Korea to spend $7 bil for overseas resources

South Korea will more than triple its investment in overseas resources development to $7 billion this year as it strives for a stable supply of key materials including rare earth metals, the government said Thursday.

Of the total, $2.6 billion, or 37 percent, will come from state-run firms and the rest from the private sector, the Ministry of Knowledge Economy said.

State-run developers Korea Electric Power Corp. and Korea Resources Corp. will execute large-scale projects such as acquiring stakes of foreign mines and overseas rare minerals development, respectively.

This year’s investment plan is particularly focused on overseas rare metals development, ministry officials said, adding that 9 percent of the total amount will be spent on such projects.

The government has been trying to boost the development of rare minerals like lithium since last year. Rare earths are key to manufacturing high-tech electronic devices and their local demand is thus projected to surge in the years to come.

The resource-scarce country currently relies mostly on China for its rare earths supply, which holds a virtual monopoly on the resources. China was providing 95 percent of the world’s supply, or 120,000 tons, as of 2009.

Instead of depending solely on China for the supply of such resources, the ministry said the country will boost cooperation with South America and Africa.

The two regions are not only abundant in rare earths but are prospective emerging markets, ministry officials said. Investment in Africa and Latin America in 2011 will reach $710 million and $690 million, respectively, they added.

The government said it will also search for possible domestic reserves of rare metals, and encourage firms to recycle and use alternatives to them to secure a stable supply within the country.

Meanwhile, rising raw material prices recently have been a growing concern for the local economy.

Industry and government officials speculated at a forum hosted by Korea International Trade Association that the price of raw materials such as crude oil and metals would continue to rise in the first half of the year, posing a big challenge for local firms.

Yet as the recent upward trend of raw material prices is caused mainly by China’s steady consumption, as well as seasonal high demand, it will likely stabilize in the second half of the year, they said.

By Koh Young-aah (youngaah@heraldcorp.com)