Govt not in talks with China to restore supply of rare earth minerals
NEW DELHI: The government is not talking to the Chinese authorities on the country's stricter export controls on rare earth minerals, a key component for manufacturing of cars, especially electric vehicles.
A team of the automotive industry is likely to visit China in 2-3 weeks' time to have discussions on restoring supply of these minerals, however, no government representative will be part of the team, said an official in the Ministry of Heavy Industries.
Meanwhile, Minister of Heavy Industries HD Kumaraswamy informed the media that the government is monitoring the situation arisen due to disruption of rare earth minerals, and the government is exploring alternative sources for these minerals.
China's stricter export controls on rare earth elements have sparked concerns in India's automotive sector, especially among electric vehicle (EV) makers. Industry sources have said the current stockpiles of these critical metals may last only a few days, and delayed shipments could disrupt operations.
China has restricted exports of vital rare earths, including EV magnet components. These elements are essential for power steering, electric windows, and high-efficiency motors, making them indispensable for automakers.
The move has unsettled India's auto industry, which already depends heavily on Chinese imports for EV batteries and parts. India isn't alone in this struggle. The US and EU also rely on China, which controls nearly the entire supply chain of these materials. Currently, China supplies 85-95% of the world's rare earth metals, cementing its grip on advanced industries.
In a meeting with commerce ministry officials recently, India's auto lobbying body - Society of Indian Automobile Manufacturers (SIAM)- said inventories at auto part makers are expected to run out by the end of May.
India's auto sector imported 460 tonnes of rare earth magnets, mostly from China, in 2024-25 and expects to import 700 tonnes worth $30 million this year, according to industry estimates.
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While both countries are resolved to reduce their dependencies on the other for national security reasons, doing so will be expensive and painful. NYT News Service A cargo ship at Yangshan Port in Shanghai, Feb. 1, 2025. The U.S. and Chinese economies remain deeply integrated, with hundreds of billions of dollars of trade flowing across the Pacific each year. (The New York Times) Since 2022, for example, the United States has been steadily expanding a global system to regulate advanced semiconductors and stop the technology from flowing to China. The rules have been aimed at restricting China's access to artificial intelligence and advanced computing needed to augment its military. But they have been met with fierce resistance from an industry that sees China as an important source of revenue. 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While some U.S. auto and electronics makers have recently received licenses from China for mineral shipments, the uncertainty and continued backlog of requests for the products are continuing to make companies nervous. China had also appeared to be giving preference to European companies over American ones. The tensions are spilling over into other aspects of the United States' diplomatic relations with China. The Trump administration has also proposed plans to "aggressively revoke" visas of Chinese students, including those with ties to the Communist Party. It is unclear how the tensions can be defused. Karoline Leavitt, the White House press secretary, said Monday that Trump and Xi would likely speak in a call this week. The Chinese foreign ministry spokesperson said he had "no information to offer" on the call. Daniel H. Rosen, the co-founder of Rhodium Group, a research company, said that Beijing recognised years ago that rare earths would be central to advanced technologies and subsidised the build-out of those supplies. The United States, he added, "horribly underestimated" the demand for them. China mines 70% of the world's rare earths, but it does the chemical processing for 90% of them. The country also makes more than 80% of the world's batteries, more than 70% of its electric cars, and about half of the world's steel, iron and aluminum, according to data from the International Energy Agency. Securing an alternative supply would likely require the United States to invest hundreds of billions of dollars, Rosen said, and cooperation with global partners who were willing to work to set up supply chains outside China. "It's going to be expensive," he said. "We have a long way to go." While some shipments of minerals have restarted, many U.S. industries remain anxious about shortages of supplies. Paul Triolo, a partner at Albright Stonebridge Group, said that the Chinese licensing system was cumbersome and that there had been a notable drop in shipments of critical minerals since the start of April, when Trump first issued astronomical tariffs on China. Triolo said the United States had no choice except to negotiate with Beijing on the issue, as well as set up a long-term strategy with other countries to reduce its dependence on China over the next five to seven years. "This problem is deep and long lasting," he said. "It will not go away, or be easily solved."
