Korea Allows State Firms to Resume Overseas Mineral Development After Decade-Long Ban

South Korea will allow state-owned enterprises to directly invest in overseas resource development for the first time in a decade, as global competition intensifies for securing rare earth elements and other critical minerals.

The Ministry of Trade, Industry and Energy announced a "Comprehensive Rare Earth Supply Chain Plan" on Monday, reviving resource diplomacy that had been effectively banned since 2016 under the Park Geun-hye administration following investment failures during the Lee Myung-bak era.

Rare earth elements refer to 17 metals including scandium and yttrium, used across electric vehicles, semiconductors, wind power generation, and defense industries, earning them the nickname "vitamins of high-tech industries." However, South Korea and other major economies currently depend heavily on China for rare earth supplies, making them vulnerable to Beijing's export controls.

Under the plan, the government will revise the Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) Act within this year to allow the agency to conduct overseas resource exploration, development, and project investments. The ministry also plans to raise KOMIR's statutory capital, currently at 3 trillion won ($2.1 billion), to secure funding for large-scale overseas resource development projects. The government is reportedly considering participation in U.S. rare earth and permanent magnet production facility projects.

"Major foreign companies often enter markets together with their state-owned enterprises, but Korean private firms have had to go alone because our public corporations' hands were tied, causing us to fall behind in competition," a senior ministry official said. "If state-owned enterprises serve as partners to private companies, it will help mitigate risks and secure project viability."

The Lee Jae-myung administration's decision to actively pursue overseas resource development, previously considered taboo under progressive governments, comes as supply chain instability for critical minerals continues to grow. China has implemented six export control measures on critical minerals over the past three years—three in 2023, one in 2024, and two in 2025.

While Chinese President Xi Jinping's meeting with U.S. President Donald Trump in Gyeongju last October resulted in a one-year suspension of China's rare earth export controls on the United States, the potential for rare earth and tariff wars between the two powers to reignite remains significant.

According to the ministry's "2024 Overseas Resource Development Report," only seven new overseas resource development projects were initiated in 2024—one-tenth of the 71 projects launched in 2008 during the Lee Myung-bak administration. None involved state-owned enterprises. The number of ongoing projects shrank from a peak of 236 in 2011 to 116 in 2024. Of KOMIR's 14 ongoing projects, only three involve the top 10 strategic critical minerals.

To support private sector initiatives, the government expanded special financing for overseas resource development from 39 billion won last year to 67.5 billion won this year, a 73.1% increase. The loan ratio will be raised from 50% to 70%, and the loan forgiveness rate for failed exploration projects will increase from 80% to 90%.

The ministry will also establish a 250 billion won critical mineral and energy supply chain stabilization fund and ease investment requirements from the supply chain fund and Export-Import Bank of Korea, extending investment recovery periods from 10 to 20 years.

Additionally, the government will expand the list of critical minerals under the National Resource Security Special Act from seven rare earth types to all 17 elements. Export-import codes will be subdivided by individual rare earth element, and a comprehensive information system through the Rare Metal Center will be established by 2027.

The government plans to develop domestic recycling industries to internalize supply chains, extracting rare earths from spent catalysts and waste batteries. It will invest 3.8 billion won this year to support recycling companies' facilities and equipment, aiming to raise the recycling rate for the top 10 strategic critical minerals to 20% by 2030.

Starting in 2027, the government will allocate more than 10 billion won per project for three major research and development initiatives focused on rare earth substitution, reduction, and recycling technologies.

"Korea has advanced industries in semiconductors, electric vehicles, and batteries, but as a consuming country that imports most of its resources, we face significant supply chain management challenges," Trade Minister Kim Jung-kwan said. "Our national competitiveness depends on industrial resource security, and the public and private sectors must work closely together for stable rare earth supply chain management."