[The Editors' Verdict] Overseas Resource Development Should Not Be Approached with Political Logic

It seems that the taboo topic of overseas resource development corruption under the Moon Jae-in administration will finally disappear. On the 14th, President Moon chaired the Foreign Economic Security Strategy Meeting and decided not to sell overseas mines owned by state-owned resource companies in response to the global supply chain instability. In addition, an emergency action plan for raw material supply chains was prepared in anticipation of the ongoing Ukraine crisis.

The supply chain measures that drew attention at this strategy meeting were undoubtedly securing key items and organizing the management system. Specifically, the government decided to reconsider the sale of important overseas mines owned by state-owned resource companies from the perspective of supply chains. Overseas resource development has been regarded as a corruption issue within the government since the Lee Myung-bak administration. In particular, the Moon administration defined overseas resource development as a failed project of past governments and, following the policy to sell major overseas mines of state-owned resource companies, sold or abandoned a total of four mines including copper and lithium, as well as several projects. Currently, the Korea Mine Reclamation Corporation (formerly Korea Resources Corporation) is also proceeding with the disposal process of shares in 15 mines including nickel, cobalt, copper, and thermal coal.

However, raw material prices continue to soar daily. The raw material in the worst condition currently is copper. The global inventory of copper, known as the "barometer of industry," is just over 400,000 tons, which corresponds to about one week’s global consumption. On the 11th (local time), copper prices at the London Metal Exchange (LME) reached $10,040 per ton, up 67.9% from the beginning of the year.

Prices of energy resources such as thermal coal are also problematic. The price of thermal coal used as raw material in steel and cement manufacturing was $211 per ton on average in 2021 but rose to $407 per ton by the end of January, an increase of 444.50%. Meanwhile, thermal coal used as fuel for thermal power generation rose from $127 to $198 per ton during the same period, a 226.52% increase. If the Ukraine crisis escalates further, crude oil and natural gas prices are expected to skyrocket, and thermal coal prices will rise much more than now.

South Korea procures most of its raw materials from China, which is also actively securing overseas supply chains due to increased demand for raw materials. China is aggressively developing domestic mines as well as overseas resource development.

Securing battery raw materials for the expanding global electric vehicle battery market, a new growth engine, is also a challenge. The raw materials used in cathode materials, one of the core components of batteries, are lithium, nickel, and cobalt. Among these, lithium prices have surged more than 44% this year. Although battery demand is rapidly increasing, supply cannot keep up. Previously, in 2009 during the Lee Myung-bak administration, Korea established a lithium acquisition strategy and succeeded in acquiring shares in lithium projects in Chile, Argentina, and Bolivia through Korea Resources Corporation and private companies such as LG International, Samsung C&T, GS Energy, and POSCO. However, all of these have now been sold off or abandoned, and Korea has withdrawn.

It is regrettable that if Korea had established a national resource development strategy that transcended corruption controversies over the past decade and continuously pursued development regardless of regime changes, Korea would be in a much better position today. The past cannot be undone, but the problem starts now. For South Korea, which has experienced the fastest economic growth in the world, to continue growing, the first priority is stable resource acquisition through overseas resource development, the second is a technological gap, and the third is high value-added product production. Additionally, sufficient training of experts is essential.

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

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