China's rare earth 'weaponization' sparks multibillion dollar Korea-U.S. minerals alliance

[NEWS ANALYSIS]

China's escalating restrictions on rare earth exports have advanced an existing minerals alliance between Washington and Seoul, with the two forming corporate partnerships worth billions of dollars across the rare earth value chain.

Rare earths are used across a wide range of products, but are especially critical to defense — fighter jets and missiles depend on a category of heavy rare earths — sourced from China at rates around 90 percent, prized for retaining their magnetic properties even at high temperatures.

To counter China's dominance, the United States is doubling down on domestic mining, while tapping Korean firms like LS, Posco, and Korea Zinc for the refining, materials, and magnet-processing expertise it still lacks.

It's a part of efforts of Washington's launch of the Forum on Resource Geostrategic Engagement — or FORGE — in February, where Korea currently serves as chair, alongside Project Vault, a $12 billion stockpiling program backed by the U.S. Export-Import Bank.

China's Ministry of Commerce recently placed 10 U.S. companies, including Aveox and Red Cat, on its export control list under the country's export control law, along with U.S. rare earth producers USA Rare Earth and MP Materials.

The latest restrictions follow rules imposed last October, when Beijing blocked exports to foreign military contractors of key rare-earth metals — including samarium, dysprosium and gadolinium — components critical to missiles and other defense systems.

The updated rules go further, now requiring the Commerce Ministry approval even when these materials are processed abroad using Chinese technology, regardless of their origin.

No rare earths, no arms

Korea's homegrown weapons systems — from the KF-21 fighter jet to the Cheongung-II air-defense system — depend on samarium-cobalt magnets, made from rare earth elements that China dominates at nearly every stage of production.

China accounts for roughly 70 percent of global rare-earth mining this year, controls about 90 percent of processing at the smelting and separation stage, where raw ore is refined into oxides, and produces roughly 93 percent of finished permanent magnets, according to the International Energy Agency.

Samarium-cobalt magnets are essential to defense weapons production due to their high-temperature stability, corrosion resistance, and durability, making them capable of operating under even the most extreme conditions.

“Rare earths used in semiconductors or batteries can often be substituted, but the samarium-cobalt used in missile systems like the Cheongung has no substitute,” said Choi Gi-il, a professor of military studies at Sangji University who also heads the Korea Institute for Defense Industry. 

“Major manufacturers are getting by on roughly a year's worth of stockpiled reserves,” he added. “Since they can no longer import through normal channels, there's widespread talk of smuggling and workaround routes being used to bring the material in.”

The impact has fallen hardest on the United States as a single F-35 fighter jet requires some 50 pounds of samarium magnets, according to a report from The New York Times. 

Fear of 'Korea passing' 

China's "0.1 percent" rule — part of its broader rare earth export controls — risks prompting international buyers to bypass Korea altogether. Under the rule, any product manufactured outside China requires Beijing's approval before export if it contains 0.1 percent or more by value of Chinese-origin rare earth elements, or was produced using Chinese rare earth-related technologies.

This signals China’s intent to “weaponize” its resources, experts say. 

“Korean companies in the rare earth supply chain have already experienced delays in export approvals, disrupting shipment schedules, supply contracts, and production plans,” said Seok Ju-heon, a research fellow at the Korea Energy Economics Institute. “This can be seen as an institutional mechanism designed to keep the global rare earth supply chain under Beijing's control.”

Park Ki-soon, a professor at Sungkyunkwan University's Graduate School of China, warned that such practices could lead U.S. and European buyers to simply route around Korea — a phenomenon some have described as “Korea passing.”

The fallout extends well beyond defense; semiconductors, EV, robotics, and batteries rely heavily on China for rare earths and other critical minerals like gallium and germanium. EVs and robotics may be hit hardest as the high-efficiency permanent magnets essential to their motors, along with raw materials like neodymium and dysprosium, are nearly 90 percent dependent on China.

Korea, an alternative to China

The United States appears to have chosen Korea as its partner of choice in building a rare earth supply chain independent of China — a shift that stands to benefit Korean firms directly.

LS Cable & System is in talks with the state of Virginia to establish a finished rare earth permanent magnet plant, with production expected to begin by late 2027. The output is slated for major automakers and electronics manufacturers, and possibly to defense firms. 

LS Eco Energy recently signed an agreement with Australia's Lynas Rare Earths — the world's second-largest supplier of rare earth raw materials — becoming the first company outside China to establish mass production of rare earth metals for defense applications. 

Under the plan, LS Eco Energy will handle metallization through its Vietnamese subsidiary while LS Cable & System produces the finished magnets, forming what the companies describe as a “global rare earth highway.”

Posco International has partnered with Indiana-based ReElement Technologies to build a joint rare earth separation and refining plant with an annual capacity of 3,000 tons. The pilot production is set to begin in the second half of 2027 and full-scale output by 2028. 

For the U.S. plant, Posco aims to construct a separate refining venture with a Malaysian firm to validate mining and stable production before scaling up.

Korea Zinc has formed a strategic partnership with Colorado-based Alta Resource Technologies to recycle and refine spent permanent magnets into high-purity rare earth oxides, with commercial operations expected to launch in 2027. 

“As the U.S. builds a 'friend-shoring' supply chain that excludes China, Korean companies stand as essentially the only viable alternative with their unmatched smelting and refining technology,” said Professor Park. “A prolonged U.S.-China rivalry could be a real opportunity for Korea's rare earth and nonferrous metal companies to seize market share with strong U.S. backing, while Chinese competitors are locked out.”

In fact, U.S. lawmakers are pushing for the Magnets Value Chain Support Act, where it grants tax credit of $5 per kilogram (2.2 pounds) for companies producing rare earth oxides in the United States. Producers of magnet-grade metals would receive $15 to $25 per kilogram, manufacturers of high-performance permanent magnets $20 to $30, and producers of defense-grade magnets up to $40 per kilogram.

BY SARAH CHEA   [[email protected]]