Is China's rare-earth weaponisation giving India a rare chance?

India Today

15 hours ago

Rare earth minerals, or rare earth metals, are a group of 17 elements essential to modern technology. From the manufacturing of electric vehicles (EVs) and wind turbines to smartphones and missile guidance systems like Akash and Astra, these metals are indispensable. They are found in concentrated deposits across the world, making global supply chains vulnerable to disruption and geopolitical tensions. Meanwhile, China, which holds the world's largest reserves (44 million tonnes) and controls over 90% of global processing capacity, has restricted exports of seven rare earths in response to US tariffs. This move has sent shockwaves globally, including in India's EV manufacturing sector, which depends on China for nearly 90% of its rare earth imports.advertisementChina's weaponising of rare earths has left the global community concerned. Without naming Beijing, Prime Minister Narendra Modi recently at the Brics summit in Brazil said the global community must ensure that no country uses these resources as a "weapon" against others.China's stranglehold on rare earths is certainly a challenge and a source of strategic discomfort for India, but it is also an opportunity.
With the third-largest rare earth reserves in the world, estimated at 6.9 million tonnes, India has the potential to reduce its dependency on Chinese imports. However, to truly leverage it, India must ramp up domestic extraction, build refining capacity, and invest in the entire value chain, from mining to magnet-making, which remains underdeveloped, say experts.They suggest that while India's potential is significant, technological and regulatory hurdles must be overcome to capitalise on this crisis.CHINA TIGHTENS RARE EARTH EXPORTS, TRIGGERING GLOBAL SUPPLY SHOCKChina's export restrictions, announced on April 4, require exporters to obtain licences and provide end-use declarations. This has slowed down shipments and raised the costs of exports. This gagging of supply has, in turn, shot up demands and costs.All seven rare earth elements restricted by China are designated as critical minerals by India's Union Ministry of Mines.Meanwhile, China is investing heavily and partnering with armed rebels in war-torn northern Myanmar, which supplies about 57% of Beijing's rare earth imports, to acquire and develop new deposits, while simultaneously building processing plants and export infrastructure to keep the entire supply chain under its control, according to a report in The New York Times.As a result of a dip in the supply of rare earths, carmakers in India, including Maruti Suzuki and JSW MG Motor India, are facing delays in raw materials, with no approvals from China's Ministry of Commerce (MOFCOM) despite applications, reported news agency PTI.The restrictions have sparked fears of production halts in India's EV and electronics sectors, which imported 540 tonnes of magnets from China last financial year.
Top 5 rare-earth producers in 2024: China leads global output.
Geopolitically, the move is seen as China weaponising its dominance amid US-China trade tensions, with India caught in the crossfire.At the 17th Brics Summit, PM Modi urged member nations to ensure critical mineral supply chains remain secure and reliable, warning against their use as geopolitical weapons, a statement interpreted as a critique of China's export restrictions on rare earth minerals.This came from the PM while he was on a multi-nation trip which included Brazil, which has the largest known rare earth reserves in the Thorium-rich Latin America. Thorium is not a rare earth, but is listed as a critical mineral in India.CHINA'S RARE EARTH DOMINANCE AND ITS STRATEGIC IMPLICATIONS FOR INDIAChina's control over 70% of rare earth production and 90% of processing gives it unparalleled leverage.The April restrictions, targeting critical elements used in high-performance magnets, have halted supplies to Indian firms while selectively resuming exports to the US and Europe.China's 2010 export ban to Japan shows its willingness to use rare earths as a trade weapon.This disrupts global manufacturing, especially EVs, where neodymium magnets are vital for motors. It also hampers India's defence production.advertisementIndian carmakers, as a result of the dip in rare earth supplies, face a 40-45-day procurement process. It is threatening production timelines and New Delhi's clean energy goals, noted a report in the Frontline magazine.But is that all bad news? Not quite.
A worker at the site of a rare earth metals mine in China's Jiangxi province. (Reuters Image)
IS INDIA ACTING ON CRITICAL RARE EARTH MINERALS? YES.India is the third-largest holder of rare earth reserves in the world. It has an estimated 6.9 million tonnes of deposits, prime monazite in the coastal sands of Andhra Pradesh, Odisha, Tamil Nadu, Kerala, and West Bengal. This offers significant potential.A 2023 Department of Atomic Energy press release said India, then was "reported to have the fifth-largest rare earth resources in the world".Rare earths are not necessarily rare, but unlike common metals like iron or aluminium, they are difficult to extract and process due to their dispersion and association with radioactive materials.advertisementThe National Critical Mineral Mission, announced in July, aims to boost domestic mining and processing of India's critical mineral sector. Under this mission, the Geological Survey of India (GSI) has been tasked with conducting 1,200 exploration projects from 2024-25 to 2030-31.The Ministry of Heavy Industries has proposed a Rs 1,345-crore scheme to incentivise rare earth magnet production, with companies like Mahindra & Mahindra, Uno Minda, and Sona BLW Precision Forgings showing interest, reported The Financial Express.India's state-run miner, Indian Rare Earths Limited (IREL), is working on reducing exports to prioritise domestic supply and exploring resources in Oman and Vietnam. India is also partnering with Australia, which has substantial rare earth deposits, to secure supplies and technology.
(Left to Right) A rare earth open-pit mine in California, US. Samples of rare earth minerals, from left, Cerium oxide, Bastnasite, Neodymium oxide and Lanthanum carbonate at California's Mountain Pass Rare Earth facility. (Reuters Images)
The Atomic Energy Act, 1962, restricts private mining due to monazite's thorium content, but reforms are under discussion to allow private participation.advertisementFurthermore, India's rare earth deposits are low in concentration, making them harder to extract economically. They are also often mixed with radioactive elements like thorium, which adds safety risks and raises extraction costs.It's a positive step that India has launched the National Critical Mineral Mission to secure its supply chains.It stayed away from rare earths due to environmental concerns. So, can it now move fast enough to leverage this opportunity and emerge as a key player in the global rare earth sector? What more is needed?As of now, India holds the third-largest rare earth reserves globally, with 6.9 million metric tons of rare earth oxides, primarily in monazite-rich coastal sands of Andhra Pradesh, Odisha, Tamil Nadu, Kerala, and West Bengal. However, its production is minimal, contributing less than 1% of global output (approximately 2,900 metric tons in 2023-24), ranking it around 8th or 9th, far behind big players like China and the US.Amit Gupta, Executive Group Vice President at Motilal Oswal Private Wealth, told business channel, ET Now, that the recent geopolitical crisis has positioned India as a key player."Rare earth is coming as that kind of opportunity... the reserves are almost 250 times higher than what is being mined now," Gupta said.
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INDIA'S RARE EARTH PROMISE NEEDS A PUSHExperts are cautiously optimistic about India's potential to leverage its rare earth reserves to become a significant player in the global supply chain, but highlight challenges.Abhijit Kulkarni, a partner at EY-Parthenon, Ernst & Young's strategy consulting arm, according to a CNBC report, pointed out that India had critical gaps, such as limited refining technologies, insufficient technical expertise, and inadequate mining infrastructure of rare earth minerals.So, India's rare-earth strategy needs recalibration to counter China's curbs, said an editorial headline in The Indian Express newspaper in June.Technology transfer and private sector involvement are critical. Meanwhile, India is also engaging with friendly foreign nations like Australia and Oman to scale up imports and build capacity.With the third-largest reserves, India, despite its own limitations and a delayed start, has a rare chance to reduce reliance on China. But this opportunity will be real only if New Delhi builds a robust supply chain, ensures sustained investment, and undertakes key policy reforms to turn the crisis into a strategic advantage. India can turn China's rare earth stranglehold into a rare opportunity. But it will have to show a rare resolve.- EndsMust Watch