China’s control of rare earth exports weighs on Korean industries

Chinese President Xi Jinping speaks with Vietnam's President Luong Cuong, unseen, at Hanoi's Noi Bai International Airport, Vietnam, Monday, as he arrives for a two-day state visit to Vietnam. Reuters-Yonhap

China’s restrictions on rare earth element exports will weigh heavily on Korean IT firms and carmakers by impeding the timely production of chips and electric vehicles (EVs) in the U.S., which reportedly has low inventory, experts said Monday.

The New York Times reported on Sunday (local time) that the Chinese government ordered restrictions on April 4 on the export of six heavy rare earth metals, which are refined entirely in China, as well as rare earth magnets, 90 percent of which are produced in China. Following the order, those items can be shipped out of China only with special export licenses.

This was seen as a retaliatory measure by Beijing in an escalating trade war following U.S. President Donald Trump’s imposition of massive tariffs of up to 145 percent on goods imported from China.

With both sides showing no immediate signs of ending the conflict, Korea’s businesses are also on edge over the possible repercussions of the restrictions.

The Korean government estimates that the country holds public stockpiles of more than six months' worth of key rare earth elements, including dysprosium, which is used as an additive in permanent magnets for EV motors.

The Ministry of Trade, Industry and Energy noted that the latest export controls are not a full-scale export ban but rather an additional license requirement. Similar to other items already under export controls, imports to Korea will remain possible once approved by China’s Ministry of Commerce, the ministry said.

However, concerns remain over potential damage to U.S.-based facilities belonging to Korean firms.

Workers transport soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China, Oct. 31, 2010. Reuters-Yonhap

Hyundai Motor Group and Samsung Electronics — both of which have their own manufacturing facilities in the U.S. — may also fall victim to the latest rare earth export restrictions from China, which could result in production delays. China accounts for more than 90 percent of the world's rare earth production.

Experts said China’s dominance in rare earth materials will affect not just the U.S., but Korea.

“Rare earths are critical to produce some IT and auto parts, so Korean companies with production lines in the U.S. may also suffer unexpected damages from China’s latest trade retaliation on the U.S.,” said Kim Pil-soo, an automotive technology professor at Daelim University College.

Kim suggested companies should try to secure at least a year’s worth of rare earths as the global supply chain disruption accelerates amid growing trade protectionism.

“Companies also need to diversify their supply chain for rare earths and focus on developing alternative materials, even if this is a time-consuming process,” Kim said.

The Korean government is also compensating for trade uncertainty on rare earths by strengthening alliances with supply chains outside China.

Last week, the Ministry of Trade, Industry and Energy said it will partner with more countries, such as Australia, to ensure stable supplies.

Experts also stressed the importance of diversifying rare earth supply chains so that external trade uncertainties do not deal unexpected damage to the export-reliant Korean economy.

According to data from the Korea International Trade Association, China accounted for 47.5 percent of Korea’s rare earth imports in 2024.

“We need to reduce our trade reliance on rare earth minerals from China in the mid- to long-term perspective,” said Kim Dae-jong, a professor of business administration at Sejong University.

“Korea is vulnerable to such external trade risks, as the country relies heavily on imports for most raw materials,” the professor said. “We should take concrete steps to diversify our supply chain, which is the only breakthrough that can help Korea minimize any shocks from the global trade uncertainty."