Poland rises as Korea’s emerging partner for batteries, defense, nuclear plants

President Yoon Suk Yeol and First Lady Kim Keon-hee, who are on their official visit to Poland after attending the NATO summit in Lithuania, arrive at Warsaw Chopin International Airport and get off their private plane, Air Force 1 on July 12 (local). [Photo by Yonhap]

South Korea’s President Yoon Suk Yeol will begin his state visit to Poland on Wednesday, local time, following his attendance at the North Atlantic Treaty Organization (NATO) summit in Lithuania.

Poland is a key bridgehead for Korean battery makers to enter the European market and has recently emerged as Korea’s key trade partner in Europe. There are growing calls for strengthened strategic cooperation with the country through summit diplomacy as expectations rise for additional large-scale cooperation in defense, nuclear power plants and Ukraine reconstruction.

According to the Korea International Trade Association (KITA) and the Korea Trade-Investment Promotion Agency (KOTRA) on Wednesday, Korea and Poland are rapidly developing economic ties in the area of electric vehicle batteries.

A major turning point in the bilateral relationship between Korea and Poland came in 2016 when LG Energy Solution Ltd. built a 5-gigawatt-hour (GWh) automotive battery plant in Wrocław, Poland and started operations the following year. The company has since expanded its annual production capacity to 70 GWh through continuous facility expansion. As its partners also expanded activities in the country, Poland became home to the K-battery cluster to target Europe, the world’s second-largest battery market.

Trade statistics show how the battery sector has transformed the economic cooperation between the two countries. Korea’s exports to Poland surged to $7.86 billion last year, more than 2.5 times the $2.91 billion in 2016, when Korean battery companies were yet to make full advances into the country.

Last year, cathode materials accounted for 27.2 percent with $2.14 billion of Korea’s total exports to Poland. Cathode materials are processed in Korea before being sent for exports to local factories and made into battery cells.

Including SK on Co. and Samsung SDI Co., which have a presence in neighboring Hungary, Korea’s three battery makers have an annual capacity of 116.5 GWh in Europe, accounting for 42.5 percent of the European Union’s entire battery capacity. Their market share in Europe is 63.5 percent.

After the outbreak of the Russia-Ukraine war, the bilateral cooperation centered on batteries rapidly expanded into the defense sector as Poland decided to purchase a large number of Korean-made weapons. Korea’s arms exports to Poland last year stood at $410 million and those in the first five months of this year at $340 million. In just over a year, arms exports to Poland totaled $750 million.

Owing to cathode materials and defense exports, Korea saw a $6.77 billion trade surplus with Poland last year. This made Poland Korea’s seventh-largest trade partner after Vietnam, the U.S., Hong Kong, India, Singapore, and the Philippines. It has become a European partner generating the largest trade surplus.

Poland also has the greatest potential as the destination for nuclear power exports after the United Arab Emirates (UAE) and Egypt. The Polish state-owned power company PGE S.A., together with private energy group ZE PAK S.A., is working with Korea Hydro & Nuclear Power Co. to build two to four units of Korean pressurized water reactor APR1400 in Pątnów, Poland. A letter of intent (LOI) to that end was signed in October last year.

Poland is also accelerating investment in energy, transportation infrastructure and the environment using EU funds, and Korean companies are actively pursuing business participation in renewable energy such as hydrogen and construction. Poland will be allocated 7.3 percent, or 134 billion euros, out of 1.824 trillion euros in EU funds and invest more than 70 percent of the allocated funds in energy, environment, and transportation sectors.

Additionally, Poland borders Ukraine and is thus expected to play a key role in the Ukraine reconstruction project, which draws growing attention in the international community including Korea. For this reason, there are increasing voices stressing the need and importance of building strategic cooperation with Poland in advance.

“Poland is the hub of Ukraine’s reconstruction project,” said Choi Sang-mok, senior presidential secretary for economic affairs, at a briefing on Yoon’s itinerary last week. “Many countries are working with Poland to pursue business in Ukraine.”