South Korean Defense Firms Reportedly Route Chinese Rare Earths Through Third Countries as Export Controls Bite

Highlights

• China's April 2025 controls cover seven rare earths including samarium, terbium, and dysprosium critical to South Korean missiles and fighter engines.
• South Korean exports of controlled rare-earth categories reportedly fell 14% in the first half of 2026, with samarium flows declining even more sharply.
• Alleged circumvention routes through Russia raise Western sanctions exposure and undermine provenance traceability demanded by allied defense procurement.
• No specific companies, shipments, or documents have been identified, so the circumvention claim remains credible but unverified reporting.
• Korea's KIGAM is developing domestic heavy rare-earth separation capability targeted for 2030 to reduce dependence on Chinese processing.

South Korean defense companies are reportedly routing Chinese rare earths through Russia and unspecified Arab countries as Beijing's export controls threaten supplies needed for missiles, aircraft, and other weapons. Sarah Chea writing for The Korea JoongAng Daily cites (opens in a new tab) anonymous industry sources; a Korean government official confirmed awareness of indirect imports but did not independently validate the reported routes or companies involved. The underlying shortage is real. China controls roughly 70% of rare-earth mining and more than 90% of processing, while South Korea remains highly exposed to Chinese strategic materials. IISS independently identifies China's controls as a serious threat to Korea's defense industry.

REEx Insight — Scarcity Creates a Shadow Market

Rare Earth Exchanges® sees a darker lesson here: when governments control indispensable materials, trade does not necessarily stop—it becomes more expensive, opaque, and risky.

If the routing allegations are accurate, China's controls are creating incentives for intermediaries, altered paperwork, and third-country trade. That potentially undermines traceability precisely when U.S. and allied defense procurement increasingly demands trustworthy provenance. Russia introduces another danger: Western sanctions exposure. The article itself acknowledges that documents may not always reveal the material's true origin.

Missiles Meet the Periodic Table

China's April 2025 controls cover samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. Korea's vulnerability is particularly acute in high-temperature samarium-cobalt magnets used in fighter engines and missile systems. Korean exports of controlled rare-earth categories reportedly fell 14% during the first half of 2026, while samarium-related flows fell more sharply.

The report's biggest weakness is evidence: no defense company, intermediary, shipment, customs document, or transaction is identified. Treat the circumvention claim as credible reporting requiring further verification—not established fact.

REEx Connect

• South Korean Ministry of Trade, Industry and Resources — Government agency managing critical-mineral supply security.
• LIG Defense & Aerospace — Identified as using rare-earth magnets in missile components.
• Hanwha Aerospace — Identified as using SmCo magnets in high-temperature fighter-engine applications.
• Korea Institute of Geoscience and Mineral Resources (KIGAM) — Developing domestic heavy-rare-earth separation capability targeted toward 2030.

REEx Bottom Line: China may be demonstrating an uncomfortable law of critical materials: control the bottleneck, and you can reshape the trade routes around it.