🚨 Rare Earth Elements

Today Korean Social News for Beginners | 2025.10.19

0️⃣ U.S.-China Resource War and Korea's Supply Chain Strategy

📌 U.S.-China 'Rare Earth War' Heats Up... Korea Expects Limited Impact on Supply Chain

💬 The United States and China have reignited their conflict over rare earth elements. China announced extraterritorial export controls requiring government approval when using Chinese rare earths overseas, and the U.S. responded by declaring a 100% tariff on Chinese rare earth elements. Rare earths are essential for semiconductors, electric vehicles, fighter jets, and artificial intelligence, but the supply chain is very vulnerable as China controls 90% of the refining and processing market. The Korean government assesses that short-term impact will be limited as Korea has a 6-month stockpile, but plans to minimize supply chain risks by actively using export control dialogue with China and FTA channels.

💡 Summary

• Rare earth elements are 17 rare metal elements essential for high-tech industries.
• The rare earth war is intensifying with China's extraterritorial export controls and U.S. 100% tariff.
• Korea expects limited short-term impact but needs supply diversification and technological independence long-term.

1️⃣ Definition

Rare earth elements are a group of 17 rare metal elements on the periodic table, including neodymium, samarium, cerium, lanthanum, and dysprosium. The name "rare earth elements" comes from when these elements were first discovered and thought to be rare.

In reality, they are widely distributed across the earth, but the mining and refining process is very complex and causes serious environmental pollution, making economically viable production limited to specific locations. Rare earths are used throughout high-tech industries for making powerful magnets, catalysts, phosphors, batteries, and optical lenses, earning them the nickname "21st century oil" or "vitamins of industry."

💡 Why is this important?

• They are key materials for semiconductors, electric vehicles, wind power, missiles, and other high-tech industries.
• China monopolizes production and refining markets, creating high supply chain risk.
• Alternative materials are difficult to develop, making them strategic resources.
• They are being used as key weapons in U.S.-China technology competition.

2️⃣ Rare Earth Supply Chain Status and U.S.-China Conflict

📕 China's Dominance in Rare Earth Market

• China overwhelmingly dominates the rare earth market. Key facts are:

  • China accounts for about 60% of global rare earth production.
  • In refining and processing, China has over 90% market share, essentially a monopoly.
  • Even rare earths mined in other regions are often sent to China for processing.
  • China has invested in rare earth-related technology and infrastructure for decades.

• China's export control measures are strengthening. Main details are:

  • In October 2024, China announced controls on exports of rare earth-related advanced technology.
  • In early 2025, extraterritorial export controls were introduced requiring Chinese government approval even when using Chinese rare earths in third countries.
  • This affects not only the U.S. but all countries including Korea, Japan, and Europe.
  • China appears to be using its rare earths as a strategic weapon to expand diplomatic influence.

📕 U.S. Response and Tariff Imposition

• The U.S. is pushing to restructure rare earth supply chains. Key policies include:

  • The Biden administration began expanding domestic rare earth production to reduce dependence on China.
  • Building alternative supply chains through cooperation with allies like Australia and Canada.
  • The U.S. Department of Defense is securing rare earths as strategic stockpile materials.
  • Conducting large-scale R&D investment in recycling technology and alternative materials.

• The Trump administration announced strong tariff measures. Main points are:

  • Announced a 100% additional tariff on Chinese rare earths.
  • This is seen as a counter-measure to China's extraterritorial export controls.
  • However, U.S. companies will also face significant short-term impact.
  • This raises concerns about increased costs in electric vehicles and wind power industries.

💡 Key Issues in U.S.-China Rare Earth Conflict

1. Supply Chain Monopoly: China controls 90% of refining market, making alternatives impossible
2. Extraterritorial Control: China's strong measures controlling usage even in third countries
3. Burden on Allies: U.S. tariffs also affect companies in Korea, Japan and other allies
4. Industry Impact: Concerns about production disruptions in semiconductors, electric vehicles, and other key industries
5. Long-term Response: Need for supply diversification, recycling, and alternative material development

3️⃣ Korea's Rare Earth Dependence and Response Strategy

✅ Korea's Rare Earth Import Status

• Korea depends on imports for most rare earths. Key facts are:

  • Korea imports all its rare earths from abroad with no domestic production.
  • China is the largest source, but Korea also imports some from the U.S., Vietnam, and others.
  • Key industries like semiconductors, displays, electric vehicles, and wind power heavily depend on rare earths.
  • The government has secured about 6 months of strategic stockpile.

• Short-term impact is assessed as limited. Main reasons are:

  • Korea maintains friendly relations with China and has separate negotiation channels.
  • The Korea-China FTA provides grounds for requesting expedited approval procedures.
  • Stockpiles and diversified import sources mean immediate production disruptions are not expected.
  • However, prolonged conflict could lead to supply instability and price increases.

✅ Government and Corporate Response Plans

• The government has established a multi-layered response strategy. Key measures include:

  • Requesting expedited approval for Korean companies through export control dialogue with China.
  • Strengthening bilateral cooperation and communication using Korea-China FTA channels.
  • Developing alternative supply sources and strengthening relationships with Australia, Vietnam, Canada, etc.
  • Expanding budget for rare earth recycling technology development and alternative material research.

• Companies are also managing risks independently. Key efforts include:

  • Major companies like Samsung, LG, and Hyundai Motor are signing long-term contracts to secure rare earths.
  • Some companies are pursuing direct investment in overseas mines or acquiring stakes.
  • Investing in technology development to reduce rare earth usage and alternative material research.
  • Increasing use of recycled rare earths to reduce dependence on new imports.

4️⃣ Related Terms

🔎 Resource Weaponization

• Resource weaponization means strategically using resources for economic or political purposes.
  • Resource weaponization refers to resource-holding countries restricting exports or manipulating prices to apply economic pressure or gain political concessions from other countries. Notable examples include OPEC's oil export ban in the 1970s and China's rare earth export suspension to Japan in 2010.
  • Main forms of resource weaponization include: First, supply cutoff through export bans or quota settings. Second, price manipulation to increase economic burden on importing countries. Third, using export permit systems as political pressure tools. Fourth, demanding additional conditions like technology transfer or investment requirements.
  • China's rare earth extraterritorial export controls are a typical case of resource weaponization, attempting to maximize influence over global supply chains by controlling usage even in third countries. This poses a serious challenge to international trade order and raises questions about WTO rule violations.

🔎 Supply Chain Risk

• Supply chain risk means the possibility of production disruptions due to instability in sourcing raw materials or parts.
  • Supply chain risk refers to various uncertainties and risk factors that can occur in the procurement, production, and distribution of raw materials, parts, and products. When overly dependent on specific countries or companies, disruptions in supply due to natural disasters, political conflicts, or trade disputes can cause major damage.
  • Main types of supply chain risk include: First, supply disruption risk when supply is cut off due to war, disaster, or policy changes. Second, price volatility risk when prices spike due to supply-demand imbalance or speculation. Third, quality risk when alternative supply sources don't meet requirements. Fourth, logistics risk when transportation delays or customs issues occur.
  • Rare earths have very high supply chain risk due to their irreplaceability and high dependence on China. To mitigate this, countries are making multi-faceted efforts including supply source diversification, strategic stockpiling, recycling technology development, and alternative material research.

🔎 Korea-China Free Trade Agreement (FTA)

• The Korea-China FTA is an agreement to lower trade barriers and strengthen economic cooperation between Korea and China.
  • The Korea-China Free Trade Agreement, which took effect on December 20, 2015, aims to gradually eliminate tariffs on goods and services trade and strengthen investment and intellectual property protection. China is Korea's largest trading partner, and this agreement provides the institutional foundation for bilateral economic relations.
  • Key contents of the Korea-China FTA include: First, over 20 years, Korea will eliminate tariffs on 92% and China 91% of imported goods by value. Second, it includes service market opening and investment protection provisions. Third, it stipulates cooperation in various fields including e-commerce, environment, and competition policy. Fourth, it specifies dispute resolution procedures and bilateral consultation channels.
  • In this rare earth situation, the Korea-China FTA can be an important negotiation tool. The Korean government can use FTA channels to request easing of China's export controls or expedited approval for Korean companies, and discuss supply chain stabilization through regular bilateral consultations.

🔎 U.S.-China Technology Competition

• The U.S.-China technology competition refers to strategic competition between the two countries over 21st century advanced technology leadership.
  • U.S.-China technology competition refers to comprehensive competition between the U.S. and China for dominance in core technology fields of future industries including semiconductors, artificial intelligence, 5G, quantum computing, and aerospace. This goes beyond simple economic competition to take on aspects of strategic confrontation determining security and international order leadership.
  • Main aspects of technology competition include: First, U.S. export controls on China in semiconductors and China's self-sufficiency efforts. Second, fierce competition in AI and big data technology development. Third, competition to preempt 5G and 6G communication technology standards. Fourth, ongoing attempts to dominate supply chains for key resources like rare earths.
  • Rare earths are a key front in this technology competition. Because semiconductors, electric vehicles, wind power, missiles and other advanced weapons and green technologies all depend on rare earths, controlling rare earth supply chains means securing leadership in future technology and security. This is why the U.S. is trying to reduce dependence on China while China is trying to use rare earths as a strategic weapon.

5️⃣ Frequently Asked Questions (FAQ)

Q: What products cannot be made without rare earth elements?

A: Most modern high-tech industries including smartphones, electric vehicles, wind turbines, and advanced weapons would be affected.

• Rare earths are essential materials for modern high-tech, and many products cannot be produced or would be severely limited without them. First, rare earths are used in smartphone and laptop displays, speakers, and vibration motors. Second, neodymium and dysprosium are essential for electric vehicle drive motors. They create powerful permanent magnets that increase motor efficiency. Third, large generators in wind turbines also use rare earth magnets. Fourth, cerium and lanthanum are used as polishing agents and catalysts in semiconductor manufacturing. Fifth, they are widely used in advanced weapon systems including fighter jet engines, missile guidance systems, and laser weapons.
• If rare earth supply is cut off, production in these industries will be disrupted and prices will rise significantly. While alternative material development is ongoing, it hasn't reached commercialization yet, so dependence on rare earths is expected to continue for now.

Q: Why can't Korea produce rare earths domestically?

A: Because rare earth minerals are scarce domestically, the refining process is complex, and environmental pollution is serious.

• There are several reasons why Korea cannot produce rare earths domestically. First, there are almost no economically viable rare earth mines in Korea. While rare earths are distributed worldwide, mines with commercially viable concentrations are limited. Second, rare earth mining and refining processes are very complex and cause serious environmental pollution. Radioactive materials come out together, and large amounts of acidic wastewater and toxic gases are generated, making it unprofitable in Korea with strict environmental regulations. Third, China has dominated the market for decades through massive investment and bearing environmental costs, making new entry economically difficult.
• However, urban mining technology that recovers rare earths from waste electronics and batteries is gaining attention recently. Korea is also increasing investment in recycling technology development, and in the long term, this could help increase some degree of self-sufficiency.

Q: How will rising rare earth prices affect our lives?

A: Prices of electric vehicles, smartphones, and home appliances may increase, and the pace of green transition may slow.

• Rising rare earth prices have direct and indirect effects on our daily lives. First, electric vehicle prices may increase. If prices of neodymium magnets used in EV drive motors rise, vehicle production costs increase and this is reflected in final consumer prices. Second, smartphone and home appliance prices are also affected because rare earths are used in displays and various components. Third, installation costs for renewable energy facilities like wind power may rise, potentially slowing the pace of green transition. Fourth, supply disruptions in semiconductors and electronics could make IT devices more expensive and harder to buy.
• However, since rare earths account for a relatively small portion of product costs, even if prices double, final product prices typically only increase by 5-10%. But if supply itself is cut off, production can stop, making supply stability more important than price.

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