Title: Hyundai Motor Group and Korea Zinc Form Strategic Alliance for Battery Material Supply Chain
Subtitle: The partnership promises stable nickel supply, recycling capabilities, and regulatory advantages
Hyundai Motor Group, in a surprising move, has joined forces with Korea Zinc to establish a comprehensive cooperation in the battery material sector. Though seemingly unrelated, this alliance holds immense potential due to their shared interests in the electric vehicle (EV) market.
Hyundai Motor Group has been actively focusing on the development of electric vehicles and recently introduced their in-house battery technology. On the other hand, Korea Zinc, as the leading non-ferrous metal smelting company in the country, possesses extensive expertise in battery material handling.
The collaboration between the two companies will primarily target the production of ‘nickel,’ a crucial material for battery precursors. By jointly sourcing raw materials, ensuring a stable supply of processing and intermediate materials, and exploring innovative recycling initiatives, the partners aim to strengthen the nickel value chain.
Battery precursors, which heavily influence battery performance, contribute to over 70% of the cathode material cost. Nickel plays a significant role in the production of these precursors, making its stable supply a crucial factor in advancing Hyundai Motor Group’s self-developed battery business.
Partnering with Korea Zinc allows Hyundai Motor Group to establish a reliable nickel supply chain, benefiting from the company’s advanced smelting technology and high-quality nickel production. In return, Korea Zinc secures a stable customer in Hyundai Motor Group, further enhancing its position in the battery material industry.
Moreover, this partnership offers additional advantages, including the ability to bypass impending US regulations. Under the Inflation Reduction Act (IRA), the US government aims to develop a domestic battery supply chain, reducing dependence on Chinese materials. However, as a domestic company, Korea Zinc remains exempt from these regulations, enabling Hyundai Motor Group to receive subsidies for their electric vehicles.
Notably, the collaboration also allows Hyundai Motor Group to meet various global standards, such as the European Union’s Core Raw Materials Act and Environmental, Social, and Governance requirements, ensuring the production of environmentally friendly vehicles on a global scale.
However, industry insiders suggest there may be underlying motives behind this alliance. Apart from the partnership in battery materials, Hyundai Motor Group has decided to acquire a 5% stake in Korea Zinc through their investment corporation, HMG Global. This move raises questions about the governance issue within Korea Zinc.
Korea Zinc has long been a subject of contention between the Jang and Choi families, who have shared control over the company’s affiliated entities. Chairman Choi’s recent capital increase strategy, in which he used Hyundai Motor Group as an ally, is seen as an attempt to consolidate his dominance within the company.
Currently, the Jang family owns a majority stake in Korea Zinc, while Chairman Chey and his allies hold a smaller share. However, with the paid-in capital increase, the stakes could tip in Chairman Choi’s favor, potentially rekindling the dispute over Korea Zinc’s management rights.
As this partnership unfolds, it becomes increasingly apparent that Chairman Choi may emerge as the primary beneficiary. Only time will tell how the Jang family will respond to this strategic alliance and whether a renewed battle for control lies on the horizon.
In conclusion, the partnership between Hyundai Motor Group and Korea Zinc presents a promising opportunity for both companies to strengthen their positions in the rapidly growing battery material industry. By collaborating on nickel supply, recycling capabilities, and regulatory advantages, they are well-positioned to capitalize on the evolving landscape of electric vehicles.
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united with ‘nickel’
Hyundai Motor Group and Korea Zinc joined hands. At first glance, it’s a combination of two companies that don’t seem to have much to do with each other. The story changes when the secondary battery is shared between the two companies. Hyundai Motor Group focuses on the electric vehicle sector. Recently, it also introduced an in-house developed battery. Korea Zinc is the No. 1 domestic non-ferrous metal smelting company. This is a place that knows how to handle battery materials.
Hyundai Motor Group and Korea Zinc have teamed up on ‘nickel’, a key material for battery precursors. Hyundai Motor Group and Korea Zinc agreed to engage in comprehensive cooperation across the nickel value chain, including △ joint sourcing of raw materials for nickel, a key material for electric vehicle batteries, △ stable supply of processing and intermediate materials, and △ search for new businesses including recycling waste batteries. Precursors account for more than 70% of the cost of cathode material, which determines battery performance. Nickel is the key to these precursors.
Kim Heung-soo, vice president of Hyundai Motor Group Global Strategy Office (GSO) (left), and Korea Zinc President Park Ki-deok take a commemorative photo after signing a memorandum of understanding (MOU) for business electric car battery core material. / Photo = Hyundai Motor Group
Hyundai Motor Group can ensure a stable nickel supply chain by joining hands with Korea Zinc. You can receive high quality nickel based on Korea Zinc’s high level smelting technology. When nickel supply and demand stabilizes, Hyundai Motor Group’s self-developed battery business may also accelerate.
Korea Zinc can secure Hyundai Motor Group as a stable customer. In 2017, Korea Zinc established KEMCO, a subsidiary to produce nickel sulfate for batteries. Last year, we established ‘Korea Precursors’, a joint venture with LG Chem to produce precursors for batteries, and we plan to complete a nickel smelter with an annual capacity of 20,000 tons at the Onsan Industrial Complex in Ulsan within this year . As such, the alliance with Hyundai Motor Group is a great source of strength for Korea Zinc.
various paving stones
The alliance between Hyundai Motor Group and Korea Zinc is not limited to the nickel sector alone. Korea Zinc has dry/wet fusion recycling technology that recovers major raw materials such as nickel, lithium, and cobalt from waste batteries. This is an area that Korea Zinc is intensively cultivating to strengthen the battery material field. It is a method of extracting core raw materials for batteries by recycling waste batteries and supplying them to finished car manufacturers.
It is for this reason that Hyundai Motor Group chose ‘which seeks new businesses including the recycling of waste batteries’ when holding hands with Korea Zinc. Hyundai Motor Group has decided to receive nickel from Korea Zinc consecutively from 2026. In 2031, Hyundai Motor Group plans to receive approximately 50% of nickel from Korea Zinc in order to respond to the US IRA (Inflation Reduction Act).
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In addition, through the alliance with Korea Zinc, Hyundai Motor Group can avoid US IRA regulations and receive subsidy benefits. The key to the US IRA is to nurture the country’s battery supply chain to exclude Chinese materials and raw materials. In the case of Korea Zinc, as it is a domestic company, it is not included in the IRA regulation. In this way, Hyundai Motor Group can receive subsidies for electric vehicles from the US government. This enables us to ensure price competitiveness.
In addition, it has the advantage of being able to secure electric vehicle battery materials that meet various standards required for global environmentally friendly vehicle production, such as regional regulations such as the European Union’s Core Raw Materials Act (CRMA) and ESG requirements. In addition to securing the supply chain for key battery materials, various side effects can be expected. This is why the industry gives a positive evaluation of the alliance between Hyundai Motor Group and Korea Zinc.
another reason?
Some also send another view on the alliance between Hyundai Motor Group and Korea Zinc. In addition to the superficial reasons, there may be other calculations hidden behind the scenes.
In addition to signing a memorandum of understanding (MOU) with Korea Zinc for key materials for electric vehicle batteries, Hyundai Motor Group decided to acquire a 5% stake in Korea Zinc. The acquiring entity is HMG Global. HMG Global is a foreign corporation established through a joint investment by Hyundai Motor Company, Kia Motors, and Hyundai Mobis. It is an investment corporation established for the purpose of investing in the group’s new businesses and future strategies.
HMG Global decided to participate in the capital increase allocated by third party Korea Zinc and acquire a 5% stake for approximately KRW 527.2 billion. In addition, we have secured the right to recommend one non-executive director to Korea Zinc.
Korean Onsan Zinc Refinery / Photo = Korean Zinc
Hyundai Motor Group’s position is to strengthen the foundation for cooperation regarding the acquisition of shares in Korea Sink. Usually, when two companies work together, they acquire each other’s shares or exchange stocks for a stronger relationship. Korea Zinc has already transferred its stake to Hanwha through a stock exchange. Even then, the subject of the acquisition was the foreign corporation Hanwha. This is because Korea Zinc’s articles of incorporation restrict domestic companies from participating in paid-up capital increases.
Here comes a different perspective. It is a story that this alliance is related to the governance issue of Korea Zinc. Young Poong Group has maintained the ‘one roof, two families’ system for the third generation since the late founders Jang Byeong-hee and Choi Ki-ho in 1949. Korea Zinc’s affiliated companies are run by the Choi family, and electronic affiliates are run by the Jang family. However, as the third generation of the founder, Chairman Yoon-beom Choi, became the chairman of Korea Zinc, the competition between the two families for shares began in earnest.
reversed stake
Korea Zinc has long been known as a place where the views of the Jang family and the Choi family on the company’s management policy are serious. This is why Korea Zinc’s related split story sometimes comes out. Therefore, some in the industry believe that Chairman Choi, behind this paid-up capital increase, is hiding a strategy to increase his dominance by using Hyundai Motor Group as an ally. If you look at the share ratio after paid-in capital increases, this argument is quite persuasive.
Currently, Korea Zinc is owned by Young Poong Co, Ltd, a holding company of Young Poong Group and controlled by the Jang family. In addition, the Jang family also owns a 6.56% stake in Korea Zinc. Therefore, the Jang family’s total stake in Korea Zinc is 32.66%. On the other hand, Chairman Chey and his related parties only hold 16.98% of the shares. However, Chairman Choi has friendly forces.
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These are Hanwha (8.85%), LG Chem (1.2%), and Trafigura (1.55%). When these shares are added together, Chairman Beom Chey’s share is 28.58%. However, with this paid-in capital increase, the situation was reversed. Even considering the dilution of the stake due to the paid-up capital increase, if Hyundai Motor Group is classified as Chairman Choi’s ally, the Choi family’s stake is 32.12%. It surpasses the Jang family (31.02%).
In the industry, there are many opinions that Chairman Chey’s side could have promoted this alliance with the aim of expanding its dominance. It is a story of a strategy that can kill two birds with one stone in order to ensure a reliable source of sales and increase the share ratio at the same time. As a result, some say there is a possibility that the dispute over Korea Zinc’s management rights will resurface once again. First of all, it seems that the biggest beneficiary of this alliance is Chairman Choi. Will the Jang family fight back? Let’s watch together.
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