Korean Media: Korea Zinc Becomes a Core Partner in the "De-China Supply Chain Alliance" for Rare Earths and Strategic Minerals

Investing Trillions of Won to Build a Smelting Plant in the U.S.

The move by Korea Zinc to build a smelting plant in the United States aligns closely with the U.S. State Department's 11th "Silicon Peace" (Pax Silica) initiative. The initiative involves fields such as rare earths, critical minerals, advanced manufacturing, chips, and AI infrastructure, and is being promoted by eight U.S. allied countries including South Korea and Japan, aiming to regionalize supply chains while excluding China.

If the smelting plant that Korea Zinc is investing trillions of won in the U.S. is completed, it is expected to work in conjunction with Canada's deep-sea resource company TMC (The Metals Company), which recently acquired shares, to establish a "North American Mining – Local Smelting – Supply to the U.S. Defense Industry" de-China value chain.

Previously, Korea Zinc had already started reprocessing antimony, a strategic mineral essential for military and defense industries, and began exporting it to the U.S. this year. The U.S. imports 70% of its antimony from China. Recently, it also decided to supply another strategic mineral, germanium, to the U.S. defense company Lockheed Martin. During the economic delegation trip led by President Yoon Suk Yeol to the U.S., Korea Zinc was included, and at that time, an MOU (Memorandum of Understanding) was signed with Lockheed Martin. In October, during the Korea-U.S. Business Roundtable meeting held by U.S. Commerce Secretary Howard Lutnick at the APEC (Asia-Pacific Economic Cooperation) Summit in Gyeongju, Chairman Choe Yun-bum of Korea Zinc also attended and discussed plans to enter the U.S. market.

Producing Strategic Minerals to Counter China's Dominance

Korea Zinc has also begun producing gallium, the No. 1 export-controlled item of China. Gallium is a core material for high-tech industries such as chips, LEDs, and high-speed integrated circuits. Korea Zinc plans to invest about 55.7 billion KRW (approximately RMB 270 million) by December 2027 to build a gallium recovery production line at the Wonsan Smelting Plant. Following antimony and germanium, it will establish another system for producing strategic minerals.

In 1996, Korea Zinc acquired an old smelting plant in the U.S. for 52 million U.S. dollars, but due to poor business performance, it sold and exited the U.S. market in the early 2000s, with low profitability being the main reason. This time, however, the investment in the U.S. smelting plant is expected to exceed 1 trillion KRW (approximately RMB 478 million) to reacquire local smelting plants or build new factories. Unlike the previous one, this time it is expected to establish a solid partnership with the U.S. government and major companies. Although the scale of the new U.S. smelting plant is smaller than the current largest Wonsan Smelting Plant of Korea Zinc, it is likely to be mainly used for producing strategic minerals.

Expecting Strong Support from the U.S. "Supply Chain Alliance"

If the U.S. Department of Defense becomes a shareholder of Korea Zinc, it could bring significant changes to the ongoing dispute over management rights between Korea Zinc and MBK Partners, Youngseong. The reason is that once the Department of Defense is registered as a shareholder of Korea Zinc, regardless of the shareholding percentage, Korea Zinc would no longer be a purely private enterprise, but would be classified as "U.S. security assets."

Attempting hostile takeovers (M&A) of enterprises with U.S. government ownership may not only trigger diplomatic friction but also significantly increase the risk of encountering obstacles when applying for business licenses in the U.S. in the future. The slogan of "protecting national backbone industries" raised by Chairman Choe Yun-bum of Korea Zinc, combined with resource security at the alliance level, may lead the National Pension Service and small shareholders, who hold key votes, to support the current management team.

While the participation of U.S. government capital can have positive effects on strengthening the alliance, it also carries the potential risk of transferring core smelting technology. On this issue, it is clearly difficult for individual companies to cope with negotiations alone. Therefore, some public opinion points out that the government should manage smelting technology as a core national strategic technology and establish legal and institutional mechanisms to prevent technology leaks, thereby reinforcing the negotiation capabilities of enterprises.

Source: Chosun Ilbo

Original article: toutiao.com/article/1851582100812812/

Statement: This article represents the views of the author.