South Korean battery material makers, including graphite anode producers, are seeking support from the government as they navigate challenges arising from a shift in the battery supply chain sparked by the U.S.-China rift.

According to industry sources on Monday, Korean producers of graphite anodes, a key component for batteries, will not benefit from electric vehicle subsidies under the U.S. Inflation Reduction Act (IRA) starting in 2025 if the graphite is sourced from China.

Industry insiders argue that the government should designate graphite anodes as a core item for economic security under the supply chain law set to take effect in 2024, whereby producers would receive subsidies for the material’s domestic production. Data from the Korea International Trade Association indicates that as of 2024, 97 percent of natural graphite and 74 percent of synthetic graphite imports came from China.

Another challenge for the domestic battery industry is the global minimum tax, which came into effect in 2024. This rule applies to multinational companies with global revenues exceeding €750 million ($797 million), mandating them to pay taxes at a minimum effective rate of 15 percent. LG Energy Solution Ltd. and SK on Co., both of which operate production facilities in the United States, benefit from advanced manufacturing tax credits, but these benefits could be offset by the global minimum tax.

By Jung You-jung and Chang Iou-chung

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