S. Korea declared 'de-China' rare earths push — but six months on, little to show

South Korea's Ministry of Trade, Industry and Energy announced earlier this year a plan to restore the government's direct investment function in overseas resource development projects as part of a push to reduce reliance on China for rare earths — but six months later, the initiative has made no internal progress and consultations with the National Assembly have yet to begin.

The ministry's plan to revive overseas direct investment by the Korea Mine Rehabilitation and Mineral Resources Corp. — announced in February as part of a "rare earths supply chain master plan" — has produced no tangible results to date.

The ministry has held several meetings chaired by the official in charge of the minerals sector but has failed to settle on a concrete direction, according to officials familiar with the matter. "We have only held governance meetings aimed at the broad goal of reorganizing the Korea Mine Rehabilitation and Mineral Resources Corp.," a ministry official said.

Direct overseas investment by the corp., a ministry-affiliated body that supports private resource development, is central to the government's rare earths localization strategy. The corp.'s direct investment function has been legally prohibited since 2021, after its predecessor, the Korea Resources Corp., fell into capital impairment following a string of failed investments. The government's aim is to revive that function and diversify rare earth import sources away from China.

The policy response came shortly after China — which dominates the global rare earths market — announced it would restrict rare earth exports amid escalating tensions with the United States. Because rare earths are essential materials for advanced industries including semiconductors, the government moved to ease concerns among domestic companies. Of the 2,056 tons of rare earth compounds South Korea imported last year, Chinese-origin material accounted for 92 percent, or 1,908 tons.

Reviving the corp.'s direct investment authority requires amending the Korea Mine Rehabilitation and Mineral Resources Corp. Act, yet consultations with the National Assembly have not advanced. The government had originally planned to work with the Assembly to grant the corp. a comprehensive resource development project management function. A related bill has already been introduced but has been stalled for nearly a year.

People Power Party lawmaker Kang Seung-gyu introduced the amendment bill — with the revival of direct investment as its centerpiece — in October last year. An aide in Kang's office said the lawmaker had been on the standing committee overseeing the corp. when the bill was filed, but moved to a different committee after this year's Assembly reorganization. "If the government formally begins the amendment process, we plan to convey the intent behind the bill," the aide said, "but for the time being there is no separate movement on our end."

While South Korea's policy response stalls, competitors in advanced industries have moved early to invest in markets that could replace China. Large-scale investment is already under way in Brazil (21 million tons of reserves), India (6.9 million tons) and Australia (5.7 million tons) — countries with the largest rare earth deposits after China but where resource development remains slow. China, seeking to maintain its dominance, and Japan, like South Korea trying to cut its dependence on Chinese supply, have been the most aggressive investors.

Industry observers are paying particular attention to Japan's government support model. Under the umbrella of JOGMEC, a state energy agency with an annual budget of 1 trillion won ($700 million), Japan has cut its reliance on Chinese rare earths from 90 percent in 2010 to around 50 percent in recent years.

Choi Young-jae, an executive director at POSCO International, highlighted Japan's approach at a critical minerals supply chain forum held at the National Assembly earlier this year. "JOGMEC directly subsidizes up to 50 percent of project costs when building a rare earth procurement network," Choi said, adding that the agency also guarantees about 20 percent of mineral demand at fixed prices, effectively absorbing price risk on behalf of the industry.

In a report released in April last year, the Korea Energy Economics Institute assessed Japan's model favorably. "Despite scarce domestic resource endowments, Japan developed a unique path combining a 'public-private unity' overseas resource development model centered on JOGMEC with the networks of general trading companies," the institute said, calling it "the most realistic resource security model available to a resource-poor country."