Navigating the New Geopolitics of Critical Minerals
Seoul is executing a high-stakes balancing act that few industrialized nations can attempt with such precision. On Wednesday, South Korean Foreign Minister Cho Hyun stood alongside representatives from 54 countries at the U.S. State Department as Seoul formally joined the Forum on Resource Geostrategic Engagement (FORGE), a U.S.-led trade bloc designed to counter Beijing’s dominance over rare earth elements. Within 24 hours, the Korean trade ministry announced plans to establish a direct government hotline and joint committee with Chinese authorities to expedite mineral imports and prevent supply disruptions.
This apparent contradiction reflects the uncomfortable reality facing advanced manufacturing economies in an era of strategic competition. Complete decoupling from China remains impossible in the short term, yet diversification is essential for long-term economic survival. The Trump administration has accelerated efforts to create what Vice President JD Vance described as a preferential trade zone for critical minerals among allies, utilizing price floors and adjustable tariffs to protect supply chains from cheap Chinese minerals flooding the market. Simultaneously, South Korea recognizes that Chinese processing facilities currently handle approximately 90 percent of the world’s rare earth supply, creating a dependency that diplomatic realignment alone cannot quickly resolve.
The vulnerability is particularly acute for South Korea. As the world’s second-largest semiconductor producer, manufacturing over 60 percent of global memory chips, and home to leading electric vehicle battery makers, the nation maintains a net import reliance exceeding 99.7 percent for all critical minerals according to the Korea Institute of Geoscience and Mineral Resources. The country sources approximately 80 percent of its lithium hydroxide and over 90 percent of precursor cathode materials and synthetic graphite from Chinese suppliers. When Beijing restricted exports of gallium and germanium in mid-2023, key components for chip manufacturing, Seoul recognized that supply disruptions could cripple its technology sector within weeks.
Mechanisms of Cooperation with Beijing
The specific measures announced by Seoul’s Ministry of Trade, Industry and Resources represent a pragmatic acknowledgment of Chinese dominance in rare earth processing. The planned government-to-government hotline aims to create rapid response channels when export restrictions or regulatory changes threaten South Korean manufacturers, while the joint consultative body will address customs procedures, quality standards, and long-term supply contracts.
Industry Minister Kim Jung-kwan articulated the rationale during a visit to a rare earth magnet manufacturer in Daegu, stressing that South Korea’s national competitiveness depends on industrial resource security. The government intends to designate all 17 rare earth elements as core strategic minerals, creating new customs classification codes to improve monitoring and demand forecasting. Additionally, Seoul will create a dedicated rare earth research and development fund under existing industrial innovation investment programs to develop substitute materials and processing technologies.
These moves come against the backdrop of heightened Chinese export controls. In October, Beijing expanded restrictions on rare earths, imposing extra scrutiny on semiconductor users and adding five additional metals to its controlled list. China currently controls approximately 60 percent of global rare earth reserves and processes roughly 90 percent of the world’s supply, giving Beijing formidable leverage in trade disputes. Chinese Foreign Ministry spokesperson Lin Jian stated that Beijing opposes any country setting up exclusive blocs to disrupt international economic and trade order, asserting that all parties share responsibility for keeping global industrial supply chains stable.
The October restrictions were particularly concerning for Seoul given the timing. Just weeks earlier, South Korea had publicly warned that China’s monopoly on rare earths increased instability in global supply chains. Rather than retaliating or accelerating decoupling, Seoul chose deeper engagement, calculating that maintaining open channels with Beijing reduces the likelihood of complete supply cutoff while alternative sources develop.
Leadership in the Western Alliance
Despite the outreach to Beijing, South Korea has simultaneously assumed a central role in the U.S.-led effort to diversify supply chains. The rebranding of the Minerals Security Partnership (MSP) as FORGE marks a significant evolution in international mineral diplomacy, with Seoul serving as the first non-U.S. chair of the initiative through June. This transition recognizes South Korea’s growing importance in global supply chain security and its unique position straddling Western alliances and Asian supply networks.
The MSP, established in June 2022, had already begun supporting 32 projects worldwide by September 2024, including 13 in Africa, 8 in the Americas, and 6 in the Asia-Pacific region. South Korea’s POSCO International committed $40 million to the Mahenge graphite project in Tanzania, representing the kind of concrete investment that distinguishes this partnership from earlier framework agreements. During the inaugural Critical Minerals Ministerial, U.S. Secretary of State Marco Rubio hosted officials from 54 countries including Japan, Australia, Canada and India to coordinate efforts to prevent any single country from using control over key resources as geopolitical leverage.
Vance outlined ambitious plans for the preferential trade zone during the ministerial, stating that allies within the bloc would receive immediate and durable benefits through consistent pricing regardless of global market fluctuations. The mechanism aims to establish reference prices for critical minerals at each stage of production maintained through adjustable tariffs to uphold pricing integrity. However, the Trump administration is reportedly backing away from guarantees of minimum prices that Australia and other resource-rich nations had requested to justify investments in new mining capacity.
South Korea’s leadership of FORGE while engaging with China creates a unique diplomatic position. Foreign Minister Cho Hyun stressed in Washington that Seoul would boost coordination among partners and promote investment in projects to secure supply chains. Simultaneously, the trade ministry in Seoul negotiated closer bilateral ties with Beijing. This dual-track approach requires careful calibration to avoid alienating either Washington or Beijing, while advancing Seoul’s core interest in stable mineral supplies.
Expanding the Supply Web
Beyond the binary choice of Western alliances or Chinese supplies, South Korea is actively cultivating alternative sources across multiple continents. The government has allocated 250 billion won (approximately $172 million) in state funds to support local companies developing overseas mines, with policy loans for overseas resource development increasing to $46.2 million this year from $26.6 million in 2025. The state financing coverage ratio will expand to 70 percent from 50 percent, reducing risks for private sector investment in politically volatile regions.
Australia represents the most developed of these alternative partnerships. Under the two countries’ 2021 comprehensive strategic partnership, Australian mining company Pilbara Minerals and South Korean steel giant POSCO completed a lithium hydroxide facility in South Korea processing spodumene concentrate from Western Australian operations. This joint venture creates a vertically integrated supply chain bypassing Chinese processing facilities. Similarly, Wesfarmers Chemicals signed an agreement to supply up to 85,000 tonnes of lithium concentrate to LG Energy Solution, while Australian Strategic Materials secured its first commercial sale of heavy rare earth metals processed at its Korean Metals Plant in Cheongju.
In October, Australian Prime Minister Anthony Albanese and former U.S. President Trump signed a critical minerals agreement giving the U.S. access to Australian rare earth minerals in return for investment, creating a trilateral link that benefits South Korean manufacturers operating in the U.S. supply chain. The Australia-South Korea partnership stands out for its ability to convert shared strategic intent into industrial cooperation spanning mining, refining and advanced manufacturing.
In Southeast Asia, South Korea is pursuing partnerships with Vietnam and Laos to diversify rare earth supplies. Vietnam holds approximately 18 percent of the world’s rare earth element reserves, while the Philippines accounts for 5 percent of nickel reserves and Indonesia possesses roughly 22 percent of global nickel reserves. However, structural challenges including limited processing capacity, weak regulation and outdated refining technology currently hinder the region’s ability to attract investment. South Korea and ASEAN launched a $5.6 million project on critical minerals management in July 2024, with capacity-building programs planned through 2028.
Mongolia offers another potential corridor for diversification, located just 2,000 kilometers from Seoul. Landlocked between China and Russia, Mongolia possesses substantial mineral wealth but requires development assistance to enhance extractive capabilities. South Korea has provided official development assistance averaging $53 million annually between 2018 and 2024, establishing a Rare Metals Cooperation Committee in November 2023. Seoul appears to believe that providing development aid will encourage the export of goods derived from extracted materials to South Korea. However, geography constrains Mongolia’s utility as all exports must transit through Chinese or Russian territory, potentially subjecting them to third-party political pressure.
Domestic Resilience and Recycling
Recognizing that external diversification alone cannot eliminate vulnerability, Seoul is implementing robust domestic measures. The Special Act on National Resources Security, which entered into effect in February, introduced an early warning system, mandated stockpiling of key resources, and empowered the government to take emergency measures including price controls and supply allocation during crises. Authorities will designate 33 minerals as critical to economic security, with 10 classified as strategic minerals essential for electric vehicles and batteries receiving priority monitoring.
Recycling has emerged as a crucial component of the strategy. South Korea maintains a comprehensive roadmap for critical mineral recycling, one of only three nations alongside China and the European Union with such long-term planning. According to the International Energy Agency, scaling up recycling could reduce the need for primary minerals production by 25 to 40 percent by 2050 and save $600 to $800 billion in mining investments. The government aims to increase the share of critical minerals sourced from recycled materials from 2 percent to over 20 percent by 2030, with annual revenues in the battery recycling industry forecast to surpass $95 billion globally by 2040.
The state-run Korea Mine Rehabilitation and Mineral Resources Corporation manages a longstanding stockpile of critical minerals, part of a broader Asian trend that includes Japan’s international resource strategy adopted in March 2020. These stockpiles serve as buffers against sudden export restrictions or geopolitical disruptions. South Korea is also expanding its stockpile capacity and developing an eight-day rapid-response distribution system to prepare for supply shocks, significantly faster than traditional procurement timelines.
Additionally, Seoul is pursuing technological innovation to reduce material intensity. The government has prioritized developing substitute materials for rare earths in semiconductor manufacturing and advancing recycling technologies through regulatory reforms and subsidies for new facilities. These efforts align with similar strategies in the United States and Japan, creating opportunities for trilateral cooperation on non-geological solutions to supply constraints.
The Strategic Calculus
South Korea’s dual-track approach reflects a sophisticated understanding of economic security in an era of great power competition. The RAND Corporation’s analysis of trilateral cooperation among South Korea, Japan, and the United States identifies opportunities for joint stockpiling initiatives, mineral swap agreements, and pooled resources targeting foreign mining projects. However, analysts note that barriers remain, including competition between South Korean and Japanese firms in battery and semiconductor sectors, and historical divides that complicate deep economic integration.
The strategy also acknowledges the limitations of immediate decoupling. While the United States has aggressively pursued alternative supply routes and established Project Vault, a $12 billion strategic minerals stockpile funded by $2 billion in private capital and a $10 billion loan from the U.S. Export-Import Bank, South Korea lacks the domestic mineral resources to support similar autarky. The nation’s eight-day rapid-response distribution system and expanded stockpile capacity represent the maximum feasible insulation given geographic and geological constraints.
China’s October expansion of export controls demonstrated the risks of over-reliance, yet also showed that Beijing prefers calibrated pressure to complete cutoff. By maintaining diplomatic and commercial channels while simultaneously chairing the Western diversification effort, Seoul attempts to mitigate the worst-case scenario while building long-term resilience. The approach requires constant maintenance of relationships with both Washington and Beijing, each of which suspects Seoul’s commitment to the other’s camp.
The coming months will test the viability of this hedging strategy. As chair of FORGE through June, South Korea must demonstrate tangible progress in diversifying supply chains while maintaining the Chinese imports that currently sustain its semiconductor and battery industries. The 17 critical minerals designated for heightened national security monitoring represent the red lines where supply disruptions could cause immediate economic damage. Success would establish South Korea as a model for resource security in an age of strategic competition; failure could demonstrate that geopolitical neutrality carries unsustainable costs when supply chains become weaponized.
The Essentials
- South Korea announced a hotline and joint committee with China to secure critical mineral supplies, just one day after joining a U.S.-led trade bloc to reduce dependence on Beijing.
- Seoul will chair the Forum on Resource Geostrategic Engagement (FORGE) through June, succeeding the Minerals Security Partnership as the first non-U.S. chair nation.
- The government designated 17 critical minerals as essential for national security and will allocate 250 billion won ($172 million) to support overseas mining ventures.
- South Korea aims to reduce critical mineral import dependency from 80 percent to 50 percent by 2030 through partnerships with Australia, Vietnam, Laos, and Mongolia.
- The country targets increasing recycled critical minerals from 2 percent to over 20 percent of supply by 2030, with new stockpiling mandates under the Special Act on National Resources Security.
- China controls approximately 60 percent of rare earth reserves and 90 percent of processing capacity, prompting export restrictions that threaten South Korea’s semiconductor and battery industries.
