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Supply chain diversification lags despite Korea's critical mineral challenges

Published: 28 Jul. 2025, 18:08 Updated: 28 Jul. 2025, 19:05

The flag of China is placed next to the elements of Gallium and Germanium on a periodic table, in this picture taken on July 6, 2023. [REUTERS/YONHAP]

While the United States, China and other major economies scramble to lock down supplies of critical minerals essential to semiconductors, electric vehicles and defense systems, Korea is losing ground — and growing more reliant on China in the process.

Korea depends on China for more than half of its imports of 14 rare metals out of a list of 33, including five types of rare earth elements, according to trade data released by the Korea Institute of Geoscience and Mineral Resources on Monday. For some elements, the dependency is extreme: 98 percent for gallium, 93 for indium, 84 for magnesium and 78 for niobium.

China has weaponized its control over certain materials, including gallium and magnesium, both essential for semiconductors. The country restricted exports of these materials in December last year, raising concerns over supply disruptions.

Since the urea shortage crisis in 2021, the Korean government has promoted supply chain diversification policies.

In 2023, the Ministry of Trade, Industry and Energy designated 33 minerals, including copper, tungsten and gallium, as "critical minerals" requiring strategic oversight. Of these, 10 — such as lithium, nickel and five rare earth elements — are defined as strategic core minerals, prioritized for closer monitoring and reduced import dependency.

A sample of gallium is displayed at the Laboratory of Physics and Material studies in Paris, France, on June 23 [REUTERS/YONHAP]

The government aims to cut dependence on any single country, such as China, to 50 percent or less by 2030 for these strategic minerals.

But diversification efforts have lagged. China’s share in Korea’s gallium imports grew from 43 percent in 2020 to 98 percent in 2024.

Korea faces unique structural challenges, as the country lacks a broad range of domestic mineral deposits, and most are not economically viable.

The country’s self-sufficiency rate for metal minerals stands at just 0.5 percent. Excluding gold at 11 percent and iron ore at 0.3 percent, self-sufficiency for most minerals is essentially zero. Nearly all 33 critical minerals are almost entirely imported.

China, leveraging its pricing power and production capacity, dominates the global critical minerals market. It produces 69.2 percent of the world’s rare earth elements.

Korea’s reliance on such countries poses economic risks.

The Korea Institute for International Economic Policy estimates that a rare earth import disruption could reduce Korea’s exports of secondary batteries by 10.8 percent and auto parts by 24.2 percent.

BYD Dolphin Surf electric cars are parked at a vehicle presentation event in Berlin, Germany, on May 21. [REUTERS/YONHAP]

China already classifies 30 of Korea’s 33 designated critical minerals as either strategic materials or export-controlled items. A policy shift in Beijing could trigger another supply crisis.

One such example is dysprosium, a rare earth element that China restricted in April. Korea now faces domestic shortages of dysprosium, a material used in permanent magnets essential for electric vehicle motors and currently produced only in China.

The Korean government has increased emergency stockpiles to manage short-term disruptions and plans to expand recycling as a long-term strategy.

This year’s supplementary budget included 214.7 billion won ($155 million) to boost mineral reserves. As of August last year, Korea’s average stockpile covered 57.5 days, but prolonged disruptions or the need for greater reserves remain critical concerns.

“Stockpiling is important, but Korea must focus on diversifying supply chains and securing minerals that can be brought in at any time, including through mine development,” said Kang Cheon-goo, an adjunct professor at Inha University’s Graduate School of Manufacturing Innovation.

Despite the growing urgency to secure overseas resources, Korea has limited options.

The government merged the Mine Reclamation Corporation and Korea Resources Corporation in 2021 to create the Korea Mine Rehabilitation and Mineral Resources Corporation (Komir), banning new overseas resource development projects. The Komir now focuses on liquidating existing assets.

The Komir is currently negotiating the sale of its stake in the Teguidda uranium mine in Niger.

“With uranium prices rising and renewed interest in nuclear energy, we believe now is the right time to sell and prepare a deal,” a Komir official said.

Uranium is reemerging as a strategic mineral amid soaring power demand driven by AI and revived interest in nuclear energy. The Komir is also considering selling off stakes in a rare earth joint venture in China and the Boleo copper mine in Mexico.

Japan, by contrast, is advancing its supply chain strategy through public-private partnerships.

The Japan Organization for Metals and Energy Security (Jogmec), established in 2004 by integrating separate agencies for petroleum, natural gas and minerals, plays a central role.

An aerial view of storage tanks at the Kinder Morgan Watson Station, a gathering system for oil and refined petroleum product pipelines, in Long Beach, California, on March 11, 2022 [REUTERS/YONHAP]

The Jogmec has worked with Japanese trading company Sojitz since 2011 to secure a rare earth supply by investing heavily in Australian mining firm Lynas Rare Earths.

In 2023, it contributed an additional 200 million Australian dollars to secure up to 65 percent of Lynas Rare Earths’ future output of dysprosium and terbium — roughly 30 percent of Japan’s total rare earth consumption.

In March, Jogmec also signed a long-term supply agreement to obtain up to 50 percent of rare earth output from French company Caremag after investing 110 million euros.

“Private companies often cite the absence of a ‘Team Korea’ approach — similar to that seen in nuclear projects — as a major barrier when entering the overseas mining sector,” said Kim Jin-soo, a professor of earth resources and environmental engineering at Hanyang University. “Although past failures in overseas development left financial and political baggage, Korea must revisit public-led resource strategies if it wishes to maintain its manufacturing base.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY AHN HYO-SEONG [[email protected]]