Betting Big on Reducing Dependence on China
Korea Zinc, POSCO, and LS Move Quickly
Concerns Grow over Potential Backlash from Decoupling from China
With the official launch of the new critical minerals consultative body led by the United States, the FORGE Initiative, and Korea taking the lead as its inaugural chair country at the forefront of supply chain restructuring, the moves of Korean companies are also evolving beyond simple raw material procurement toward a practical phase of "resource self-reliance." According to the government and industry on the 6th, major companies such as Korea Zinc, Posco, and LS are accelerating "vertical integration" that spans rare earth separation, refining, and finished product manufacturing in third countries, in order to reduce their dependence on supply chains concentrated in specific countries.
◆ Korea Zinc signs rare earth production partnership with U.S. company = Korea Zinc signed a "strategic partnership for rare earth production" last month with U.S. technology company Alta Resources Technologies. Alta Resources Technologies is a U.S. company that owns precision mining technology, and Korea Zinc plans to use the partnership to recycle and refine waste permanent magnets into high-purity rare earth oxides and produce rare earths.
Based on the partnership, the two companies plan to establish a joint venture in the United States and build related facilities on the site of a U.S. business location currently operated by Pedalpoint, Korea Zinc's U.S. subsidiary. Since 2022, Korea Zinc has been building a resource-circulation value chain through Pedalpoint by acquiring e-waste recycling company Igneo, electronics recycling company evTerra, scrap metal trading company Catrman Metals, and IT asset management company MDSi.
Korea Zinc has been pursuing the rare earth business by diversifying its domestic smelter operations. The company built a new germanium plant at its Onsan Smelter in Ulsan and signed a contract to supply germanium to Lockheed Martin. It also decided to invest about 56 billion won by 2027 to install a gallium recovery process at the Onsan Smelter in order to produce gallium in-house, which had been the first item subject to China's export controls.
Chairman Choi Yoonbum of Korea Zinc has personally stepped forward to underscore the importance of securing critical mineral supplies. Attending the World Economic Forum (WEF, Davos Forum), he served as an official speaker in the session on "Strategic Partnerships and Investment in Critical Minerals," identifying "time" as the fundamental constraint in supply chain issues and emphasizing the importance of building a long-term integrated system.
◆ Posco and LS, from raw materials to finished products in one go = Posco International is pursuing a vertical integration strategy that connects the entire process from rare earth mining and separation/refining to permanent magnet manufacturing into a single value chain. The plan is to go beyond simple raw material procurement and directly link this to the production of intermediate and finished products, thereby securing both supply stability and competitiveness.
The key base of this strategy is the United States. Posco International is pushing to create an integrated production complex in the U.S. that covers rare earth separation/refining and permanent magnet manufacturing. Using non-Chinese rare earth raw materials, the structure is designed to carry out the entire process locally, from raw material processing to magnet manufacturing and recycling, with the goal of establishing a North American rare earth supply chain.
Substantial demand has already been secured. Posco International signed a long-term supply contract for about 7,700 tons of permanent magnets with a North American automaker for the period from 2026 to 2031. This volume is sufficient for more than about 3.8 million electric vehicles and is based on the premise that the U.S. local production complex will be in operation. It has also signed a permanent magnet supply contract with a European automaker.
LS Ecoenergy plans to build rare earth metallization facilities at its manufacturing subsidiary in Ho Chi Minh City, Vietnam, and produce rare earth metals by refining rare earth oxides supplied by mining companies. Through this, it aims to complete the rare earth permanent magnet value chain (global mining companies → Vietnam/LS Ecoenergy → United States/LS Cable). LS Ecoenergy has invested 38.5 billion won in this project.
As companies continue to move away from China, some warn that a backlash could arise, calling for a cautious approach. Heo Yoon, a professor at the Graduate School of International Studies at Sogang University, said, "The United States, Canada, and Australia, and more recently Japan as well, are attempting to diversify supply chains to some extent, but there has not yet been any change significant enough to shake China's position in practical terms," adding, "I believe it will take considerable time before alternative supply chains are actually up and running." He continued, "The discussions emerging in the West are closer to countries putting their heads together to seek long-term solutions, rather than immediately replacing China," and added, "While participation by our country and companies is necessary, we do need to think carefully about whether we really have to go as far as taking on the chair role of the Minerals Security Partnership (MSP)."
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