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| European Commissioner for Internal Market Thierry Breton speaks during a press conference on the Critical Raw Materials Act at the European Union headquarters in Brussels, Thursday. AFP-Yonhap |
By Park Jae-hyuk
Korean manufacturers of batteries and electric vehicles (EVs) are still on alert over the European Union's recent decisions on critical raw material and net-zero goals. This comes after the Korean government expressed cautious optimism toward the EU's policies comparable to the U.S. Inflation Reduction Act (IRA), according to industry officials, Sunday.
Last Thursday, the European Commission announced drafts of the Critical Raw Materials Act (CRMA), intended to stabilize the supply of raw materials within the EU member nations, and the Net-Zero Industry Act (NZIA), aimed at nurturing eco-friendly industries.
"Unlike the U.S. IRA, the draft of the CRMA does not include discriminatory clauses against foreign companies or requirements regarding the sourcing of raw materials from the EU nations," the Ministry of Trade, Industry and Energy said in a press release, Friday. "The NZIA is also expected to apply to both EU and non-European firms."
Europe's request to reduce dependence on critical minerals sourced from China to less than 65 percent, however, will likely weigh on Korean EV battery makers.
Although Korean companies have diversified their critical minerals sources, 90 percent of the country's lithium hydroxide imports and 70 percent of cobalt imports come from China.
Given that they initially anticipated that the EU would ask them to source less than 70 percent of critical minerals from a single third party, its latest announcement has been considered stricter than expected.
In addition, the tightened regulations could raise the cost of battery manufacture, increasing the prices of EVs sold in the European market.
"We are keeping a close watch on Europe's moves, as it has yet to disclose details about the acts," a battery industry official said.
Another burden for Korean companies is the EU's plan to perform regular audits of the strategic raw materials supply chains of large companies hiring over 500 employees and generating over 150 million euros ($162 million) in annual revenue.
Korea's three EV battery makers seem to be subject to the rule, as LG Energy Solution runs its manufacturing plant in Poland, while SK On and Samsung SDI each have factories in Hungary.
"As the EU is expected to ask for disclosure of company information regarding critical raw materials, and it is likely to tighten requirements for the recycling of permanent magnets in the long run, Korean firms should remain cautious about this issue," said Cho Bit-na, executive director of the Korea International Trade Association (KITA) Brussels Center.
The association also emphasized the importance of support from the government.
"Korean firms need thorough analysis of incentives and costs before they invest in Europe," KITA Vice Chairman Jeong Marn-ki said. "The government should not hesitate to increase tax incentives for R&D initiatives by electrolysis and battery materials companies."
The trade ministry plans to hold meetings with companies concerned, in order to analyze how the EU acts will affect the industry and to seek countermeasures.
"We will continue to talk with the EU authorities, in order to minimize burdens on Korean companies and maximize their opportunities," the ministry said.
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