"China Weaponizes Rare Earths... Need to Establish Domestic Supply Chain"

[Sejong=Asia Economy Reporter Kwon Haeyoung] As China, which controls more than 70% of the world's rare earth production, has started to 'weaponize rare earths,' there are claims that South Korea urgently needs to establish its own supply chain to reduce dependence on Chinese imports of rare earths, along with the United States, the European Union (EU), and Japan.

On the 13th, the Korea International Trade Association's Institute for International Trade and Commerce released a report titled 'Current Status and Implications of Rare Earth Supply Chains in South Korea and Major Countries,' making this assertion.

Rare earths are difficult to produce due to environmental pollution and other issues, yet they have an excellent effect in enhancing the functionality of materials even in small quantities. They are difficult to substitute with other elements, so countries worldwide have long recognized their strategic value. They are widely used in advanced industries such as semiconductor abrasives, petrochemical catalysts, lasers, and fighter jets, and recently, demand has increased as they are essential core materials for permanent magnets used in eco-friendly industries like electric vehicles and wind power generation.

However, on the supply side, China controls more than 70% of global production. Although rare earth deposits have been confirmed in some areas of South Korea, they are not economically viable, so the country relies entirely on imports. In particular, for neodymium permanent magnets (NdFeB), the import dependence on China reaches as high as 88%.

Accordingly, the United States, the EU, Japan, and others are putting all their efforts into building regional supply chains to reduce dependence on China and secure stable procurement of rare earths. Especially, the United States, in a report announced on the 8th, recommended reviewing the application of Section 232 of the Trade Expansion Act for neodymium permanent magnets, indicating that it will reduce dependence on Chinese permanent magnets from a national security perspective.

The report suggested that South Korea also needs a supply chain construction strategy that considers the entire process of securing rare earth raw materials, developing processing technology, stockpiling, and resource circulation from the perspective of industrial security. It pointed out the importance of establishing a national-level control tower to manage supply chain risks for key strategic items and inducing the rare earth industry ecosystem to stabilize domestically through cooperation between demand and supply companies.

Furthermore, it proposed including neodymium and other elements in the stockpiling target minerals and subdividing the HS codes (internationally standardized item and code system) of rare earths by element or processing stage to facilitate smooth monitoring of supply and demand trends.

Kim Kyunghoon, a research fellow at the Korea International Trade Association, said, "For South Korea to secure global leadership in eco-friendly and advanced industries, stable procurement of rare earths, which are key raw materials, is essential," adding, "Taking the opportunity of the United States emphasizing cooperation with allies to build supply chains for four core items, South Korea should also cooperate with friendly countries to diversify rare earth supply sources and establish domestic supply chains."

This content was produced with the assistance of AI translation services.