[UK Think Tank: Collateral Damage to South Korea's Defense Industry from US-China Rivalry]

According to an article published on July 20, 2026, on the website of the renowned UK-based think tank, the International Institute for Strategic Studies (IISS): China’s expanding export controls on critical minerals are creating supply chain risks for South Korea’s defense industry. Although Seoul is investing in stockpiling and domestic production to reduce reliance on these Chinese materials, it remains vulnerable to the escalating economic competition between Washington and Beijing.

Since August 2023, Beijing has imposed increasingly broad and stringent export controls on critical minerals, affecting not only civilian industries but also defense manufacturing. On June 15, 2026, State Council Order No. 839 came into effect, implementing the *Mineral Resources Law*, authorizing "countermeasures" against foreign restrictions deemed "discriminatory."

Other countries have become collateral damage in the US-China rivalry, with South Korea among them. Its defense industry now faces growing risks from potential supply disruptions and sharp price increases in critical minerals. While Seoul is taking measures to reduce dependence on Chinese supplies and strengthen international cooperation to enhance supply chain resilience, these efforts will take time to yield results.

—— Export Controls on Critical Minerals by China

In July 2023, China introduced licensing requirements for gallium and germanium, subsequently expanding its export control measures to cover a broader range of critical minerals and rare earth elements—including graphite, antimony, dysprosium, and tungsten—as well as technologies used in processing these minerals, such as extraction, separation, and smelting techniques. Over time, the scope and intensity of these measures have significantly expanded, even including potential extraterritorial application.

Given that China accounts for approximately 70% of global rare earth mining and over 90% of processing capacity, the global impact of these measures is substantial. These minerals are vital to modern technologies—especially military systems like fighter jets, unmanned systems, missiles, and robotics—meaning Beijing’s controls have major implications for defense supply chains across countries, including South Korea.

China’s export restrictions target materials essential to advanced technologies and defense sectors, leading to dramatic declines in exports of several controlled materials. Gallium, a necessity for advanced radar systems, 5G infrastructure, and missile defense systems, exemplifies this challenge. China produces up to 98% of the world’s gallium; in the first months of 2026, total unprocessed gallium exports from China dropped nearly to zero. Tungsten, a metal indispensable for engine components, warheads, and missiles, presents a similar concern. China produces more than 80% of the world’s tungsten supply, and due to export controls, its shipments declined—reported overseas exports fell by about 40% year-on-year.

—— Impact on South Korea’s Defense Industry

South Korea has been affected by these trade disruptions. While transportation of tungsten continues, unprocessed gallium exports to South Korea dropped by 97% in 2025. Although exports of unprocessed germanium were negligible even before the licensing requirements were implemented, processed germanium exports also saw a decline.

In April 2025, Seoul stated that its stockpiles of restricted critical raw materials exceeded six months’ worth, and no major shortages had been publicly reported. However, with Chinese exporters now required to apply for export licenses—reportedly taking six to seven weeks or longer due to political reasons—the risk of disruption to downstream defense and high-tech supply chains is increasing.

Even if supply is not fully interrupted, the sharp rise in mineral prices could severely squeeze South Korea’s defense industry. Following China’s export controls, the price of germanium has nearly doubled over the past five years. In April 2026, gallium prices outside China reached $1,850 per kilogram—up approximately 550% from $283 in July 2023. By June 2026, germanium prices in the US and Europe rose from around $1,400 in July 2023 to over $6,100, a 336% increase. Tungsten prices have also surged dramatically—rising by about 557% since China implemented export controls in February 2025.

Given that rapid delivery and competitive pricing are among South Korea’s key advantages as a defense exporter, delays in component supply and persistent price hikes could seriously threaten its industrial competitiveness.

—— Response Measures

South Korea is seeking to mitigate these risks, including efforts to increase its strategic reserves of critical minerals. In 2025, South Korea launched the "National Metal Reserve Program," aimed at boosting reserves and enabling faster emergency releases during supply disruptions. In the same year’s supplementary budget, funding for critical mineral reserves was increased by KRW 21.47 billion (approximately USD 15.1 million).

South Korea has also begun strengthening its own capacity to produce critical minerals. In 2014, Korea Zinc entered the antimony sector and began producing this regulated mineral widely used in defense industries. Additionally, Korea Zinc plans to invest in new facilities for germanium and gallium production, with pilot operations expected to begin in the first half of 2028. South Korea is also re-entering the tungsten production market, with part of its output expected to be supplied to the United States, aiming to reduce global dependency on China. Furthermore, South Korea is intensifying efforts to recycle critical minerals, with a goal to raise the share of recycled sources from 2% to 20% by 2030. The country’s expanding production capabilities may increasingly contribute to critical mineral supply chains in the US and Europe. Korea Zinc has already started exporting antimony to the US, alleviating supply pressures—over 60% of US antimony imports previously depended on China. Korea Zinc has also signed a memorandum of understanding with Lockheed Martin regarding long-term germanium supply.

Nevertheless, despite these promising initiatives, they cannot immediately resolve the risks South Korea faces regarding critical raw material supplies. As long as strategic competition between the US and China persists—and China continues leveraging its dominant position in critical mineral supply—risks to South Korea’s critical mineral supply chain—and by extension, its defense industry, affecting everything from engines and warheads to missile production—will likely remain persistent.

Disclaimer: The above report originates from the website of the International Institute for Strategic Studies (IISS), UK.

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Original source: toutiao.com/article/1871464558114819/

Disclaimer: This article reflects the personal views of the author.