Despite the de-sinicization of domestic battery material companies, it was found that this year’s dependence on Chinese raw materials has increased compared to last year. Precursor, a key material for cathode materials, was all imported from China. Ahead of the implementation of the US Inflation Reduction Act (IRA) next year, it is pointed out that it is necessary to reduce China’s dependence in a hurry by diversifying the supply chain of raw materials.
On the 24th, the Korea Economic Daily investigated the amount of imports of five major minerals for batteries, such as nickel, lithium, cobalt, manganese, and graphite, from January to October this year through the Korea Customs Service item classification system. . During the same period, nickel (88.3% → 99.4%), lithium (55.4% → 63.2%), cobalt (73.7% → 81.5%), and graphite (88.6% → 93.1%) all rose.
The reliance on Chinese-made battery materials also shows no signs of improving. The share of imports from China for precursors used in nickel, cobalt, manganese (NCM) and NCA (nickel, cobalt, aluminum) cathode materials, which are the main products of domestic companies, reached 92.6% and 99.9%, respectively.
100% reliance on China for raw materials for cathode materials… K Battery’s ‘weak link’ ahead of IRA
Imports of lithium hydroxide exploded 6-fold in one year… NCA precursors that domestic companies focus on
The cathode material that supplies lithium to the battery is an energy source that determines capacity and output, and is a key material that accounts for regarding half of the battery cost. Domestic cathode materials makers such as Ecopro BM, Posco Chemical, and L&F are rapidly increasing their market share. The problem is that most of the raw materials used in ‘K cathode materials’ are from China. To make 1t of cathode material, 1t of precursor and 0.5t of lithium are needed. Domestic companies imported $2.5 billion (approximately 3.3 trillion won) worth of lithium hydroxide from China from January to October this year. It has increased more than 6 times compared to the same period last year. The dependence on Chinese imports reached 86.1%. 99.9% of the precursors used for NCA (nickel, cobalt, aluminum) anode materials are made in China.
○ China dominates the supply chain
According to the Korea Customs Service and the Korea International Trade Association on the 24th, the average dependence on Chinese imports of nickel, lithium, cobalt, and graphite imported from January to October this year reached 84.3%. In terms of compounds processed and smelted from minerals, 8 out of 11 products, excluding nickel sulfate, lithium carbonate, and manganese sulfate, were made in China, taking the overwhelming first place. Finland depended the most on nickel sulfate, Chile on lithium carbonate, and Belgium on manganese sulfate.
According to market research firm Benchmark Intelligence, China’s share of the battery mineral mining market this year is 13% for lithium, 1% for cobalt, 18% for nickel, and 8% for manganese. The mineral is mainly distributed in South America and Africa. On the other hand, in the smelting market, China accounts for 44% of lithium, 75% of cobalt, 69% of nickel, and 95% of manganese. “Most of the smelting facilities are concentrated in China because pollutants can be generated during the mineral processing and smelting process and the process is labor-intensive,” said an industry insider. Another reason why smelting facilities are concentrated in China is that China sucked in a large amount of foreign mineral resources at cheap prices like a ‘black hole’.
As a result, the international price of lithium, which is called ‘white oil’, is set in ‘yuan’, the Chinese monetary unit, not in US dollars. Although 60% of the world’s lithium reserves are concentrated in the “lithium triangle,” such as Bolivia, Chile, and salt lakes in Argentina in South America, this is because China dominates the market for lithium compounds such as lithium hydroxide. The price of lithium soared to 557.5 yuan (regarding 107,000 won) per kg on the 23rd, more than three times higher than a year ago (175.5 yuan). This means that China will take all the benefits from the rise in mineral prices.
○Cathode material manufacturers “Fire in the foot”
Domestic cathode material makers are on fire ahead of the implementation of the US Inflation Reduction Act (IRA) next year. Under the IRA, automakers can receive a subsidy ($7,500 per unit) in the form of tax credits starting next year only when batteries with at least 40% of minerals procured from the United States or countries that have signed free trade agreements (FTAs) with the United States are used. This proportion increases by 10 percentage points every year, rising to 70% by 2027.
Domestic ‘Big 3’ cathode material makers are evaluated as having the world’s best competitiveness in the high-nickel cathode material manufacturing sector. The problem is that there is a ‘weak link’ that depends on China for the mineral and material value chain. They are rushing to internalize the mineral smelting and processing process, which depended on Chinese companies, albeit belatedly. The reason why Ecopro BM and Posco Chemical are building a cathode material plant in Quebec, Canada one following another is to diversify the material supply chain through de-sinicization.
There are also voices in the industry that Finland’s secondary battery policy should be benchmarked. Finland’s mineral reserves are extremely small, but it is expanding its share of the lithium hydroxide smelting market following nickel sulfate. Park Hyeon-seong, head of KOTRA’s Helsinki Trade Office in Finland, said, “The Finnish government has put a lot of effort into building a battery chemical value chain from the beginning.”
Reporter Kang Kyung-min [email protected]
