[Man-Ki Kim] Korea’s supply chain imperative

Rising tensions in the Middle East have once again shaken global oil markets, raising concerns about potential disruptions to the Strait of Hormuz, one of the world’s most critical energy transit routes. For Korea, which imports nearly all its energy, such uncertainty poses a serious economic risk.

The Strait of Hormuz is a vital artery for global energy. A large share of the world's crude oil and liquefied natural gas passes through this narrow corridor. Even brief disruptions can trigger price spikes and volatility, while prolonged instability strains global supply chains.

Korea is especially vulnerable to these risks.

In 2024, Korea’s trade dependency ratio was about 70.4 percent, with exports and imports making up over two-thirds of GDP. Korea imports 90 percent of its energy. About 70.7 percent of its crude oil and 20.4 percent of its liquefied natural gas come through the Strait of Hormuz.

Korea relies on maritime shipping for energy and vital materials and exports manufactured goods globally. Disruptions at choke points will quickly affect the whole industrial ecosystem. Financial markets also react quickly to geopolitical risks. Recently, global volatility increased. The Kospi fluctuated, and the won weakened past 1,500 per dollar.

If instability in the Middle East continues, nearly every Korean industry could be affected. Steel production, petrochemicals, shipping, semiconductor manufacturing and power generation would face rising input costs amid volatile energy markets. Geopolitical tensions abroad can quickly translate into economic pressure at home.

Energy, however, represents only one dimension of Korea’s supply chain vulnerability.

The war in Ukraine illustrates how conflict can disrupt global food systems. When war erupted in February 2022, blockades of Black Sea ports sharply reduced grain exports from a region that accounted for roughly 30 percent of global wheat exports and 14 percent of maize exports. Wheat prices surged by more than 130 percent, while maize prices doubled within weeks. These disruptions pushed global food prices higher and rippled through international commodity markets, contributing to rising costs for Korean households.

Rare earth elements and other critical minerals represent another growing strategic concern. Countries such as China, Brazil, and India dominate production of these materials. They are essential for semiconductors, advanced batteries, electric vehicles, and dual-use defense technologies. These resources underpin modern technological development and increasingly serve as instruments of strategic leverage amid geopolitical competition.

As a leading semiconductor producer and advanced manufacturing hub, Korea faces significant risks if critical mineral supply chains are disrupted. Export controls, processing bottlenecks, or geopolitical retaliation affecting rare earth supplies could threaten production capacity and technological competitiveness. In today’s environment, supply chains themselves can become tools of strategic leverage.

Korea, therefore, faces a clear structural challenge. Its economy has long been deeply integrated into global supply chain networks. Today, however, those networks are increasingly shaped by strategic rivalry, selective decoupling, and heightened geopolitical sensitivity.

Supply chains are no longer merely logistical networks. They have become strategic infrastructure. Strengthening supply chain resilience should therefore be treated as a key component of Korea’s national economic security strategy, not simply as an economic policy issue.

First, Korea should establish a centralized framework for managing critical supply chains. Such a system could integrate real-time information on strategic materials, including energy, grain, rare earth elements, and other key resources. It would improve monitoring, risk assessment, and decision-making during disruptions. High-level coordination could also strengthen early warning capabilities and long-term strategic planning.

Second, Korea should focus on preventing risks rather than just reacting to crises. Strategic stockpiles should be updated to meet current threats, and an emergency supply chain center should be set up to provide long-term, sustainable management of raw materials supplies. Korea should run regular national simulations to test preparedness and ensure government and industry work together for a coordinated crisis response.

Third, diversification should accelerate. Korea could expand overseas investments in energy resources, mining projects, and logistics infrastructure. Partnerships with resource-rich countries may help strengthen supply stability, while participation in trusted supply chain cooperation frameworks could reduce dependence on any single supplier. Initiatives such as the US-led Project Vault, aimed at securing rare earth supply chains, may also provide opportunities for cooperation.

Protecting maritime stability is equally important. Korean industry depends on secure sea lanes through major chokepoints, including the Strait of Hormuz and the Strait of Malacca, as well as the Taiwan Strait. Diplomatic engagement to support freedom of navigation remains essential for both economic continuity and national security. While Korea cannot control global geopolitical developments, it can strengthen its preparedness.

In an era of chokepoint risks spanning the Middle East, Eastern Europe, and the Indo-Pacific, economic security and national security are increasingly intertwined. Korea’s future prosperity will depend on applying the disciplined strategy and coordination that supported its rise to securing supply chains in a world where stability can no longer be taken for granted.

Korea must make supply chain resilience the centerpiece of its economic strategy. Stronger, more diversified supply chains will protect prosperity and maintain competitiveness in an uncertain world.

Man-Ki Kim

Man-Ki Kim is a professor at the KAIST Graduate School of Future Strategy, specializing in global public procurement, defense acquisition innovation and global strategic trends. He also serves as a senior adviser at Yulchon. The views expressed here are the writer’s own. — Ed.