China's rare earth export curbs are India's wake-up call

Mint

3 hours ago

The US-China trade war has opened a fresh front, now impacting Indian industry in a big way. China's curbs on exports of rare earth magnets—processed from rare earth elements (REEs)—have disrupted supply chains, particularly in the country's automobile sector.
The development also underscores why India must urgently reduce its dependence on China by ramping up domestic exploration and refining of its own rare earth reserves.
In April, Beijing imposed export restrictions on seven REEs in retaliation for US tariff hikes. Importers were forced to navigate a complex licensing system, triggering delays and shortages worldwide. Indian firms have faced stiffer restrictions than many others, Mint reported last week.
China dominates the global rare earths industry, mining 46% of REEs and refining 74% as of 2024, according to the International Energy Agency. These 17 metals are essential for everything from electric vehicles and fighter jets to smartphones and MRI scanners. Given the high costs of extraction, China has built a commanding lead in the sector over decades.
India, despite having the world's third-largest rare earth reserves—estimated at 6.9 million metric tonnes—mines only a small portion. The country has remained heavily import-dependent, with China as the primary supplier.
India's position
This isn't the first time China has used REEs as a geopolitical lever. In 2010, it briefly cut off exports to Japan during a territorial standoff. The latest curbs serve as a timely reminder for India to move faster in securing its access to these critical materials.
Some steps have been taken. Under the National Critical Mineral Mission (NCMM), launched in January 2025 with a ₹16,300 crore outlay over seven years, REEs have been identified as one of 30 critical minerals. Their production and import have been made a national priority. In March, for the first time, the REE sector was opened to private investment. A Reuters report noted that the government plans to introduce fiscal incentives for domestic production in response to the current disruption.
But more must be done. A 2020 Exim Bank working paper identified key gaps. Chief among them is India's limited refining and processing capacity, which has long hamstrung efforts to tap domestic reserves. Greater investment in R&D is also needed to develop alternatives for critical minerals, the report said.
India must also look outward—by enabling joint mining ventures and helping Indian firms acquire assets abroad. This strategy has been adopted by countries like the US and Japan. As the global push to reduce Chinese dominance in the sector gathers pace, India could emerge as a viable alternative supplier—though the transition will take time. China's own dominance took nearly two decades to build after it began prioritizing REE development in the 1980s.
What next?
Demand for rare earths is set to soar as the global economy pivots toward decarbonization and electrification. According to the IEA's Critical Minerals Outlook 2025, demand stood at 91 kilotonnes in 2024 and could nearly double to 178 kilotonnes by 2050.
Clean energy will be the main driver, with REE demand from this segment expected to rise from 20% today to over 33% by 2050. 'Growing demand for permanent magnets, particularly from EVs and wind power, boosts the need for magnet rare earths," the IEA report noted.
Read this | EV industry, government struggle to find alternatives as China throttles rare earth magnet supply
While demand is set to rise sharply, the biggest vulnerability remains China's dominance—and its willingness to weaponize supply chains.
Australia is expected to emerge as a key supplier over the next decade. Meanwhile, India and Central Asian nations—including Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—have expressed interest in joint exploration of rare earths and other critical minerals. Such efforts may not yield immediate results, but could gradually chip away at China's grip over the global supply.