South Korea is urgently exploring new sources of graphite following China's recent tightening of export controls on this critical mineral, crucial for electric vehicle (EV) batteries. In response to the escalating trade tensions between the U.S. and China, China's new export permit requirements, set to take effect on December 1, have raised concerns.
The South Korean trade ministry convened emergency talks on Monday with key battery manufacturers like LG, Samsung, SK Innovation, and materials firm POSCO to mitigate the potential impact of this development.
China currently dominates global graphite production, producing a substantial 820,000 metric tons in 2021, compared to just 68,000 metric tons from second-ranked Brazil. This shift in export controls raises concerns for South Korea, which has prioritized the EV and battery industries as drivers of economic growth but relies heavily on China for essential raw materials.
To reduce this reliance, South Korea is actively seeking alternatives in countries rich in graphite resources, such as Tanzania and Mozambique. Additionally, Seoul plans to fund domestic graphite production and engage directly with Chinese trade authorities. However, this move has sparked criticism, with some accusing China of "weaponizing" resources for geopolitical purposes.
Past disruptions in imports, such as urea solution from China, have affected various industries, including trucking and construction. Now, with new export restrictions on materials like lithium, nickel, cobalt, and manganese, South Korea's industrial ecosystem faces the possibility of collapse.
Given the limited availability of substitutes, experts view China's actions as a form of "economic coercion." However, a global coalition is considering reciprocal actions, potentially affecting other Chinese exports, such as zinc, in a bid to deter further moves.
South Korea's challenge now lies in swiftly reducing its dependence on China for strategic minerals to withstand potential supply shocks.
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