[Why&Next] Supply Chain War 'Daejungguk' Critical... Preparing for China's Resource Weaponization

Japan to Sign MOU with Canada on 21st
Expecting Battery Production Integration
US to Cooperate with Vietnam on Rare Earths
EU to Establish Key Raw Materials Law Within the Year

As the technological hegemony competition between the United States and China intensifies, the curtain has risen on major countries' operations to establish their own supply chains. The goal is to exclude Chinese minerals, which supply most of the world's mineral resources. Following China's export restrictions on minerals and directives to use domestically produced semiconductors and electronic components, countermeasures have been taken to resolve supply chain shocks. Major countries have actively responded by securing mineral production rights in third countries in exchange for providing technology or by enacting legislation related to mineral supply chains to strengthen resource security through legal frameworks.

US and Japan Seek Alternative Supply Chains for Lithium and Rare Earths... Cooperate with Third Countries

On the 15th, Nihon Keizai Shimbun reported that on the 21st, the Japanese government will sign a memorandum of understanding (MOU) with the Canadian government regarding the supply chain of critical minerals. Through this agreement, Japan's public and private companies will build an integrated battery supply chain that processes nickel and lithium deposits in Canada and produces electric vehicle batteries in North America. The Canadian government will also provide subsidies for the project.

Lithium Mine

Japan's state-owned resource exploration agency, the Metal Energy Security Organization, will begin nickel and lithium extraction operations in Canada through this MOU. Canada expects to expand its domestic mineral production as Japanese mineral extraction technology is introduced. Japan anticipates that Japanese companies in Canada will establish battery manufacturing plants in exchange for providing their technology. Currently, companies such as Panasonic and Prime Planet Energy & Solutions (PPES), a battery joint venture between Toyota and Panasonic, have shown interest in this plan.

According to the United States Geological Survey (USGS), Canada's lithium reserves amount to about half of China's reserves (6.8 million tons). However, Canada's lithium production accounts for only 2% of China's output. In terms of reserve size, China ranks sixth globally (6.8 million tons) and holds a 70% share in lithium processing.

The United States is also intensifying efforts to establish its own mineral supply chain for rare earth elements. On the 11th, US President Joe Biden and Vietnamese President V? V?n Th??ng signed an MOU to strengthen rare earth supply cooperation between the two countries. Vietnam has rare earth reserves of 22 million tons but produces only about 400 tons annually due to a lack of mining technology. This cooperation is expected to reduce US dependence on China for rare earths.

Additionally, the US is discussing joint rare earth development with Saudi Arabia. The plan involves Saudi state-owned companies acquiring stakes in mines in African countries such as Congo and Namibia and supplying rare earths produced in these mines to US companies.

U.S. President Joe Biden (second from left) is toasting with Vietnamese President Vo Van Thuong (third from left) at a luncheon held in Hanoi, Vietnam, on the 11th.
[Image source=AFP Yonhap News]

Moreover, a large lithium clay deposit was recently discovered in the US, raising the possibility of securing massive lithium reserves. According to major foreign media on the 12th (local time), a lithium clay deposit estimated at 20 to 40 million tons was found in a volcanic crater on the border between Nevada and Oregon. This surpasses the approximately 23 million tons of lithium reserves in Bolivia's salt flats, previously considered the largest reserve, and is estimated to be worth about 1.48 trillion won. If the US secures such reserves, it is expected to gain a favorable position in the global lithium market.

Europe and the European Union (EU) have also joined the race to secure their own supply chains. The EU aims to reduce dependence on strategic raw materials produced in third countries to less than 65% of total regional consumption by 2030 and plans to establish the Critical Raw Materials Act (CRMA) by December.

Securing Minerals Directly Linked to Technological Competitiveness... Urgent Need to Prepare for China's Resource Weaponization

The goal of these moves is to exclude China from the mineral supply chain. As US-China technological conflicts intensify, the 21st-century technological competition, represented by semiconductors and electric vehicle batteries, has become directly linked to how many critical minerals a country can secure. Especially, countries aligned with the US in the anti-China camp face the urgent need to secure alternative supply chains in preparation for China's potential weaponization of resources.

Lithium battery for electric vehicles. [Image source=AFP Yonhap News]

In fact, China has previously used rare earth export suspensions as a card during disputes over the Senkaku Islands with Japan in 2010. Since August, China has also imposed export controls on gallium and germanium, which are used in semiconductor manufacturing.

Japan, in particular, is in a more urgent situation to secure alternative supply chains as it depends heavily on China for most of its lithium imports, similar to South Korea. According to Japanese Ministry of Finance statistics, as of 2019, China accounted for only 10% of Japan's lithium carbonate imports but 78% of lithium hydroxide imports. Lithium hydroxide is used in high-capacity electric vehicle batteries, while lithium carbonate is used in batteries for IT devices such as smartphones.

The US Inflation Reduction Act (IRA), which aims to exclude China from the mineral supply chain, also causes concerns among Northeast Asian countries. The IRA requires that more than 50% of battery components for electric vehicles sold in the US be produced in North America to qualify for a $3,750 subsidy. Nihon Keizai Shimbun explained, "Canada was chosen as an alternative because it meets the conditions of reducing dependence on China and mitigating the impact of the IRA."

The mineral supply chain securing war is expected to continue, centered not only on Japan but also on major countries such as those in Europe. Bloomberg stated, "China's export controls on germanium and gallium are accelerating the West's decoupling from China," and this will lead to a decline in China's competitiveness in the mineral market.

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