South Korea Faces Supply Chain Challenges... "Need to Establish a Control Tower and Venture into Overseas Resource Development" (Comprehensive)

Interview with Josanghyun, Director of the Global Supply Chain Analysis Center

[Asia Economy Reporter Sunmi Park] "The term 'resource-poor country' is even too generous. South Korea should be considered as having no resources. It relies on overseas imports for almost all raw materials needed to produce its main export items, exposing it to a higher supply chain risk than any other exporting country."

On the 15th, Cho Sang-hyun, head of the Global Supply Chain Analysis Center, the only domestic specialized supply chain analysis institution, stated this in an interview with Asia Economy Newspaper, diagnosing that "South Korea's awareness and response to the supply chain risks it faces have been delayed compared to the degree of risk."

In fact, the Ministry of Trade, Industry and Energy only began pushing for the establishment of a dedicated supply chain analysis center after experiencing Japan's export restrictions in 2019, the COVID-19 pandemic in 2020, and last year's shortage of urea solution. The result was the launch of the Global Supply Chain Analysis Center on the 9th of last month. The Ministry, in cooperation with related organizations such as the Korea International Trade Association and KOTRA, formed the country's first specialized supply chain analysis institution composed of trade experts.

Director Cho said, "The Supply Chain Analysis Center is still in its early stages, and for more efficient operation, a higher-level national control tower is necessary," adding, "Once the new government transition committee is formed, we plan to make related recommendations together with related organizations and companies."

Immediately after the center's launch, Russia's invasion of Ukraine occurred, and he has been focusing on inspecting related supply chains. He emphasized, "To carry out the center's core tasks of supply chain analysis by country, industry, and item, as well as supporting the operation of an early warning system, it is important to establish practical networks with government ministries, industry associations, and private companies." He added, "Especially since much of the supply chain information requires security, close coordination and consultation between institutions are also necessary."

Director Cho believes that strengthening supply chain resilience requires a nationwide response involving not only the economy but also government ministries in diplomacy, security, science and technology, as well as experts and companies from various sectors.

The Global Supply Chain Analysis Center Plays a Role Similar to the Meteorological Administration

He compared the center's role to that of the Meteorological Administration.

Collecting and conducting in-depth analysis of industrial supply chain information, quickly disseminating alerts when abnormal signs are detected, and recommending response measures are roles that closely align.

Director Cho evaluated, "However, supply chain analysis is complex and difficult because it must reflect not only simple supply and demand flows but also changes in national industrial policies, recent events such as the Russia-Ukraine conflict, and regional unexpected variables like lockdown measures in Shenzhen due to COVID-19."

He also suggested that for South Korea, which depends on imports for almost all raw materials needed to produce its main export items, securing key raw materials such as rare metals is essential for medium- to long-term supply chain stabilization, and the next government should take a more proactive approach to overseas resource development.

This is because the possibility of supply instability has increased as major resource countries have strengthened resource weaponization moves, such as China's control over rare earth production and nationalization of production companies, and Bolivia and Chile's nationalization of natural resources like lithium and copper. In particular, domestic overseas resource development has sharply declined since 2014 due to deteriorating profitability of resource projects, restructuring of resource public enterprises, and suspension of new investments, necessitating a response.

He emphasized, "To stabilize the supply chain, it is necessary to secure resource supply sources through overseas resource development and also establish a system to recycle waste resources."

Increased Requests for Supply Chain Analysis Focused on Raw Materials with Rapid Price Surges

Meanwhile, regarding the key industrial items that are considered most at risk in terms of supply chain related to our companies, he expressed concern that "there is a possibility of supply chain disruption becoming full-scale, centered on items such as energy, non-ferrous metals, and grains, where Russia has a high production share in the global market." Russia is the world's second-largest producer of oil and natural gas, accounting for 11.6% and 16.6% of global production respectively, so if energy sanctions against Russia are implemented, disruptions in global energy supply and demand are expected.

He said, "Russia also accounts for a significant share of global raw material production, including nickel (6.1%), aluminum (5.6%), titanium (12.9%), and palladium (41.2%), raising concerns about disruptions in raw material supply for related industries." He added, "Aluminum and nickel are essential materials for electric vehicles and secondary batteries, and palladium is used as a catalyst for automobile exhaust gas purification, with demand rapidly increasing due to the growth of carbon neutrality and eco-friendly industries."

He continued, "Recently, requests for supply chain analysis have been increasing, focusing on raw materials with rapidly rising prices," adding, "Due to the escalation of the Russia-Ukraine crisis and COVID-19 cluster infections in some parts of China, the possibility of price and supply instability for aluminum has increased, so we are analyzing domestic and international aluminum supply chains and delivering the results to the government. Also, due to sanctions on Russia, it is expected that nickel supply, a key raw material for battery cathodes, will become difficult, so we are conducting supply chain analysis for nickel as well."

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