Chapter 4. A Strategy to Secure Materials in Response to Energy Transition
A. Stockpiling of mineral resources in South Korea
South Korea relies on imports for its supply of mineral resources, including oil, steel, and rare metals, and is therefore constantly exposed to supply risks originating from situations in resource-rich countries. Therefore, changes in the global resources market have a direct impact on the national economy. The Korean government operates a stockpiling system as a short-term policy measure to mitigate risks in the resources market.
The Public Procurement Service (PPS) and the Korea Resources Corporation (KORES) are currently responsible for the stockpiling of some of the nation’s key resources.PPS stockpiles minerals for economic purposes for price stability and for emergencies, whereas KORES stockpiles minerals for strategic purposes for emergencies. PPS also stockpiles minerals for strategic purposes. It stockpiles non-ferrous metals for economic purposes, but nine types of rare metals for strategic purposes, similar to KORES.
The metals stockpiled by PPS and KORES are listed in Table 4-1, and the type and specifications of these minerals are shown in Table 4-2 and Table 4-3.
Table 4-1. Types of Minerals Stockpiled by PPS and KORES Institution Types of Minerals Stockpiled
Public Procurement Service (PPS)
(6 Types of non-ferrous metals): Copper, aluminum, zinc, lead, tin, and nickel (9 Types of rare metals): Silicon, manganese, cobalt, vanadium, indium, lithium, tantalum, strontium, and bismuth
Korea Resources
Corporation (KORES)
(10Types of rare metals): Chrome, molybdenum, niobium, tungsten, antimony, titanium, selenium, gallium, rare-earth elements, and zirconium Source: Audit and Inspection Board of Korea (2017) p.
Table 4-2. Types and Specifications of Minerals Stockpiled by PPS Mineral
type
Item and
form Specifications Major uses
Non-ferrous metals
(6 types)
Copper Copper ingot 99.99% and 99.9808%
Wires, communication equipment, cables
Aluminum Aluminum
ingot 99.7% High voltage wires, chassis, materials for ships and vehicles
Nickel Nickel ingot 99.95% and 99.80%
Stainless steel, batteries, heat exchangers
Zinc Zinc ingot 99.995% Zinc plating, zinc alloys
Lead Lead ingot 99.99% and
99.97%
Batteries, plumbing, zinc compounds, pewter
Tin Tin ingot 99.85%
and99.90% Pewter, plating, alloys
Rare metals (9 types)
Silicon Ferrosilicon Si 75% Adjust alloy elements, casting additives
Manganese
Ferro-
manganese Mn 73–78% Deoxidizers in manufacturing steel Silico-
manganese
Mn 70–75%, Si 15–20%
Steel that includes silicon, manganese elements
Cobalt Cobalt ingot Co 99.8% High heat-resistance alloys, positive electrodes in secondary batteries
Vanadium
Vanadium
pentoxide 98% and over Manufacturing of ferro-vanadium Ferro-
vanadium V 75–85% Special steel additives
Indium Indium ingot In 99.995% Manufacturing of indium tin oxide Lithium Lithium
carbonite
Battery Grade 99.2%
Positive electrodes in secondary batteries
Tantalum Tantalum
carbide Ta 92.8–93.4% Cemented carbides, cutting tools additives
Strontium Strontium carbonate
SrCo3/BaCo3
98.7% +-0.5 Manufacturing of ferrite magnets Bismuth Bismuth
ingot Bi 99.99% PDP Panels, low melting point alloys, and plating additives
Source: Audit and Inspection Board of Korea (2017) p.135.
Table 4-3. Types and Specifications of Minerals Stockpiled by KORES Mineral type Item and form Specifications Major uses
Rare metals (10 types)
Chrome
High carbon ferro
chrome 60% STS steel
Low carbon ferro
chrome 60% Special steel
Molybdenum
Molybdenum
trioxide 57% Special steel, desulfurization
catalysts Ferro-
molybdenum 60% Special steel
Niobium Ferro-niobium 63% High-strength alloy steel
Antimony
Antimony ingot 99.65% Storage batteries Antimony
trioxide 99.80% Flame retardants
Tungsten Ferro-tungsten 75% Microalloying
Tungsten power 99.90% Microalloying
Titanium Ferro-titanium 70% High tensile steel, heat resistant steel, steel additives
Selenium Selenium-granule 99.99% Solar cells, zinc-carbon batteries
Rare earth elements
Ceria 99.95% Precision abrasives
Cerium carbonate 99.99% Abrasives
Lanthanum oxide 99.95% Catalysts, ferrite magnets Ferro-
dysprosium 80% Permanent magnets
Gallium Gallium metal 99.9999% Solar cells
Zirconium Zirconium oxide 99.8% Milling media (for mining) Source: Audit and Inspection Board of Korea (2017) p.135.
The criteria and method for selecting mineral resources for stockpiling and establishing stockpile goals vary between the two institutions as shown in Table 4-4. These inconsistencies have led to criticisms that the nation’s stockpiling plan—including its selection of targeted mineral resources and establishment of stockpile goals—does not reflect changes in industrial structures and market conditions, and that the plan is largely inefficient. The Board of Audit and Inspection of Korea (BAI) conducted an audit of the stockpiling plans of both institutions in 2017 and called for national-level coordination of the two institutions stockpiling projects to address the problem of dualization.77 Currently, the Ministry of Economy and Finance, Ministry of Trade, Industry and Energy, PPS, and KORES are engaged in research to coordinate the functions of the two government agencies for the more efficient stockpiling of resources.
77The Board of Audit and Inspection of Korea (2017) p.46.
Table 4-4. Criteria and Method for Selecting Stockpiling Targets and Establishing Stockpiling Goals
PPS KORES
Selection of Stockpiling Target
Each resource is graded on a scale of 1 to 5 in terms of its: ①global risk,
②weakness in responding to risks and
③economic importance.
The grades are then input into the following formula:
(Geometrical average of ① and ②) x
③
If the result of the formula is 9 or higher, the relevant item is eligible, but if the result is lower than 9, the item is considered in eligible for stockpiling.
Each resource is graded in terms of its:
①degree of concentration in reserves or production, ②degree of export concentration, ③market stability/instability,
④whether there is domestic demand for the item as a material for new industries,
⑤domestic production capability, ⑥ability to be stored for 3 years or more, and
⑦whether it is a military supply.
Resources that meet 5 or more of the criteria listed above are considered eligible, and those that fail to meet 5 of the criteria listed above are considered ineligible for stockpiling.
Establishment of Stockpiling Goals
‘Safety Inventory Goal’(15 days or 30 days) and ‘Operation Inventory Goal’(varies by type of mineral) are calculated for each mineral type based on international trading markets, private domestic supply capabilities, transport periods, and release results, among other things. Later, the results of the ‘Safety inventory goal’ and ‘Operation inventory goal’ are aggregated.
Resources are evaluated using 9grades with consideration to their ‘Level of industry demand’ and ‘National strategic importance.’
The number of days for stockpiling (0-100 days) is determined according to the grade of the item.
Note: ‘Safety Inventory’ refers to the inventory that must be maintained for use in an emergency, such as international supply disruption. ‘Operation Inventory’ refers to the inventory needed for flexible operation (ordinary-time release etc.) according to market trends and supply and demand, among other things, for the management of supply and demand and price stability.
Source: The Board of Audit and Inspection of Korea (2017) p. 28.