Critical Mineral Security in an Era of Rising Geopolitical Risk
The Need for Global Cooperation and Resource Supply Chain Network-Building
Seon-Yong Kim, Ph.D. in Economics
Department of Gas Policy Research / Associate Research Fellow
The Front Line of Resource Security Is Shifting to Critical Minerals
In October 1973, during the Fourth Arab–Israeli War, Arab oil-producing countries progressively cut production and imposed an oil embargo on the United States and the Netherlands. Oil prices nearly quadrupled within a few months, but the more immediate concern was the physical shortage of supply. Long queues formed at gas stations, several European countries introduced Sunday driving bans, and Japan experienced negative economic growth in 1974 for the first time since the war. The crisis made clear that energy security was not merely an economic concern but a matter of national security. It also prompted the establishment of the International Energy Agency (IEA) in 1974 and the introduction of emergency oil-stockholding arrangements.
Half a century later, a similar dynamic is emerging in critical minerals. As U.S.–China strategic competition has intensified, extending to tariffs and technology controls, China has progressively expanded its export controls—from gallium and germanium in 2023 to graphite, antimony, tungsten, and seven rare earth elements. The effects were felt quickly. Following the controls introduced in April 2025, China’s rare earth magnet exports in May fell by approximately three-quarters year on year, forcing Ford, Suzuki, and several European auto-parts suppliers to suspend some production lines. In October 2025, China also announced extraterritorial controls covering products manufactured in third countries that contain Chinese-origin rare earths. Although implementation of these measures has been suspended under the U.S.–China trade truce, which has since been extended through early 2027, critical minerals have become instruments of retaliation and geoeconomic leverage. Unlike oil, however, critical minerals still lack an international safety net comparable to coordinated emergency stockpiles.
Pressures are also mounting on the demand side. Critical minerals are essential to the energy transition: rare-earth permanent magnets are used in wind turbines and electric-vehicle motors, while lithium, nickel, cobalt, and graphite are key materials for batteries and energy-storage systems. Artificial intelligence (AI) is adding another source of demand. Data-center electricity consumption is projected to more than double by 2030, driving demand for renewable energy, copper for data centers and power grids, and minerals such as gallium for semiconductors. The spread of physical AI will add further pressure, as robots require permanent-magnet actuators in their joints and batteries to power their operations. With defense and other advanced industries adding to these demands, global consumption of critical minerals is expected to rise substantially above current levels.
South Korea is among the countries most exposed to these changes. It hosts world-leading battery and semiconductor industries, yet relies almost entirely on imports for lithium, nickel, cobalt, and manganese. Its dependence on China for cathode precursors and anode materials reaches as high as 90 percent. The very industrial competitiveness that underpins Korea’s economic strength also leaves it highly vulnerable to supply chain disruptions.
What Makes Critical Mineral Supply Chains Different
Oil and gas supply chains generally follow a relatively linear path from extraction and transportation to end use. The tools for managing supply risks—including strategic reserves, supplier diversification, and long-term contracts—are also well established internationally. Critical minerals, by contrast, pass through a complex, multi-stage supply chain, spanning mining, beneficiation, smelting, refining, and materials processing to component manufacturing and final-product assembly. Each stage requires distinct resources, technologies, and capital investment, creating its own potential bottlenecks. A disruption at any one stage can constrain the entire chain, bringing downstream production to a halt.
The greater challenge is that supply concentration tends to increase, rather than decrease, farther downstream. China accounts for more than 60 percent of global rare earth mining, but its share exceeds 90 percent in separation and refining and permanent magnet manufacturing. Although lithium mining is distributed across Australia, Chile, and other countries, roughly two-thirds of global lithium refining still takes place in China. More than 90 percent of Australia’s lithium production is also shipped to China as spodumene concentrate for further processing. This “inverted funnel” structure—one that narrows farther downstream—means that simply acquiring equity stakes in mines is insufficient to secure supply chains.
Policy shifts in resource-rich countries add another layer of uncertainty. Indonesia, Zimbabwe, the Democratic Republic of the Congo, and Chile, among others, are seeking to retain more economic value domestically through measures such as raw-ore export bans, higher royalties, nationalization, and domestic-processing requirements. Yet the outcomes have not always matched these ambitions. Indonesia, for example, developed a substantial nickel-processing industry after banning nickel ore exports, but Chinese capital controls an estimated 75 percent of the country’s processing capacity. Resource nationalism without the necessary processing technologies and investment capital can therefore reinforce, rather than reduce, China’s dominance. Experience repeatedly demonstrates that mineral reserves alone do not guarantee resource sovereignty.
How Major Economies Are Responding: Midstream Focus, Direct Intervention, and Alliances
Major economies are adopting approaches tailored to their respective circumstances. The United States has opted for direct government intervention to reshape market incentives and supply chains. It supports domestic production through measures such as the Section 45X advanced manufacturing production tax credit under the Inflation Reduction Act (IRA) and has invoked the Defense Production Act to expand domestic critical mineral production. In February 2026, it launched Project Vault, a $12 billion public–private initiative to build a strategic stockpile of critical minerals. It has also pursued direct intervention in the rare earth market: under an agreement with MP Materials, the U.S. Department of Defense established a $110-per-kilogram price floor for neodymium-praseodymium (NdPr) products and a 10-year offtake arrangement for magnets produced at the company’s planned manufacturing facility.
Major economies are adopting approaches tailored to their respective circumstances. The United States has opted for direct government intervention to reshape market incentives and supply chains. It supports domestic production through measures such as the Section 45X advanced manufacturing production tax credit under the Inflation Reduction Act (IRA) and has invoked the Defense Production Act to expand domestic critical mineral production. In February 2026, it launched Project Vault, a $12 billion public–private initiative to build a strategic stockpile of critical minerals. It has also pursued direct intervention in the rare earth market: under an agreement with MP Materials, the U.S. Department of Defense established a $110-per-kilogram price floor for neodymium-praseodymium (NdPr) products and a 10-year offtake arrangement for magnets produced at the company’s planned manufacturing facility.
The European Union, by contrast, leverages the regulatory power of its single market. The Critical Raw Materials Act (CRMA) establishes non-binding 2030 benchmarks under which EU capacity should meet at least 10 percent of annual consumption through domestic extraction, 40 percent through processing, and 25 percent through recycling. It also seeks to diversify imports by limiting dependence on any single non-EU country to no more than 65 percent of the EU’s annual consumption of any strategic raw material. Complementary measures, including the EU Battery Regulation and supply-chain due-diligence requirements, use access to the European market to encourage more sustainable and resilient global supply chains.
Japan, a resource-poor country, offers a particularly relevant model for South Korea. In 2011, following the 2010 Senkaku Islands dispute with China, Japan’s state-backed Japan Oil, Gas and Metals National Corporation (JOGMEC), together with trading company Sojitz, invested in Australian rare earth producer Lynas to diversify Japan’s supply sources. Rather than treating the investment as a one-off response to a crisis, Japan continued its support in 2023, committing an additional AUD 200 million to expand production and develop heavy rare earth separation capacity. As a result, when China imposed export controls on heavy rare earths in 2025, Japan already had an alternative source of supply.
Resource-rich Australia and Canada, meanwhile, are seeking to move beyond extraction by expanding domestic refining and processing capacity. They are also tightening scrutiny of investment from countries considered security risks while actively attracting capital and technology from trusted partners. Through these efforts, both countries are positioning themselves as important hubs in more diversified, non-Chinese critical mineral supply chains.
Three common trends emerge from these policies. First, the policy focus is shifting from mining toward midstream and downstream activities, particularly refining and materials processing. Second, the role of government is evolving from indirect support through subsidies and tax incentives to more direct intervention through equity investments, offtake agreements, and price floors. Third, resource security has become a central agenda in alliance diplomacy, as reflected in initiatives such as the Minerals Security Partnership (MSP) and its successor, the Forum on Resource Geostrategic Engagement (FORGE), launched in 2026, the Quad Critical Minerals Initiative, and the G7 Critical Minerals Action Plan.
Why Cooperation and Networks Matter
Critical mineral supply chains are exceptionally long, extending from mining to finished-product manufacturing, with each stage requiring distinct capabilities. Mining depends on accessible reserves, permits, and supporting infrastructure such as reliable power and port facilities. Refining requires advanced process technologies and substantial, long-term capital investment. Materials and component manufacturing, in turn, depends on industrial capabilities, technical expertise, and reliable offtake arrangements. Few countries possess all these capabilities within their own borders. Even the United States is developing its supply chains on the basis of a division of labor with allies and partners, rather than pursuing complete self-sufficiency.
Viewed from this perspective, a diversified, non-Chinese supply chain can be built only by combining the complementary strengths of different countries. Australia, Canada, and countries across Latin America and Africa possess abundant mineral resources. South Korea and Japan bring expertise in refining, materials processing, battery technologies, and advanced manufacturing, while the United States and the European Union contribute capital, market access, and regulatory standards. By dividing responsibilities across different stages of the supply chain, countries with abundant mineral resources can work with those possessing processing technologies to address bottlenecks without requiring any single country to bear the burden alone.
Such cooperation is also the most practical way to respond to policy shifts in resource-rich countries. When these countries restrict raw-ore exports and require domestic processing, their underlying objective is generally to capture more value locally and promote industrialization. Achieving these goals requires processing technologies, investment, and capable partners. Countries that can offer these assets are therefore better positioned to negotiate mutually beneficial arrangements. To date, Chinese capital has played a dominant role in filling this gap. Countries with advanced processing technologies should now work together with like-minded partners to offer an alternative backed by financing and long-term investment.
Japan’s involvement in a rare earth mining project in Namibia and a refining project in France illustrates this approach. Its appeal as a partner rests not simply on the scale of its financial resources, but also on the value of its refining expertise and magnet technologies. South Korea, too, could offer emerging resource-producing countries in Indonesia, Latin America, and Africa integrated partnership packages combining processing technologies, infrastructure investment, and workforce training. Because some of these countries are reluctant to join frameworks perceived as overly bloc-oriented, bilateral partnerships should be pursued alongside multilateral cooperation.
South Korea’s circumstances make international cooperation all the more important. Through three supply chain-related laws and a series of critical mineral strategies, the country has rapidly established an institutional foundation for strengthening supply chain security. Its 2026 budget for overseas resource development loans also rose by 73 percent from the previous year, reaching KRW 67.5 billion. Nevertheless, competing for equity stakes in overseas mines on the basis of financial resources alone is difficult when major economies can commit comparable or even larger sums to individual projects.
A more realistic strategy is for South Korea to establish a distinctive role within cooperative networks by offering an integrated package that combines its refining and materials-processing technologies with reliable demand from its battery and semiconductor industries. In this way, South Korea can serve as a technology and offtake partner for resource-producing countries while providing its allies with a source of midstream processing capacity outside China.
Directions for Full-Cycle Supply Chain Cooperation
First, at the sourcing stage, South Korea should continue to secure equity stakes in overseas resource projects. The eligibility and allocation criteria for its overseas resource development loan program should be clarified to ensure that the program’s expanded support reaches critical mineral projects. FORGE and the MSP Finance Network, launched in 2024, provide channels through which South Korea can identify and pursue joint investment opportunities with the United States and other partners.
Second, strengthening refining and processing capacity is the most urgent priority. The South Korean government has already identified the expansion of domestic refining and processing capacity as a policy objective. To translate this objective into action, the institutional framework should be strengthened to facilitate equity investments and debt guarantees for overseas refineries and domestic beneficiation and smelting facilities. Japan took steps in this direction through amendments to the JOGMEC Act in 2020 and 2022.
In particular, jointly developing refining facilities in resource-rich countries using South Korean technology could help those countries meet domestic processing requirements while improving South Korea’s access to raw materials. Australia and Canada are promising partners. Australia seeks to move beyond raw-material exports toward greater domestic processing, but faces challenges in securing the necessary technologies and reliable offtake commitments. Canada, meanwhile, has nickel sulfide resources that could support the production of battery-grade materials, and its mineral supply chains are closely connected to the North American market in which South Korean battery manufacturers operate. Joint refining projects backed by long-term offtake agreements could therefore create mutual benefits by combining resource access, processing expertise, and reliable demand.
Third, at the materials and demand stage, mechanisms are needed to ensure that non-Chinese supply chains remain commercially viable. When China expands production and drives prices down, alternative suppliers can struggle to remain competitive, as illustrated by the successive suspensions of operations at five nickel mines in Western Australia in 2024. A coordinated policy package could combine public guarantees for long-term offtake agreements, price floors, and environmental, social, and governance (ESG) and traceability requirements in public procurement.
A price floor can function more like insurance against market collapse than a conventional subsidy: depending on its design, it may entail little or no fiscal expenditure under normal market conditions, with public support activated only when prices fall below a specified threshold. Such mechanisms are likely to be more effective when coordinated with allies. The United States, Australia, and Japan have incorporated price floors or other pricing arrangements into bilateral frameworks to support critical mineral supply chains. As an initial step, South Korea could explore linking North American raw-material procurement by Korean battery manufacturers with U.S. strategic stockpiling and price-support mechanisms.
Fourth, at the recycling stage, Korea must prepare in advance for the large volumes of end-of-life batteries expected in the 2030s. Only by building both collection systems and refining capacity can Korea prevent the value of its “urban mines” from flowing abroad. If Korea can go further and become an international resource circulation hub that processes scrap from across Asia with its own recycling and refining capabilities, recycling itself will strengthen Korea’s position within cooperative networks. The recycled content, carbon footprint and due diligence requirements of the EU’s Battery Regulation and CRMA impose additional compliance burdens on Korean companies. However, if they are linked to cooperation on recycling and traceability technologies and to discussions on mutual recognition, these requirements could also become an opportunity for partnership.
Conclusion: Acting After a Crisis Is Too Late
Developing a mine typically takes more than a decade from exploration to production. If investment begins only after a supply disruption occurs, new sources of supply may not become available until long after the crisis has passed. Moreover, momentum behind efforts to diversify supply chains has repeatedly weakened whenever China has eased its export controls. Japan’s experience offers an important lesson: it had alternative sources of supply when a crisis struck precisely because it continued investing when the immediate pressure had subsided.
This issue is particularly important for the South Korean economy. Batteries, semiconductors, and automobiles—and increasingly, defense and shipbuilding—are key drivers of South Korea’s exports and economic growth, and all depend on reliable access to critical minerals. In 2021, South Korea experienced firsthand how a disruption in the supply of even a relatively inexpensive input could have far-reaching consequences. China’s export restrictions on urea triggered a shortage of diesel exhaust fluid, raising concerns about nationwide disruptions to logistics and transportation. A disruption in critical mineral supplies could have an even broader impact, affecting not only South Korea’s major industries but also employment and exports.
Securing critical minerals should therefore be treated not merely as a concern for the resource sector, but as a prerequisite for maintaining South Korea’s industrial competitiveness and safeguarding its economic security.
At the same time, South Korea has the capabilities to contribute to building global supply chains. It is one of the few countries that combine refining, materials, battery and semiconductor manufacturing capabilities with large and stable demand, which can improve the viability of new supply projects. On this basis, South Korea can serve as a bridge, providing technology and offtake to resource-rich countries seeking industrialization, and non-Chinese midstream processing capacity to partner countries seeking to diversify supply. South Korea’s chairmanship of FORGE in 2026 also provides a basis for playing a more active role in shaping the rules of international cooperation on critical minerals.
Resource security is no longer a matter of responding to crises as they arise; it is an ongoing strategic task that requires the integration of industrial, diplomatic, and technology policies. South Korea must ensure policy consistency through medium- and long-term strategies backed by multi-year budgets, using its First Basic Plan for Resource Security as a foundation. By leveraging its technological and industrial strengths through international cooperation networks, South Korea can move beyond its role as a consumer in global resource supply chains and become an indispensable partner in building more resilient ones.