Link in Value Chain
Canada is actively taking steps to build a Korean battery value chain. The nation is trying to get attention from Korean battery makers by promising federal and state incentives for them. The United States and the European Union (EU) which share a customs union with Canada, announced trade policies to keep China in check, and are pulling out all the stops to attract Korean companies.
Canada is trying to attract Korean companies because all of the customs union members are trying to keep China in check. In order to receive tariff-free benefits in the North American market after the New US-Mexico-Canada (USMCA) Agreement takes effect in 2025, the proportion of production in the United States, Canada, and Mexico must be at least 75 percent. Canada has signed a comprehensive economic and trade agreement (CETA) with the EU. The United States and the EU introduced the Inflation Reduction Act (IRA) and the Core Raw Materials Act (CRMA), respectively, to put an end to their dependence on China and strengthen regional production. Recently, there have even been moves for solidarity among Canada, the United States and the EU, which can enhance the value of Canadian products if solidarity comes true.
As the United States and the EU excluded China from their supply chains, Canada has been pumping up its efforts to cooperate with Korea which divides the global battery ecosystem. Canada continues to discuss attracting new investments with multiple Korean companies. Some analysts predict that several Korean companies will announce plans to make new investments in Canada within this year. In addition to state incentives, the federal government of Canada is also planning to prepare various support measures to attract Korean battery and battery material companies.
Canada ran Canadian Pavilion at InterBattery 2023 held at COEX, in Seoul from March 15 to 17. This means that Canada participated in the event for two consecutive years with the goal of attracting investment from Korean companies. Canadian Pavilion was set up by the federal government of Canada and the Canadian province of Quebec. Canadian Pavilion publicized Canada’s merits –- lower labor costs compared to the United States, enjoying North American tariff benefits and good conditions for raw material procurement and transportation.
Industry insiders agree that Canada is an attractive investment destination for Korean battery makers. In particular, the nation is considered to have strengths in terms of raw materials, investment cost, infrastructure, and eco-friendliness. Ontario can be called the “mecca of the Canadian automobile industry” as it is home to automobile manufacturing plants of major automakers such as Ford, GM, Toyota, and Honda. US automakers’ car factories are also concentrated in the vicinity of the Great Lakes (Rust Belt) which borders Canada, so it is easy to respond to orders from those car factories. Quebec Province has many mines where minerals for batteries are buried. It also has strong hydroelectric power generation infrastructure so its electricity rates are relatively low. It can also help Korean battery makers with reducing carbon footprints because hydroelectric power generation supplies eco-friendly electricity with no carbon emissions. These merits explain why Canada has become home to a battery joint venture between LG Energy Solution and Stellantis, a cathode material joint venture between POSCO Future M and GM and Solus Advanced Materials’ battery foil factory.