Summary

  • Park Jung-ho’s analysis identifies a structural transition in which South Korean firms’ cost-optimized procurement architecture, routed disproportionately through Chinese processing facilities, faces concave exposure under the U.S.-China competition over critical minerals — small supply perturbations produce manageable losses while a comprehensive disruption would produce losses vastly exceeding years of accumulated cost savings.
  • The United States is pursuing a bloc-based resource strategy built around three regional pillars — Greenland rare earth access, North American refining capacity expansion, and Latin American lithium and nickel agreements — anchored by Project Vault, a White House-backed $12 billion stockpiling initiative that, if it materializes at the described scale, represents the most significant Western state-directed resource strategy since the Cold War.
  • China’s willingness to deploy export controls as a policy instrument, confirmed by the IEA, CSIS, and ETH Zurich’s Center for Security Studies, combined with structural economic constraints including a fiscal deficit of approximately 4% of GDP, a prolonged property downturn, and slowing growth, creates conditions in which resource nationalism becomes an increasingly attractive domestic political lever.
  • South Korea’s leverage is constrained by mutual dependency with the United States — reliance on U.S. security guarantees and semiconductor export licensing on one side, U.S. dependence on South Korean battery and semiconductor manufacturing capacity on the other — while the recovery window for feasible redesign at manageable cost narrows as bloc strategies materialize.

Myongji University economics professor Park Jung-ho told a Seoul forum on Wednesday that South Korean companies must redesign procurement strategies around national and economic security rather than cost alone, framing the advice within an analysis of U.S. resource strategy, China’s economic vulnerabilities, and AI-driven demand acceleration. His assessment, delivered at the Korea Management Innovation Small and Medium Business Association’s 149th Good Morning CEO Learning Forum at the Ambassador Seoul Pullman Hotel, identifies a supply-chain environment in which cost optimization and supply security, once largely compatible, are increasingly in tension — and in which the transition itself carries risks if assumptions about allied resource commitments prove unreliable.

Structural Fragility: Cost-Optimized Architecture Under Concave Exposure

Park’s diagnosis, examined through the convexity framework articulated by Taleb and Douady (2012), reveals that South Korea’s current critical minerals procurement presents a classic concave profile. The system is optimized for lowest landed price, fastest delivery, and most mature processing, routing a disproportionate share of rare earth processing, battery-grade graphite, and significant portions of refined lithium and cobalt through Chinese facilities.

Small supply perturbations produce manageable losses. A large disruption — comprehensive Chinese export restrictions, sanctions-driven supply reorganization, or acute geopolitical tension severing procurement lines — would produce disproportionately severe losses that vastly exceed the cumulative savings from years of cost-optimized procurement. Fragility is concentrated in the very efficiency features that are rational under stable conditions and dangerous under volatility: low redundancy, minimal stockpiling, concentrated processing relationships, and limited alternative-chain qualification.

A hidden concave exposure lies in the assumption that Chinese processing capacity will remain available at scale and at low price — an assumption now being tested by the very policies Park described. A further hidden concavity emerges on the demand side: growth in the AI inference market will drive escalating demand for high-performance semiconductors and advanced hardware whose manufacturing depends on precisely the mineral supply chains under geopolitical pressure. Park cited a 23-fold expansion of the AI inference market; available market-research forecasts project two- to three-fold growth with a compound annual growth rate of approximately 18–19%. The 23-fold figure originates from Park’s presentation and cannot be independently verified at the claimed magnitude. The analytical point — that AI-driven demand acceleration compounds supply-chain fragility regardless of the specific multiplier — holds under either estimate.

China-Side Vulnerabilities: Structural Constraints and Cascading Risk

China holds approximately 90% of rare earth refining capacity according to current industry assessments. The IEA’s Global Critical Minerals Outlook 2025 reports China as the leading refiner with an average market share of approximately 70% across 20 strategic minerals, with higher concentration in rare earths specifically. China’s willingness to deploy export controls as a policy instrument is confirmed by the IEA, CSIS, and ETH Zurich’s Center for Security Studies.

Park pointed to a fiscal deficit equivalent to about 4% of GDP — the standard official target for 2025–2026, confirmed by China’s Government Work Report and independent analysis — a prolonged property downturn, and slowing economic growth as conditions that make resource control an increasingly attractive domestic political lever.

Park described a specific vulnerability in China’s energy supply structure. As reported by UPI, Park stated: “Chinese state-owned companies face a dilemma because they cannot openly handle sanctioned crude without risking U.S. penalties.” Independent refiners concentrated in Shandong province — commonly known as teapot refineries — have become major processors of Iranian crude as a result, giving Beijing continued access to oil but exposing smaller refiners to sanctions, volatile prices, and tightening profit margins.

This arrangement illustrates a broader dynamic: state-adjacent actors absorbing risk that the sovereign cannot officially acknowledge. Chinese mineral processors could face analogous margin compression and sanctions exposure if U.S. bloc strategies tighten further. A sanctions-driven contraction in teapot refinery output would tighten domestic fuel markets, divert state refiners to cover the gap, and reduce the surplus energy capacity that supports energy-intensive mineral processing — a cascade that could weaken China’s ability to maintain stable mineral exports.

The U.S. Bloc Strategy: Three Pillars and Architectural Intent

Park characterized the U.S. resource strategy as “Monroe Doctrine 2.0” — a label originating from Park’s presentation, not an official U.S. government designation, though the underlying policy direction is corroborated by official ministerial statements and external policy analyses. The strategy is bloc-based, seeking to exclude Chinese and Russian control of resources in the Western Hemisphere.

The first pillar involves Greenland, where Washington is seeking access to significant deposits of rare earth elements — including neodymium and dysprosium used in permanent magnets, according to U.S. Geological Survey assessments and Danish policy analyses — while strengthening its strategic position along emerging Arctic shipping routes. The second centers on expanding refining and processing capacity within North America to reduce dependence on overseas suppliers and reinforce the industrial foundation of the U.S. defense sector. The third involves separate agreements with resource-rich Latin American countries, including Brazil and Argentina, to secure supplies of lithium, nickel, and other minerals needed for batteries and advanced industries.

These pillars are anchored by Project Vault, an official U.S. initiative announced by the White House in February 2026, backed by the Export-Import Bank, and valued at approximately $12 billion — confirmed by the New York Times, CNBC, Reuters, and the Center for Strategic and International Studies. The Monroe Doctrine 2.0 characterization implies architectural intent: not merely to diversify U.S. sourcing but to structure Western Hemisphere resource access in a way that leaves non-aligned actors with diminished options.

South Korea’s Position: Mutual Dependency and Constraining Leverage

South Korea’s leverage within this reorganizing landscape is constrained by a mutual dependency with the United States. South Korea relies on U.S. security guarantees and semiconductor export licensing. The United States depends on South Korean battery and semiconductor manufacturing capacity to operationalize its supply chain goals. This mutual dependency limits either side’s ability to dictate terms unilaterally, but it also means South Korean firms risk being positioned outside the resulting supply architecture if they do not participate in U.S.-led arrangements.

The alternative scenario Park’s analysis suggests — within five years of committing to a security-first strategy, South Korea could find itself paying a premium for U.S.-sourced minerals while the United States invokes national security clauses to prioritize its own industries — underscores that the choice is not simply between security-first and cost-first procurement but involves navigating the uncertain commitments of external powers. Redesigning supply chain strategies requires careful balancing of costs, security, and the reliability of allied resource allocations.

Greenland and Latin America: Emerging Choke Points as Alternatives

The very countries identified as alternative sources could introduce new vulnerabilities. Greenland and Latin American countries including Brazil and Argentina want investment and technology transfer and could play the United States off against China to extract better terms. Greenland’s mineral deposits and Arctic shipping routes represent a geographic pivot point where U.S. strategic positioning could create new choke points in the very supply chains South Korea would need as alternatives to Chinese processing. The architectural intent behind Washington’s approach — structuring access rather than merely diversifying — means that alternative sources may come with strings that substitute one form of dependency for another.

Failure Classes and Diagnostic Indicators

Five failure classes emerge from a prospective-hazard assessment conditioned on the scenario premise that South Korean manufacturing faces a 12-to-18-month interruption in access to processed rare earths and battery-grade materials by 2030. A path without such disruption would invalidate the diagnostic.

Context-shift constitutes the dominant risk: the world is reorganizing resource access around bloc logic, and a supply chain designed for the globalization era does not survive the transition unmodified.

Motivational failure operates through the short-term margin benefits of cheap Chinese-processed inputs, which create persistent institutional resistance to the expensive, lower-margin work of building alternative chains — particularly acute for publicly traded firms under quarterly earnings pressure.

Assumption failure underlies both the status-quo and the security-first scenarios: the belief that the minerals procurement environment would remain stable enough to justify cost-optimized single-source strategies, or alternatively, that the United States would treat South Korea as a first-tier partner in resource allocation, prioritizing allied access over domestic industrial demands.

Execution failure involves slow qualification of alternative processors due to regulatory hurdles, testing timelines, and the technical challenge of matching Chinese-processed material specifications.

Interaction failure forms a reinforcing loop: each year of inaction deepens single-source exposure, which raises the cost of eventual diversification, which further incentivizes delay. The operative assumption that fails across both scenarios — that the geopolitical procurement environment would remain stable and the U.S. alliance reliable enough for cost-optimized supply chains to persist without structural modification — is the root diagnostic.

Leading indicators to monitor include a widening spread between U.S.-sourced and Chinese-sourced mineral prices, and a series of U.S. export control actions signaling a narrower interpretation of the alliance.

Stakeholder Salience and Competing Claims

Under the salience framework of Mitchell, Agle, and Wood (1997), which assesses stakeholders by power, legitimacy, and urgency as independent dimensions, several actors shape the decision environment.

South Korean semiconductor and battery manufacturers hold highest salience across all three dimensions: they control procurement strategy and capital allocation, hold direct operational stake in supply continuity, and face immediate production-stoppage risk from any disruption.

The Korean government holds power through industrial policy instruments and regulatory authority, with legitimacy through its economic security mandate but facing a competing legitimacy claim from firms that resist mandates increasing input costs. Kim Myung-jin, the association’s chairman, stated at the same forum that the organization’s budget had expanded to 55.2 billion won ($36.5 million) — confirmed by UPI — suggesting government-directed institutional resources toward industrial support, though whether such programs address mineral-supply vulnerability specifically or operate on a different track remains unclear.

China holds structurally dominant power as incumbent supplier but faces eroding legitimacy as a trading partner in Western policy circles due to its export-control conduct, while retaining high legitimacy within its own bloc and among states dependent on Chinese-processed inputs. What remains uncertain is whether China’s in-bloc legitimacy can be sustained if export controls begin to harm the economies of its trade-dependent partners — a dynamic that could shift its salience from high to moderate over a three-to-five-year horizon.

Resilience and the Recovery Window

The current policy conversation, as Park frames it, focuses on resilience — surviving a shock — but stops short of identifying features that would allow the system to gain from volatility. A supply chain designed to benefit from disruption would incorporate dual-sourcing agreements allowing firms to exploit price divergences during supply shocks, recycling and substitution R&D that becomes more valuable as virgin material costs rise, and excess refining capacity that can process diverse feedstocks and profit from supply-chain rerouting.

The via-negativa prescription — removing sources of fragility rather than constructing new sources of strength — points to reducing single-source dependency on Chinese processing, building strategic reserves of concentrated inputs, and qualifying alternative processing chains even when more expensive under current conditions. Each removal of single-source dependency directly reduces concavity, shifting the supply chain’s response profile from fragile toward robust. The barbell allocation applies at the portfolio level: maintain cost-optimized procurement for inputs with multiple available sources while directing deliberate over-investment toward resilience for inputs with concentrated or geopolitically exposed supply chains.

Between the first clear signal of structural supply risk and the point at which mitigation options collapse, a recovery window exists during which redesign is feasible at manageable cost. Early action requires expensive but reversible investment — stockpiling infrastructure, alternative supplier qualification, participation in U.S.-led mineral consortia. Late action, undertaken after disruption materializes, requires the same investments under emergency conditions with less favorable terms and less time. The recovery window is bounded by the pace at which U.S. bloc strategies materialize and by the pace at which China’s economic constraints drive resource-nationalist policy responses. The asymmetry between early and late action favors early action decisively.

Distributional Question Unresolved

Park’s prescription to prioritize security over cost raises a distributional question that has not been foregrounded in the current discussion. If South Korean firms pass increased procurement costs through to buyers of semiconductors, batteries, and advanced-manufactured goods, the global customer base absorbs a share of the resilience investment. If firms absorb costs internally, shareholders bear margin compression. If government subsidy funds the transition, taxpayers finance the adjustment. The question of who ultimately pays for supply chain redesign — and how competing claims among consumers, shareholders, and taxpayers are adjudicated — will shape the political durability of any security-first procurement strategy.

Analytical techniques used in this piece

This analysis applies the methods below. Each links to a short, plain-English explainer you can read and reuse.

Fragility / Antifragility Audit
Asks whether a system gains or loses from volatility, shocks, and disorder (Taleb).
Pre-Mortem (Action Plan)
Imagines the plan has already failed, then works backward to find out why.
Stakeholder Mapping
Charts the parties to a situation — their interests, power, and alignments.
Creative Destruction
Innovation that grows the economy by dismantling the incumbents it displaces (Schumpeter).
Antifragility (Taleb)
Whether shocks break a system, leave it unharmed, or actually make it stronger.