[New Weapon Rare Earths] Resource-Poor Korea... Experts Say "Must Be Managed by National Control Tower"

High Alert in Korean Industry Highly Dependent on China
Increased Presence of Rare Earths in Electric Vehicle Production
Looking to 'Australia' but Cannot Ignore World's Largest Rare Earth Producer
Experts Say "Need for Import Diversification and Overseas Resource Development"

A rare earth mine in China.
Photo by Asia Economy DB

[Asia Economy Reporters Han Yeju and Kim Pyeonghwa] As the United States imposes export control measures on semiconductors to China, China is expected to pull out the rare earth weaponization card. Chinese authorities have already completed most of the preliminary preparations for weaponizing rare earths. Domestic companies have world-class export competitiveness but rely on imports for most raw materials used in industrial activities. The same applies to rare earths. This means that with a single word from China, domestic companies could face a 'rare earth supply cliff.' [News Terminology] Rare Earths, Essential Materials of Electronic Civilization

Experts emphasize that since this is an issue that cannot be addressed at the private level, the government must actively prepare alternatives. There are calls to establish a control tower under the government to strategically secure critical mineral resources, including rare earths.

Currently, domestic companies are turning to Australia to reduce dependence on Chinese rare earths. Australia's status has been further elevated recently due to the implementation of the U.S. Inflation Reduction Act (IRA). The IRA sets the condition for electric vehicle subsidies that raw materials must be sourced from the U.S. or countries that have free trade agreements (FTA) with the U.S. Australia is a resource-rich country and has an FTA with the U.S. Hyundai Motor Company recently signed a memorandum of understanding with Australian rare earth company Arapura Resources for this reason. The plan is to reduce dependence on China and mitigate supply chain risks by securing Australian rare earths.

Despite private efforts, the influence of China, the world's largest rare earth producer, is expected to remain strong. According to a report by the U.S. Geological Survey (USGS), China accounted for 60% (168,000 metric tons) of global production in 2021, ranking overwhelmingly first. Australia's production was 22,000 metric tons, only about 8% of the global annual production (280,000 metric tons). This is why there are repeated calls for the government to prepare mid- to long-term responses.

The government has yet to find a clear alternative. Rather, it appears less proactive in securing critical resources compared to the past. According to data received by Jeong Uncheon, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Business Committee from the Korea Mining and Resources Corporation, the domestic rare earth resource development rate has been declining every year. The resource development rate is the ratio of resources secured through overseas resource development relative to total imported resources. This ratio increased to 24.9% in 2014 but sharply declined after 2015, falling to 0.2% last year. To make matters worse, the Korea Resources Corporation, which led overseas mineral investments by domestic companies, merged with the Korea Mine Reclamation Corporation last year. Not only has the budget for overseas resource development and related projects been continuously reduced, but the overseas resource development functions of related institutions have also been eliminated.

Lee Jaesoo, head of the Asia-Pacific Cooperation Team at the Federation of Korean Industries, said, "There are institutional issues for the private sector to enter overseas resource development, and cooperation with the host country's government is required when promoting projects, so government support is essential." He advised, "From the perspective of future industries, rare earths should be approached as national strategic resources, and more negotiation and support measures should be taken to secure mines."

Kim Donghwan, president of the National Strategic Resources Institute, also pointed out, "In the past, neglecting resource acquisition was acceptable, but now it cannot be postponed. Since rare earths are used wherever machines operate, efforts should be made to build supply chains based on regions outside China while maintaining price competitiveness." He added, "A control tower should be established under the Prime Minister to manage resources."

There were also opinions emphasizing the importance of securing original technology. Kang Cheongu, an invited professor in the Department of Energy Resources Engineering at Inha University, said, "Japan does not have rare earths but has original technology to develop permanent magnets using some of the 17 rare earth elements, and secures raw materials from China and others." He pointed out, "Since Korea has secured technology to separate and refine rare earth elements, it should devise strategies such as win-win cooperation with Japan."