Lithium Source
The rapid growth of the electric vehicle market and a sharp increase in sales of the three Korean battery makers are bringing big profits to Chinese companies that dominate the market for key battery materials such as lithium. Korean battery makers depend on Chinese companies for close to 90 percent of lithium, a core material for batteries.
Korea’s imports of lithium hydroxide, a key material for battery cathodes, reached US$2.16 billion in the first quarter of 2023, up 490.3 percent from the same period last year according to statistics from the Korea International Trade Association (KITA) on May 7.
Korea’s annual imports of lithium hydroxide have been on a sharp rise, standing at US$390 million in 2019, US$440 million in 2020, US$670 million in 2021, and US$3.68 billion in 2022.
The Korean battery industry imports most of the lithium hydroxide used to manufacture cathode materials for high-nickel nickel-cobalt-manganese (NCM) batteries. The percentage of lithium hydroxide imports from China reached 88 percent last year.
In 2022, the Korean battery industry spent US$3.23 billion, or about 4.3 trillion won, to import lithium hydroxide from China. In the first quarter of 2023 alone, lithium hydroxide imports amounted to US$1.82 billion. At this rate, imports are expected to reach about US$7.3 billion, or nearly US$10 trillion, this year.
China has big shares in other key battery materials such as cobalt and graphite, too. For example, natural graphite, a key raw material for anode materials, is produced by Korean company POSCO Future M, but it imports all raw materials for natural graphite from Chinese suppliers. This is one of the factors that expands Korea’s trade deficit with China.
In response, the Korean battery industry is making various efforts to reduce its dependence on China. The U.S. Inflation Reduction Act (IRA), which seeks to build a global supply chain centered on the United States and excluding China, is also fueling this movement.
POSCO is most active in realizing lithium self-sufficiency. In 2018, POSCO acquired Argentina’s salt lake to secure lithium resources. It plans to produce and introduce lithium hydroxide locally in Argentina from 2024 when the first phase of the plant is completed.
In April, LG Energy Solution signed a business agreement with China’s Yahua to produce lithium hydroxide in Morocco, Africa. Morocco has a free trade agreement with the United States and the European Union, enabling the Korean battery maker to meet conditions for IRA subsidies.