Japan sweeps up rare earth projects as Korea falls behind

South Korean companies are failing to make their mark in the global rare earth investment market even as competitors move in aggressively. While the government has made building a rare earth supply chain a top policy priority, Korean firms are falling behind in the race to secure emerging deposits, industry observers say.

Australia's Lynas Rare Earths is widely regarded as the most viable alternative to Chinese rare earth supply, industry sources said Wednesday. Lynas is the only company outside China capable of producing rare earth materials at scale, mining them in Australia and processing them into finished products in Malaysia.

Korean companies only began paying serious attention to Lynas this year. LS Eco Energy signed an MOU with Lynas in March and recently concluded a mutual investment agreement worth 30 billion won ($21 million). JS Link invested 53.4 billion won to secure a roughly 4.58 percent stake and locked in an exclusive rare earth materials supply contract through 2038.

Japan, by contrast, began investing in Lynas 15 years earlier. When China first attempted to restrict rare earth exports in 2011, Japanese state energy company JOGMEC and trading house Sojitz extended a $225 million loan to Lynas in exchange for a guaranteed annual supply of 8,500 tons of rare earths. Japan then invested an additional $135 million in Lynas's rare earth development projects in 2023.

Through those investments, Japan secured a large share of Lynas's output. Publicly disclosed contracts alone include a minimum of 5,000 tons per year of NdPr oxide — an intermediate rare earth material — and up to 65 percent of annual production of dysprosium and terbium, both heavy rare earths.

Industry analysts say Japan has in effect already locked up most of the global rare earth market, while Korea repeatedly misses opportunities in major African projects. JOGMEC and Japanese trading house Toyota Tsusho recently agreed to invest about $34 million in a rare earth development project in Namibia. Last year, Malaysia and JOGMEC signed an MOU to cooperate on rare earth exploration.

"Korean companies keep a close eye on global rare earth development projects and review them every time, but Japan has already swept up Southeast Asia and Australia to a degree that leaves little room," an industry official said. "With the weak yen making financing even more favorable, Japan is securing resources more aggressively than ever."

China, determined to maintain its dominance over rare earths, is also snapping up overseas mines on top of developing its own. State-owned CNMC acquired a Brazilian rare earth mine last year for $340 million, while Shenghe Resources bought an Australian rare earth developer with Tanzanian mine holdings for $130 million, also last year.

Against this backdrop, Korean companies are turning to the United States as an alternative partner. The US does not hold large rare earth reserves, but it is expanding rare earth separation and refining operations and permanent magnet production as a counter to China, rather than focusing on mine development. A leading example is POSCO International's plan to jointly invest $200 million with US rare earth startup ReElement Technologies to build a rare earth separation and refining facility on American soil.

Cooperation with the US alone is not enough to build a complete supply chain, industry observers warn. "Korean companies are still well behind in terms of financing capacity and technology," one industry official said. "Japan is also pushing aggressively into the US market, so Korea is nowhere near a position where it can feel secure." The official added that the US itself does not have abundant rare earth reserves, making it difficult to secure fundamental raw material supply and, by extension, to build a truly complete supply chain.