How South Korea's Market Maneuvers Are Making it a Global Lithium Powerhouse

February 08, 2024 -

In the global race for lithium, a key element powering the electric vehicle (EV) revolution, South Korea is emerging as a formidable player.

This article delves into South Korea's strategic moves in the lithium market, highlighting its increasing involvement in Argentina and Alberta, and the broader implications for the global market and retail investors.

South Korea's Lithium Strategy: Diversifying and Securing Resources

South Korea's leap into the lithium market is marked by strategic diversification and resource security. The country's growing EV market, fueled by an eco-conscious consumer base and technological advancements, has spurred an increased demand for lithium. Recognizing this, South Korea has made significant strides in securing lithium resources, notably in Argentina and Alberta.

Navigating a Changing Automotive Industry Landscape

South Korean automakers Hyundai and Kia both ranked second and third respectively in US EV sales after Tesla, beating legacy auto giants Ford and General Motors. Both Korean companies together made up 7.5% of the US EV market, ahead of GM’s Chevrolet brand, which made up 5.9%—which is quite impressive, considering none of its electric vehicles qualify for the Inflation Reduction Act’s $7,500 tax incentives. Meanwhile, Tesla remains at the top of the US EV market, holding a share of 57.4%, while Ford holds a 5.5%. Soon it’s expected that Hyundai’s US presence will grow, once its $7.6 billion EV factory in Georgia is completed.

The Trajectory of South Korea's Lithium Industry: 2022 - 2026

The outlook for South Korea's lithium industry from 2022 to 2026 presents an intriguing picture, especially when compared to key markets such as China and Japan. South Korea's lithium imports are forecasted to reach 48 million kgs by 2026, marking a 3.7% increase from 39 million kilograms in 2021. This steady growth trajectory, with an annual increase of 14.2% since 1993, reflects the country’s escalating demand in the lithium market. In comparison, China, Japan, and the USA led global lithium imports in 2021, underlining the intense competition and strategic importance of lithium in these major economies.

On the export front, South Korea is expected to see its lithium exports grow to 2.8 million kgs by 2026, a 4.2% rise from 2.2 million kgs. This growth is part of a long-term trend, with a significant annual increase of 37.1% since 1995. In terms of global exports, South Korea ranked sixth in 2021, trailing behind Germany, while countries like Argentina, Belgium, and China occupied the second, third, and fourth positions, respectively. This ranking highlights South Korea's evolving role as a significant player in the global lithium market.

The Quest for Lithium Amidst EV Boom and Geopolitical Tensions

The global pursuit of lithium, a key component in electric vehicle (EV) batteries, is intensifying against the backdrop of growing EV demand and concerns over China's potential control over lithium supplies. Despite a recent dip in lithium prices due to a slowdown in the EV market, long-term projections by Statista suggest a significant rise in demand, from 310,000 tons in 2020 to an estimated 3.8 million tons by 2035. This forecast underlines the strategic importance of lithium in the future of sustainable transportation.

Korean companies are also making notable strides in securing diverse lithium sources, crucial for manufacturing EV batteries. With 95% of Korea's lithium being imported in 2023, and 64% of that being lithium hydroxide from China, Korean firms are seeking to diversify their sources.

Strategic Investment in Pioneering Advanced Lithium Extraction

In a significant move to enhance lithium production efficiencies, a consortium led by South Korean conglomerate POSCO is investing in a lithium technology start-up. This investment reflects a broader industry trend of seeking more efficient methods for extracting lithium, a critical component for the green energy transition.

POSCO has already announced a $4 billion investment in Argentina, aiming to produce 100,000 metric tons of lithium by 2026, potentially making it South America's largest lithium producer. This ambition aligns with the Korean giant’s broader strategy to boost battery material sales to $32.57 billion by 2030. The company operates a small test facility at the Sal de Oro site, capable of producing 2,500 metric tons of lithium annually.

Challenges and Strategies in South Korea’s Rare Metals Stockpiling and Lithium Reserves

The South Korean government has heightened its focus on securing rare metals, crucial for technological and industrial development, by increasing its stockpiling target to 100 days of use. Despite these efforts, a critical gap exists in the stockpiling of lithium, a vital component in the manufacturing of secondary batteries, which are key to future growth sectors like electric vehicles and renewable energy storage.

Current reserves amount to only six days’ worth of lithium, significantly short of the government's target. This shortfall poses a risk, especially if there's a disruption in the supply chain, such as export controls from lithium-exporting countries. Given lithium's increasing importance, often referred to as ‘white oil’, its demand is projected by the International Energy Agency to surge 40-fold by 2040 compared to 2020 levels.

Looking Ahead

South Korea's strategic efforts in the lithium market are pivotal for its role in the EV industry. As lithium demand escalates, South Korea's market position becomes increasingly significant, presenting lucrative investment avenues. Retail investors can benefit from understanding these market dynamics, particularly in the flourishing EV battery se