Securing the Supply Chain: Korea's Rare Earth Elements Strategy

Strategic Context: Why Minerals Are the New Oil

South Korea's inclusion of rare earth elements and critical minerals as one of K-Moonshot's 12 national missions reflects a hard-won recognition: the technologies that will define the AI era are only as secure as the supply chains that feed them. Semiconductors require gallium, germanium, and ultra-pure silicon. Electric vehicle batteries depend on lithium, cobalt, nickel, and manganese. Defence systems, renewable energy infrastructure, and advanced electronics all rest on a foundation of materials that Korea overwhelmingly imports from a single source.

That source is China. And in an era of intensifying geopolitical fragmentation, that dependency represents an existential vulnerability for an economy whose exports are dominated by semiconductors, automobiles, batteries, and electronics. Mission 9 is not merely a mining initiative. It is the material security prerequisite for every other K-Moonshot objective.

The Dependency Problem: Korea's Mineral Vulnerability

Korea's mineral import dependency is among the highest of any advanced industrial economy. The country imports virtually 100% of its rare earth elements, approximately 93% of its lithium, and the overwhelming majority of critical inputs for semiconductor manufacturing. China accounts for roughly 80% of Korea's rare earth imports, a concentration of supply risk that the escalating technology competition between Beijing and Washington has made untenable.

The fragility of this arrangement was exposed in 2023 when China imposed export controls on gallium and germanium, both essential to semiconductor production. Korea's Ministry of Trade, Industry and Energy moved swiftly to diversify sourcing, but the episode underscored a structural vulnerability that cannot be resolved through ad hoc responses. Mission 9 represents the systematic, long-term answer.

The 33 Critical Minerals

Korea's critical minerals framework, administered jointly by the Ministry of Trade, Industry and Energy (MOTIE) and the Ministry of Science and ICT (MSIT), identifies 33 minerals across four strategic categories:

Of these 33, the government has designated 10 as "strategic minerals" warranting the highest level of policy intervention: lithium, cobalt, nickel, manganese, graphite, gallium, germanium, neodymium, dysprosium, and silicon. These 10 minerals are the subject of dedicated stockpiling programmes, bilateral sourcing agreements, and domestic processing investments.

The China Factor: Quantifying the Risk

China's dominance of global rare earth supply is not merely a function of geological endowment. Beijing has spent three decades building an integrated supply chain, from mining through separation, refining, and manufacturing of finished rare earth products. As of 2025, China controls approximately 60% of global rare earth mining, 90% of rare earth processing, and over 90% of permanent magnet manufacturing.

For Korea, this concentration creates multiple points of vulnerability:

• Direct supply disruption: Export restrictions, licensing requirements, or outright embargoes can interrupt Korean manufacturing within weeks
• Price manipulation: China's ability to flood or restrict markets creates pricing volatility that undermines Korean manufacturers' cost planning
• Technology leverage: Access to processed rare earth materials can be conditioned on technology transfer or geopolitical concessions
• Secondary sanctions risk: As US-China technology restrictions intensify, Korean companies using Chinese-sourced materials face potential secondary sanctions exposure

The July 2023 gallium and germanium export controls were a warning. China's subsequent expansion of export restrictions to antimony, graphite processing technology, and additional semiconductor materials in late 2024 confirmed that mineral supply weaponization is now a permanent feature of the geopolitical landscape. Korea's response under Mission 9 treats this not as a temporary disruption but as a structural shift requiring fundamental supply chain redesign.

The Minerals Security Partnership: Korea's Multilateral Play

Korea's assumption of the chair of the Minerals Security Partnership (MSP) in 2025 represents one of the most significant dimensions of Mission 9. The MSP, launched by the United States in 2022, brings together 14 partner countries and the European Union to coordinate investment in critical mineral supply chains outside of Chinese control.

As MSP chair, Korea is positioned to shape the multilateral framework for critical mineral governance at a pivotal moment. The partnership's focus areas align precisely with Korea's Mission 9 objectives:

• Diversified extraction: Coordinating investment in mining operations in Australia, Canada, the Democratic Republic of Congo, Chile, Argentina, and emerging African sources
• Processing capacity: Building rare earth separation and refining capacity outside China, with Japan, Australia, and the United States as priority partners
• Recycling and circularity: Developing urban mining and recycling infrastructure to recover critical minerals from electronic waste, spent batteries, and industrial byproducts
• Standards and certification: Establishing ESG-compliant mining and processing standards that create a trusted supply chain parallel to Chinese sources

Korea's MSP chairmanship is not ceremonial. Seoul has used the position to advance bilateral mineral agreements with Australia (lithium, rare earths), Canada (nickel, cobalt), Kazakhstan (uranium, rare earths), and Chile (lithium). These agreements typically combine government-backed loans, joint venture frameworks, and offtake arrangements that give Korean companies priority access to non-Chinese mineral supplies.

Government Policy Architecture

The Korean government's approach to Mission 9 operates across four policy pillars, each backed by specific fiscal instruments:

Pillar 1: Overseas Resource Acquisition

The government provides concessional loans, political risk insurance, and tax benefits for Korean companies investing in overseas mining and processing operations. Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) and Korea Resources Corporation serve as the primary state vehicles for overseas mineral acquisition. Key initiatives include:

• Concessional financing at below-market rates for Korean firms acquiring stakes in foreign mining operations
• Political risk insurance through Korea Trade Insurance Corporation (K-SURE) covering expropriation, war, and currency transfer risks
• Tax deductions of up to 30% for overseas mineral exploration expenditures
• Dedicated mineral diplomacy staff embedded in Korean embassies across resource-rich countries

Pillar 2: Strategic Stockpiling

Korea maintains strategic reserves of critical minerals managed through the Korea Resources Corporation, with target stockpile levels sufficient for 100 days of industrial consumption for the 10 strategic minerals. The stockpiling programme was significantly expanded following China's 2023 export controls, with additional appropriations approved in the 2025 and 2026 budgets.

Pillar 3: Domestic Recycling and Urban Mining

Korea generates approximately 10 million tonnes of electronic waste annually, containing recoverable quantities of gold, silver, copper, rare earths, lithium, and cobalt. Mission 9 investments in urban mining technology aim to recover an increasing share of critical minerals from domestic waste streams. The 2026 R&D budget includes dedicated funding for advanced recycling processes, including hydrometallurgical and bio-leaching techniques for rare earth recovery from spent magnets and phosphors.

Pillar 4: Substitution and Reduction

The longest-term pillar of Mission 9 invests in fundamental materials science to reduce or eliminate dependence on the most supply-constrained minerals. Research programmes at KAIST, KIST, and POSTECH target development of rare-earth-free permanent magnets, cobalt-free battery cathodes, and alternative semiconductor materials that can bypass China-controlled supply chains entirely.

Implications for the Semiconductor Supply Chain

The intersection of Mission 9 with Mission 11 (AI Accelerator Chips) is among the most critical strategic linkages in the K-Moonshot programme. Korea's semiconductor industry, which accounts for approximately 20% of national exports, depends on a complex web of material inputs, many of which are sourced predominantly from China.

Gallium is essential for compound semiconductors used in 5G, radar, and power electronics. Germanium is critical for fiber optic infrastructure and infrared applications. Ultra-pure neon, used in lithography processes, was historically sourced largely from Ukraine and Russia before supply diversification efforts began in 2022. Photoresist chemicals, while not classified as rare earth elements, represent another category of advanced materials where Japanese suppliers dominate and supply security remains a concern.

The Korean government's ₩33 trillion semiconductor support package includes dedicated provisions for materials supply chain security. Samsung Electronics and SK Hynix, both designated as national champions in the semiconductor ecosystem, are investing in backward integration to secure material inputs. SK Hynix's partnership with several Australian and Canadian mining firms for HBM-grade raw materials exemplifies the corporate response that Mission 9 policy is designed to catalyze.

Implications for the EV and Battery Supply Chain

Korea's three major battery manufacturers, LG Energy Solution, Samsung SDI, and SK On, collectively command approximately 25% of the global EV battery market. Their competitiveness depends on reliable, cost-effective access to lithium, cobalt, nickel, manganese, and graphite, all of which are subject to supply concentration risks.

Lithium presents a particular challenge. Global lithium supply is dominated by Australia (mining) and Chile/Argentina (brine extraction), but China controls approximately 65% of global lithium refining capacity. Korea's battery manufacturers have responded by investing directly in upstream assets: LG Energy Solution has secured lithium hydroxide supply agreements with Pilbara Minerals (Australia) and SQM (Chile), while Samsung SDI has invested in cobalt sourcing from the Democratic Republic of Congo through ethical supply chain certification programmes.

Mission 9 policy frameworks support these corporate initiatives with government-backed financing, diplomatic facilitation, and risk insurance. The goal is to ensure that Korea's battery industry, which faces intensifying competition from Chinese manufacturers like CATL and BYD, is not undermined by material supply vulnerabilities even as it competes on technology and manufacturing efficiency.

The Recycling Imperative

Korea's approach to critical mineral security increasingly emphasizes circular economy solutions. The country's electronics manufacturing base generates substantial quantities of end-of-life products containing recoverable critical minerals. Korea's battery recycling industry, anchored by companies like SungEel HiTech and Posco Holdings' subsidiary Posco HY Clean Metal, is emerging as a globally significant source of recycled lithium, cobalt, and nickel.

SungEel HiTech operates one of the world's largest lithium-ion battery recycling facilities, with capacity to process 24,000 tonnes of spent batteries annually. The company has expanded internationally, with operations in Hungary and partnerships in North America, positioning itself as a key node in the circular battery supply chain that Korean and European regulators are mandating through upcoming battery passport requirements.

For rare earth elements specifically, recycling remains technically challenging but strategically essential. Rare earths are used in small quantities across millions of devices, from smartphone vibration motors to wind turbine generators, making collection and separation costly relative to virgin material. Mission 9 R&D investments target breakthrough recycling processes that could improve rare earth recovery economics by an order of magnitude, though commercialization timelines remain uncertain.

Global Competitive Landscape

Korea is not alone in recognizing critical mineral vulnerability. The United States, European Union, Japan, and Australia have all launched parallel mineral security initiatives, creating both collaborative opportunities and competitive tensions:

Korea's competitive advantage in this global scramble lies in its position as a major end-user of critical minerals. Unlike resource-rich countries like Australia or Canada, Korea offers demand certainty: its semiconductor fabs, battery plants, and electronics manufacturers provide guaranteed offtake for mineral suppliers. This demand leverage, combined with Korean companies' manufacturing expertise and government-backed financing, makes Korea an attractive partner for mining jurisdictions seeking to move up the value chain.

Risk Assessment

Mission 9 faces several structural challenges that could impede achievement of the 50% import diversification target by 2030:

Timeline Compression

Mining projects typically require 10-15 years from exploration to production. Even with aggressive government support, new supply sources brought online by 2030 will largely reflect investments initiated before the K-Moonshot announcement. The most impactful Mission 9 outcomes will materialize in the 2032-2035 timeframe.

Cost Competitiveness

Chinese rare earth production benefits from scale, integrated supply chains, and lower environmental compliance costs. Non-Chinese sources are typically more expensive, creating a tension between supply security and Korean manufacturers' cost competitiveness. Government subsidies can bridge this gap in the near term, but long-term economic sustainability requires either technological breakthroughs in processing efficiency or sustained geopolitical disruptions that permanently reprice Chinese supply risk.

Environmental and Social Governance

Mining operations in many resource-rich countries face significant ESG challenges, from artisanal cobalt mining in the DRC to water usage conflicts in Chilean lithium extraction. Korean companies investing overseas must navigate these issues carefully to avoid reputational damage and comply with emerging supply chain due diligence regulations in the EU and United States.

Technology Risk

Substitution and recycling technologies targeted under Pillar 4 remain largely at laboratory or pilot scale. The transition from promising research results to industrial-scale deployment involves significant technical and economic uncertainty. Rare-earth-free permanent magnets, for example, have been a research objective globally for over a decade without achieving performance parity with neodymium-based alternatives.

Assessment and Outlook

Mission 9 is arguably the most strategically defensive of the 12 K-Moonshot missions. Where other missions aim to create breakthrough capabilities, Mission 9 seeks to prevent the erosion of existing capabilities by securing their material foundations. This defensive character makes it no less critical; indeed, failure on Mission 9 would cascade across Mission 11 (AI Chips), the semiconductor sector, and the battery industry that collectively underpin Korea's export economy.

The most immediate and achievable gains will come from demand-side measures: strategic stockpiling, recycling infrastructure, and substitution research. Supply-side diversification through overseas mining investments faces longer timelines and greater execution risk but represents the only path to structural reduction of China dependency. Korea's leadership of the Minerals Security Partnership provides diplomatic leverage that few other nations can match, but converting multilateral frameworks into actual tonnes of diversified mineral supply will require sustained political commitment and substantial capital deployment through the end of the decade and beyond.

The inclusion of critical minerals in the K-Moonshot framework, alongside frontier technologies like quantum computing and humanoid robotics, signals that Seoul understands a fundamental truth of the AI era: the most advanced algorithms and architectures are worthless without the physical materials to build the hardware that runs them. Mission 9 is where the digital meets the geological, and its success or failure will determine whether Korea's technology ambitions rest on a secure foundation or a single point of catastrophic supply chain failure.