U.S.-China minerals rivalry opens doors for Korean suppliers to Lockheed Martin, Chinese battery makers

Decisions about manufacturing and overseas expansion in strategic industries such as semiconductors are no longer driven by economics alone. As geopolitical developments increasingly shape business decisions, Korean manufacturers across the chip, auto and shipbuilding industries are weighing a growing set of risks in drawing global strategies. In this series, “Redefining Korea’s economic security in an era of U.S.-China rivalry,” the Korea JoongAng Daily examines how Korean companies navigate geopolitical pressures and realign their global supply chains. — Ed.

The escalating contest between Washington and Beijing over critical minerals has delivered a strategic dividend to Korea, widening its foothold in the United States while opening a path to sell materials to Chinese battery firms on which it relied on for supply.

After Beijing curbed exports of minerals critical to the defense industry, the U.S. Department of Defense took the rare step of acquiring a 10.6 percent stake in Korea Zinc, the largest zinc smelter in Korea, through a joint venture.

The Korean smelter has since inked a contract to supply germanium to Lockheed Martin. It is also pressing ahead with a $7.4 billion smelter in Clarksville, Tennessee, a project that U.S. President Donald Trump touted as the first new mineral smelter in the United States since 1979 during a rally in the city on Oct. 10.

The rivalry has also upended the battery supply chain, as Chinese manufacturers that dominate the world’s raw materials turn to Korean suppliers to comply with U.S. restrictions on Chinese content in subsidy-eligible batteries. 

Still, experts warn that Seoul’s place in the Washington-led supply chain may not survive deeper commercial ties with Beijing, forcing it to decide which network it will join and on what terms.

Seoul as Washington’s mineral shield

The U.S. government’s indirect acquisition of a stake in Korea Zinc is widely seen as a sign of its urgency in pursuing independence from Chinese minerals.

Although the United States ranks as the world’s second-largest rare earths miner, it depends on foreign rivals for processing and imports its entire supply of 12 critical minerals and more than half of 29 others.

Beijing has tightened its controls in deliberate stages, requiring export licensing for gallium and germanium starting in 2023 before escalating to an outright ban on shipments of gallium, germanium and antimony to the United States in December 2024. 

Last April, it placed seven medium and heavy rare earths and the magnets derived from them under licensing requirements, and that October, it moved to extend its jurisdiction to foreign-made products containing as little as 0.1 percent Chinese rare earths by value — a plan that has been suspended for a year under U.S.-China consensus. 

The restrictions on samarium weigh especially heavily on the United States, as samarium-cobalt is a critical material for fighter jets, missiles and aerospace systems due to its magnets, which retain their strength at extreme temperatures.

A single F-35 requires roughly 50 pounds of samarium magnets, according to The New York Times. China has added Lockheed Martin, RTX and General Dynamics to its export control list and, as a matter of policy, denies rare earth exports intended for military use.

“Korea’s leverage lies not in mineral resources but in the industrial base that it built while developing its heavy and chemical industries. The United States, on the other hand, has the technology but lacks production capacity at commercial scale,” said Cho Sung-hun, an associate research fellow specializing in geoeconomics and supply chain crisis response at the Korea Institute for International Economic Policy, pinpointing that Korea Zinc is already the United States’ largest supplier of indium. 

“To expand supply quickly, Washington needs partners that combine industrial capacity with proven reliability, and outside Beijing, only Seoul and Tokyo meet both conditions.” 

A China-free supply chain in the making

Korean companies are rushing to reconfigure their supply chains in response to Washington’s push to decouple from Chinese minerals.

Korea Zinc’s $7.4 billion integrated smelter in Tennessee will begin phased operations in 2029 and produce 13 minerals, including antimony, germanium and gallium, all of which China has cut off from the U.S. market. 

The company has also signed a memorandum of understanding with Lockheed Martin to supply germanium and is negotiating a long-term offtake agreement.

As Korea’s sole antimony producer, Korea Zinc plans to raise shipments to the United States from more than 100 tons last year to at least 240 tons this year.

Posco International has partnered with Indiana-based ReElement Technologies to jointly invest $200 million to build a rare earth separation and refining plant with an annual capacity of 6,000 tons. Pilot production is set to begin in the second half of 2027, and full-scale output by 2028. 

LS Eco Energy is investing 11.6 billion won in a facility in Vietnam that will produce 240 tons of samarium metal a year, enough for roughly 700 to 1,000 tons of samarium-cobalt magnets, with trial production scheduled for December. 

LS Cable & System is in talks with Virginia about investing roughly $689 million to establish a finished rare earth permanent magnet plant in the state, with production expected to begin by late 2027.

China, from supplier to potential customer

The U.S.-China rivalry has also made it harder for Chinese manufacturers to sell in the United States, and many are now turning to Korean suppliers for materials that can carry a “Made in Korea” label.

Chinese battery makers have also begun tapping Korean material firms to source key ingredients that comply with U.S. and European regulations. 

“Since the United States began restricting Chinese materials, Chinese battery makers have been running sample tests on cathode materials and other products with Korean suppliers,” said a source at a major Korean materials company, noting that Europe’s growing preference for incentivizing batteries made with locally produced materials has intensified the trend. 

“It is fair to say that nearly every Chinese battery maker is now testing with Korean materials companies,” the source added.

Posco Future M is testing natural graphite-based anode materials with CATL, the world’s largest battery manufacturer, according to a report from The Korea Economic Daily.

CATL’s interest is notable given China’s overwhelming dominance of the anode market, where it produces about 80 percent of the world’s natural graphite; Posco Future M holds less than 2 percent of global share. 

Washington declared “prohibited foreign entity” rules, under which batteries qualify for subsidies only if the share of raw material value sourced from Chinese companies declines from 40 percent this year to 15 percent by 2030. 

Posco Group controls a supply chain independent of China, extending from natural graphite mines in Africa and coal tar, a steelmaking by-product used in synthetic graphite, to finished anode materials.

CATL cannot claim U.S. subsidies directly, even using Korean materials, but is utilizing them when it enters North America by licensing its technology to automakers such as Ford Motor and General Motors in exchange for royalties. 

EcoPro BM, which began operating a plant in Hungary in June, is conducting cathode sample tests with a major Chinese battery maker.

Experts caution, however, that these gains could leave Seoul in a strategic bind unless it sets a clear direction and decides where its priorities lie.

“The critical minerals supply chain the United States is building is a security strategy designed to secure strategic goods from trusted countries,” said David Shin, a research fellow at the Korea Institute for Defense Analyses. “It is difficult to profit from cooperation with Chinese companies while expecting the same trust and benefits within the U.S. strategic supply chain because gains with one side can constrain opportunities with the other.

“Ultimately, rather than seeking to capture the benefits from both sides, Korea must decide which strategic supply chain it will join and what role it intends to secure within it.”

BY SARAH CHEA [[email protected]]