon] As the United States and Europe rush to establish domestic (regional) supply chains for secondary batteries, there is a growing argument that Korean companies, which possess the world's second-largest production capacity, should seize this opportunity to actively target the battery market.

According to the "Opportunities and Challenges Arising from Changes in the Secondary Battery Supply Chain" report by the Korea International Trade Association's Institute for International Trade and Commerce on the 7th, major electric vehicle producing countries such as the U.S. and Europe have so far procured batteries for electric vehicles, which have relatively low added value, from overseas in order to efficiently focus on developing high value-added complete electric vehicles. In this process, the global battery industry supply chain has been led primarily by Korea, China, and Japan. These three countries account for 80-90% of the world's production of the four major battery materials: cathode materials, anode materials, electrolytes, and separators.

However, as China, the only country in the world that possesses the entire value chain from raw material mining and processing to material processing, cell, module, and pack production, has solidified its position, the added value gained by the U.S. and Europe from the division of labor in batteries has decreased. This has led to accumulated dissatisfaction with the global value chain (GVC) of the battery industry. Furthermore, as the COVID-19 pandemic exposed problems in the battery GVC that affected both upstream and downstream industries of electric vehicles, major countries such as the U.S. and Europe have begun restructuring supply chains to produce key industrial items like batteries and semiconductors domestically.

The report stated, "The movement by the U.S. and EU to build regional battery supply chains is not a crisis but an opportunity for us." It added, "In the global electric vehicle market, Korean companies held a battery market share of 34.7% in 2020, ranking second after China (37.5%). Korea is at an advantage over competitors because it has established trust and cooperative systems through free trade agreements (FTAs) and battery manufacturing partnerships with countries and automakers involved in supply chain restructuring." Domestic battery companies have also welcomed the supply chain restructuring phase regardless of cell or material and plan to expand their local presence.

The report also presented challenges that the Korean government and companies need to address. First is the establishment of stable raw material supply sources. The increase in battery production leads to higher raw material demand, making price increases inevitable; for example, the price of lithium, an essential raw material for cathode materials, has already more than doubled compared to 2012. Next, it emphasized the need to activate battery-related industries such as robotics and urban air mobility (UAM) to dispel concerns about domestic battery production and exports declining due to companies expanding overseas. It also advised efforts to enter battery markets aligned with the electric vehicle adoption in emerging countries with large market sizes.

Cho Sung-dae, a research fellow at the Korea International Trade Association, said, "The 21st century, where climate change and the post-pandemic era are key issues, will see intense data and battery rushes over tangible and intangible resources," adding, "Considering the characteristics of the battery industry, which must be dominated by economies of scale, it is essential to build friendly relations between countries and strengthen partnerships between automakers and battery companies."

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