Exclusive: Korean defense firms quietly bypass China's rare earth curbs via third countries

With China tightening its grip on rare earth exports, Korean defense firms have quietly begun routing shipments through third countries like Russia, circumventing restrictions on elements for which no substitute exists.

The stakes are particularly high for heavy rare earths, indispensable to missile systems like the Cheongung-II air defense platform, an increasingly sought-after export to the United Arab Emirates and other Gulf States. Nearly 90 percent of Korea's supply of these heavy rare earths originates in China. 

"Korean defense firms are routing Chinese rare earths through third-party trade via Russia or Arab states that maintain relatively cordial ties with Beijing," said an industry source who spoke on condition of anonymity, citing the sensitivity of the matter.

 "The government asked companies to disclose their stockpiles and circumstances in order to assess the situation and formulate a response, but firms have been reluctant to come forward, since not all of their existing inventories were sourced through fully legitimate channels," the source added. 

The practice occupies a legal gray zone, and the risks extend beyond Beijing's own restrictions.

Shipments passing through Russia raise the possibility of running afoul of U.S. and Western sanctions targeting Moscow, and the paperwork behind these transactions doesn't always reflect the true origin of the materials.

“We've heard such reports, but we haven't specifically looked into or investigated the matter. It isn’t something within our authority to block, and as long as domestic law is complied with, indirect importation itself does not constitute a legal violation," a senior official directing Korea's industrial resources security at the Ministry of Trade, Industry and Resources told the Korea JoongAng Daily.

"We are in ongoing discussions with China to ensure that licenses for civilian-use items are approved in a timely manner,“ he added.

In April last year, Beijing announced export controls targeting seven rare earth elements — samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium — citing the need to prevent military diversion.

Under the rules, any export to an unclear end user or a party suspected of onward shipment to a conflict zone faces strict licensing scrutiny and is prohibited. Even civilian use shipments now require individual authorization.

Though China’s export controls were designed chiefly to counter the United States, the collateral damage to Korea's defense industry has been substantial. Rare earth exports fell to 30,482.8 tons in the first half of this year, down 6 percent from 32,569.3 tons in the same period of 2025, according to data from the General Administration of Customs of the People’s Republic of China.

China produced 270,000 tons of rare earths — accounting for 70 percent of global production — followed by the United States at 45,000 tons and Myanmar at 31,000 tons, according to U.S. Geological Survey's 2024 report. 

China controls about 90 percent of the smelting and separation capacity that refines raw ore into usable oxides, and manufactures some 93 percent of the world's finished permanent magnets. For the seven rare earths now under export control, Chinese supply dominance reaches 97 percent.

Specifically for shipments to Korea, among the four controlled elements with distinct customs codes — dysprosium, terbium, yttrium and scandium — plus a residual "other rare earth metals" category believed to include samarium, gadolinium and lutetium, exports dropped roughly 14 percent, to 10,200 kilograms (22,487 pounds) in the first half of this year from 11,865 kilograms during the same period last year. 

Within that residual category, shipments likely containing samarium fell especially sharply — by 63 percent, to 4,294 kilograms from 11,635 kilograms. Exports of samarium oxide and its compounds, the raw material for samarium-cobalt magnets, dropped about 41 percent, to 178,755 kilograms from 303,857 kilograms.

“Supply chains for a single weapons platform can involve dozens of subcontractors; for instance, the Cheongung-II alone has some 80 second-tier vendors," said another source, who said such circumvention as an unavoidable necessity.

"You can't choke off rare earths simply by decree. Routing supply through Russia carries risk, but there are no permanent friends or enemies in this business,” he said. “And this isn't a matter of technology transfer, but simply the procurement of raw materials."

Samarium-cobalt magnets can withstand temperatures up to 350 degrees Celsius (662 degrees Fahrenheit), far surpassing the roughly 50-degree threshold at which neodymium magnets lose magnetic strength, making samarium essential for components operating near fighter jet engines and missile propulsion systems. 

LIG Defense & Aerospace uses similar rare earth magnets in missile components, while Hanwha Aerospace uses samarium-cobalt magnets in components near fighter jet engines.

Experts urge that Seoul needs a more forceful hand in securing this supply chain — belatedly, but not too late — if it hopes to sustain its defense-export boom.

"About 10 to 20 percent of heavy rare earths could come from alternative sources — India, Australia, Kazakhstan and other Central Asian states in the former Soviet sphere," said Choi Gi-il, a professor of military studies at Sangji University who also heads the Korea Institute for Defense Industry. 

"We need to secure those supplies urgently, and no individual firm can do that on its own. It has to be the government that moves," he said. "Japan moved quickly on this decades ago. We're already far behind." 

Korea's defense exports hiked 60 percent to $15.4 billion last year, with the order backlog at the country's four leading defense contractors surpassing 100 trillion won ($70.8 billion) by the end of the first quarter.

BY SARAH CHEA, PARK EUN-JEE   [chea.sarah@joongang.co.kr]