Call for Supply Stabilization Measures of Rare Metals Essential for 4th Industrial Revolution

- Heavily Dependent on Imports and International Prices Increased over 1 year: Cobalt 131%, tungsten 58%, lithium 33% -

- KITA’s report, Korea needs to improve its heavy rare metal import dependency on China -

Recently, the prices of major rare metals, which are essential for the Fourth Industrial Revolution, are showing a sharp increase. When it comes to rare metals, Korea is absolutely dependent on imports. Therefore, it is urgent for Korea to prepare measures to secure stable supply.

According to a report titled “Trade Trends of Rare Metals, Vitamins of High-tech Industry, and Implications” issued by the Institute for International Trade (President, Shin Seung-kwan) of the Korea International Trade Association, global demand for rare metals is rising unprecedentedly on the boom of the Fourth Industrial Revolution. Over the last year, international prices of major minerals such as new cobalt (131%), tungsten (58%) and lithium (33%) have increased sharply.

However, Korea is not only dependent on the imports of 99.6 percent of natural ore, but also its self-sufficiency rate is close to zero percent except for some kinds of minerals such as titanium and indium among 35 kinds of rare metals. In addition, rare metals are difficult to hedge the risks against price fluctuations due to the absence of futures markets. The report also points out that there will be high possibilities of supply insecurities as the reserves and productions are concentrated in specific countries.

Moreover, it appears that Korea is excessively depends on the rare metal imports from China. Thus, Korea needs measures to reduce its dependence on China. When looking into rare metal trade by breaking into the raw materials and materials and parts*, trade of raw materials of raw metals in 2016 was 2.97 billion dollars in exports and 6.09 billion dollars in imports. It shows that the imports were over two times more than the exports. When it comes to raw material imports, among the 35 kinds of rare metals, 12 kinds of minerals (27, when including the top three) were the number one dependent on the imports from China, and among the major elements with more than 100 million dollars in imports, the ratios of imports of silicon (45%), tungsten (56%), magnesium (72%) and cobalt (36%) from China were largest.

The imports of materials and parts showed a tendency to be concentrated in China and Japan, where the parts industry is highly competitive. In particular, in terms of rare earth metals, China's influence is overwhelming, the materials and parts imports from China account for 98 percent of the total imports. Manganese (81%) and lithium (67%) also account for the highest percentage of imports from China, while the largest imports of silicon (31%), nickel (34%) and tantalum (35%) are from Japan.

* Raw materials include concentrates, metals, scrap, alloys, and compounds. Materials and parts are products made of the elements as the main ingredient. The classification is based on published by Korea Institute of Geoscience and Mineral Resources.

Meanwhile, in the trade of rare metal materials and parts, Korea exported 4.31 billion and imported 39.6 billion dollars resulting in surplus of 350 million dollars in 2016. This is due to the fact that the exports of secondary batteries have greatly increased in line with the expansion of electric vehicles, and the surplus generated from one element of lithium is larger than the deficit generated from the other elements.

Lithium-ion battery, a typical lithium material and component, saw its cumulative export volume rise of 25 percent year-on-year to 3.2 billion dollars in the first 11 months of 2017 and its trade surplus increased by 27 percent to 2.63 billion dollars. However, the result of competitiveness analysis through trade specialization index*, manganese, nickel, titanium, and rare earths elements recorded a big deficit in materials and parts areas rather than raw materials. Also, it appears that the competitiveness of the materials and parts industry is not strong enough as the trade specialization index of materials and parts is low.

* Major rare metals with low trade specialization index of materials and parts: manganese (-0.95), nickel (-0.79), titanium (-0.75), rare earth metal (-0.73)

* Trade balance (over US $ 100 million) of major minerals for materials and parts: Lithium (+US $ 23.9 billion), silicon (-US $ 1.05 billion), titanium (-US $ 403 million), manganese (US $ 200 million), nickel (-US 140 million dollars), rare earth metal (-110 million dollars)

Kim Kyung-hoon, senior researcher at the Institute for International Trade pointed out “For the stable supply of rare metals used as essential raw materials for the fourth industrial revolution related new industry, it is necessary to work on preparing comprehensive measures such as ▲ to increase investment in overseas mines, ▲ to improve the stockpiling of major rare metals, and ▲ to recycle resources through urban mines.” The researcher also stressed “In order to secure the leadership in the new industry, it is important to exert efforts to strengthen the competitiveness of the materials and parts sectors that link the value chain in the intermediate processing stage.”