[Russia's Invasion of Ukraine] Raw Material Supply Crisis Realized... Soaring Prices and Insufficient Quantity

Crude Oil May Rise to $150
Russia Aluminum, Nickel Production
Monitoring Electric Vehicle and Battery Industry Situation

On the 24th, as concerns over potential disruptions in raw material supply due to the Ukraine crisis emerged, Yeohangoo, Director General for Trade Negotiations at the Ministry of Trade, Industry and Energy, presided over the "Meeting to Strengthen Cooperation in Raw Material Supply Chains" held at Lotte Hotel in Jung-gu, Seoul. Ambassadors to Korea from nine resource-rich countries with high mutual dependence on South Korea, including Indonesia, Canada, Brazil, the United Arab Emirates (UAE), Mexico, Vietnam, Malaysia, Chile, and the Philippines, attended the meeting. Photo by Moon Honam munonam@

[Asia Economy Reporters Oh Hyung-gil, Sung Ki-ho, Moon Chae-seok] The invasion of Ukraine by Russia has brought the raw material supply shortage into reality. With signs of a sharp rise in international oil prices, red flags have been raised for the import of raw materials such as specialty gases necessary for semiconductor production. As the unit price of imported raw materials rises and supply disruptions become inevitable, there are concerns about a comprehensive impact on the domestic industrial sector.

According to the refining industry on the 25th, the price of Russian crude oil imported into Korea has soared 56% in one year. It jumped from an average of $55.70 per barrel in January last year to $86.24, the highest level among importing countries.

Last month, Russian crude oil imported by domestic refining companies amounted to 5.241 million barrels, accounting for 5.5% of the total import volume (94.792 million barrels). It ranks sixth after Saudi Arabia (31.6 million), the United States (15.08 million), Kuwait (11.83 million), Qatar (5.62 million), and the United Arab Emirates (5.32 million). There are also forecasts that the already sharply rising international oil price could reach $150 per barrel due to the Russia-Ukraine situation.

The Korea Energy Economics Institute predicted that if Russia's oil and gas supply to Europe is disrupted, instability in the international energy market and increased oil demand as a substitute for gas could push international oil prices up to $150 per barrel based on Dubai crude. The rise in international oil prices could lead to an increase in prices of major domestic products. According to the Korea International Trade Association, if the import price of petrochemical raw materials rises by 10%, domestic product prices increase by 0.25%.

The electric vehicle battery industry, regarded as a next-generation core industry, is also deeply concerned. Prices of essential raw materials such as aluminum and nickel, which have already risen significantly, may increase further.

According to the Korea Resource Information Service, as of the 23rd, lithium on the London Metal Exchange (LME) surged more than tenfold from 39 yuan per kg to 444.5 yuan. Nickel and aluminum prices also doubled. Cobalt, used as a raw material for ternary batteries, soared from $33,500 to $73,005, and manganese rose from $1,205 to $1,715.

Russia is a major producer of aluminum (second in the world), nickel, and other materials. Due to Eastern European risks, the cost of batteries may rise, potentially increasing the production cost of finished vehicles. The rise in raw material prices leads to higher prices for electric vehicle batteries, which directly results in increased electric vehicle prices.

The majority of companies expect global supply chain instability to continue. According to a recent survey by the Korea Chamber of Commerce and Industry of 300 companies sourcing raw materials and parts from overseas, 88.4% of the companies responded that 'the supply chain instability from last year will continue or worsen this year.'

Although global supply chain instability is intensifying, companies preparing countermeasures remain insufficient. Only 9.4% of companies have established specific measures against supply chain risks. More than half (53.0%) responded that they have 'no countermeasures.'

An automotive industry official said, "Prices of minerals, which are raw materials for batteries, have been rising since last year, and related companies have secured stockpiles through long-term contracts," adding, "However, if the Ukraine situation prolongs and raw material prices themselves rise, it could disadvantage companies when signing additional supply contracts."

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