Analysis: Australia-Korea bilateral relations and critical minerals

The Australia-Korea bilateral relationship faces a short term boom and a long-term loss as South Korea diversifies sources.

Event or Trend: Australia and South Korea have increasingly centered hopes of improving the bilateral relationship on the supply of critical minerals essential for South Korea’s technology and manufacturing sectors.

Significance: Australia’s critical mineral resources are vital to South Korea’s industrial strategy, particularly in producing electric vehicles (EVs), semi-conductors, and batteries. Continuing the bilateral relationship on a commodity-based exchange neglects the broader opportunities available. Relying on mineral commodities risks limiting long-term cooperation, making the relationship vulnerable to market fluctuations and the emergence of alternative technologies. Understanding this risk is crucial for policymakers seeking to establish a resilient, sustainable bilateral relationship and for commercial interests in broader sectors, including finance, education, and cultural arts.

Analysis: The focus on critical minerals as the cornerstone of the Australia-South Korea partnership is problematic for several reasons. While the supply of lithium, cobalt, and rare earth elements is undoubtedly important, this one-dimensional approach risks undermining the long-term sustainability and depth of the bilateral relationship. Three key issues highlight the challenges:

1. Economic dependencies based on raw materials are historically fragile. The global market for minerals is highly volatile, subject to supply chain disruptions and price fluctuations. A clear example of this volatility is the rare earths market, where prices spiked in 2011 following export restrictions by China. This prompted countries like Japan, the U.S. and South Korea to explore alternative sources and technologies to reduce dependency, causing prices to collapse by 2015. The current efforts of Australia and South Korea stem from these concerns. The same market instability which initiated the current focus could lead to further disruptions as new technological advancements or geopolitical changes again impact the supply chain.

2. There is evidence that the push to emphasize critical minerals is driven largely by industry-sponsored think tanks and lobbyists, whose motives sideline longer term growth. Policies driven by these vested interests underplay the importance of diversification in the trade relationship and broader social and cultural imperatives.

3. Reducing the bilateral relationship to a transactional exchange around critical minerals fails to account for the broader strategic opportunities in the Indo-Pacific. Both Australia and South Korea face significant regional challenges, including the failures of the multilateral and regional diplomatic infrastructure. The current commercial framework lacks the depth required to address broader concerns and risks missing opportunities to build on nascent cooperation in global governance, including in forums such as MIKTA and the proposed Australia, Indonesia, Korea trilateral.

Current road-maps which push critical minerals as the building blocks of the bilateral relationship risk a transactional relationship that is more commercial than strategic, with little focus on the development of deeper, long-lasting ties beyond the minerals market. A more sustainable approach focused on strengthening people-to-people ties and fostering cooperation in areas beyond economic exchanges is yet to materialize.

Outlook: In the short term (0-12 months), the focus on critical minerals will continue as both countries anticipate the immediate economic benefits. In the medium term (1-5 years), increased volatility in global mineral markets and technological innovations will undermine the dependency on critical minerals and the relationship will become increasingly vulnerable to market shifts. In the long term (5-10 years), without investment in people-to-people links, the opportunity costs will increase as South Korea diversifies its sources for raw materials and turns to alternative opportunities to secure sustainability in global governance.