After the Korean government has announced a strategy to secure 33 key minerals used in high-tech industries, including lithium and graphite, by reducing its dependence on China to 50 percent by 2030, Korea’s dependence on China for some key items began to shrink in 2023.
Korea’s lithium hydroxide imports in 2023 were valued at US$6.19 billion, up 69 percent from the previous year, according to the Korea International Trade Association (KITA) on March 13. Of the total, 79.6 percent came from China in 2023, down 8.3 percentage points from 87.9 percent in 2022. Instead, the share of Chile, the second-largest source of lithium hydroxide for Korea, increased from 10.7 percent to 17.5 percent.
Korea’s dependence on China for lithium hydroxide rose from 74.1 percent in 2019 to 87.9 percent in 2022, in line with the growth of the Korean battery industry, before falling for the first time in 2023.
Lithium hydroxide in powdered form is a key raw material for cathode materials for secondary batteries. Korean companies such as LG Chem inject lithium hydroxide into precursors mixed with nickel, cobalt, and manganese to make cathode materials for electric vehicle batteries.
Lithium accounts for about 40 percent of the cost of cathode materials, making it a key mineral that influences battery prices.
China’s share of neodymium permanent magnets needed to make motors for electric vehicles also fell to 84.7 percent in 2023, down slightly from 87.5 percent in 2022. Instead, the share of neodymium permanent magnets imported from the Philippines rose to 14.3 percent in 2023, up from 11 percent in 2022.
Neodymium, a kind of rare earth metal, has strong magnetism, making it an essential material for the miniaturization of motors and boosting their efficiency. More than 80 percent of electric vehicles use neodymium-based rare earth permanent magnets in their motors. An electric vehicle’s drive motor usually weighs about 1.6 kilograms.
The decrease in Korea’s dependence on China for some key minerals such as lithium and permanent magnets is interpreted as a result of intense China phase-out efforts by Korean companies proactively responding to changes in the trade environment such as the U.S. Inflation Reduction Act (IRA), amid the Korean government’s policies to support supply chain diversification.