Non-ferrous metals ride AI demand wave, but debt burden grows amid China decoupling

The US-China hegemonic rivalry and the spread of artificial intelligence (AI) data centers are shaking the foundations of Korea's non-ferrous metals industry. As the United States builds a critical minerals supply chain centered on allies, Korean smelting and processing companies have emerged as key partners, and metal demand driven by AI infrastructure is exploding. However, some point out that large-scale plant construction in the US to seize these opportunities has led to increased borrowing, which could become a double-edged sword.

China is weaponizing strategic minerals to tighten its grip on the market. Starting with export licensing for gallium and germanium in August 2023, it has expanded controls to rare earths and the entire lithium battery value chain. In response, the US has introduced a $12 billion public-private critical minerals stockpiling program and tax incentives, staking its survival on building a non-China supply chain.

The absolute shortage of smelting facilities in the US has opened a breakthrough for Korean companies. Korea Zinc, backed by support from the US federal government and others, is pursuing a project to build a large integrated smelter in Tennessee at a total cost of $7.4 billion. Once completed, the facility will meet 35-45% of US demand for major minerals such as zinc and indium. LS MnM is also seeking to join the US supply chain by acquiring a nickel smelter in Indonesia and building a 600 billion won (about $443 million) secondary battery materials facility at its Onsan smelter.

However, non-recurring investments entail massive financial burdens. Korea Zinc plans to finance about $4.7 billion of the funds needed for the US project through borrowing. Since funds far exceeding the company's cash generation capacity will be injected intensively over a short period, financing risks could deepen. If working capital burdens overlap with increased volatility in non-ferrous metal prices, which are raw materials, profitability could deteriorate.

The fortunes of non-ferrous metal processing companies are diverging depending on whether they have US plants and their product bargaining power. This is because the US administration raised barriers in April 2026 by changing the tariff imposition system for imported metals to be based on the entire price of goods. Poongsan holds a relatively advantageous position with its US copper and copper alloy plant, but its defense sector sporting ammunition exports are still hampered by tariffs in the 10% range. Alu-Ko is investing about 160 billion won (about $118 million) to build a plant in Tennessee to avoid tariffs, but this also carries significant initial investment pressure.

In the long term, non-ferrous metal demand is expected to grow dramatically as global big tech companies expand infrastructure investment. Cumulative installed power capacity of data centers worldwide is projected to reach 277GW by 2035. Copper demand, essential for power grids and server racks, will surge by more than 1 million tons annually, and aluminum used in next-generation cooling devices and server cases is expected to open new demand of 2-3 million tons per year. If the price of copper, which trades at high levels, continues to rise, there is room for partial substitution with relatively cheaper aluminum in peripheral facilities such as transmission networks.

Variables to watch going forward are geopolitical uncertainty and infrastructure delay risks. The first indicator is whether China, whose export control waiver period to the US ends on Nov. 27, will tighten the reins again on strategic minerals such as antimony and gallium. If controls are reinstated, cost spikes and production disruptions could recur. In addition, if data center operations are delayed due to chronic power shortages in the US and lead time delays for key components, new mineral demand could shrink, pushing back the investment recovery schedules of Korean companies.

(Dollar figures are approximate, converted automatically at 1,000 won = $0.738, the rate on Nov. 8, 2026.)

※ This article is an AI translation of the Korean original published by Korea Credit News; it was checked by automated quality guards and published by the English edition desk.