Explained: China's monopoly on rare earth minerals spooking the world; what does it mean for India & what is it doing?

Time of India

19 hours ago

China's firm grip on rare earths, essential components in the production of phones, automobiles and missiles, is giving a headache to countries world over, including India. (AI image)
China's firm grip and worldwide monopoly on rare earth metals, essential components in the production of phones, automobiles and missiles, is giving a headache to countries world over, including India.
Despite mounting pressure from countries including the US, EU and India, China remains steadfast in its stance regarding export limitations of these critical rare earths.
Recent reports have highlighted increasing worries within the Indian automotive sector regarding the limited availability of rare earth magnets. These components are essential for electric vehicles and certain parts in conventional internal combustion engine vehicles.
Furthermore, India's industrial sectors have expressed apprehension over China's decision to restrict rare earth exports, particularly germanium. This plays a vital role in the production of semiconductors, fibre optic cables and solar panels.
Critical minerals and metals, including cobalt, copper, lithium, nickel and rare earth elements, are fundamental components in manufacturing environmentally friendly energy solutions, from wind power installations to battery-powered automobiles.
What's China's hold on rare earths?
China has established control over critical mineral deposits worldwide. Rare earth minerals comprise a collection of 17 metallic elements. While these elements are found across various countries, extracting them is expensive and environmentally damaging, resulting in substantial pollution.
The International Energy Agency reports that whilst China produces 61 % of globally mined rare earths, it dominates 92% of worldwide production output.
Following Premier Li Qiang's decree implementing export controls on rare earths, China has reportedly intensified these restrictions after US President Donald Trump levied 146% tariffs on Chinese exports. Recently Trump said that Chinese President Xi Jinping has allowed some rare earths to flow to the US.
In a recent column in TOI, Tanmay Kumarr Baid & Pranay Kotasthane of Takshashila Institution argued that by restricting shipments, Beijing is lifting prices worldwide and incentivising countries to set up processing elsewhere.
'Once the capital is sunk into new refining in the rest of the world, even a later U‑turn by China cannot quickly claw these customers back,' they said.
However, experts Ajit Ranade and Shardul Manurkar believe that China's rare-earth dominance is not a fragile or accidental monopoly, it is a product of deep, deliberate, and sustained strategy. 'Attempts to counter this dominance must acknowledge the scale of the challenge,' they say.
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How much does it impact India?
The Indian automobile sector continues to face challenges as China maintains restrictions on critical rare earth magnet supplies, even though nine parts manufacturers received endorsements for their import requests from the Chinese embassy.
The flow of supplies remains halted, pending approval from China's commerce ministry. These magnets play a crucial role in the production of electric vehicles and are essential for various automotive components, including gear mechanisms and drive trains.
The Society of Indian Automobile Manufacturers delivered a presentation to Indian government officials on May 28, urging immediate dialogue between India and China to expedite stalled approvals and simplify the complex procedures. The automotive industry body emphasised the need for bilateral discussions to address these regulatory challenges, according to a Bloomberg report.
Saurabh Agarwal, Partner & Automotive Tax Leader, EY India says, 'The recent actions by China have significantly disrupted global supply chains, particularly through their increasing export control over critical commodities.
This underscores the urgent need for India, and indeed any nation, to foster a self-sustaining economy. We must prioritize developing our own critical mineral resources and building an end-to-end domestic supply chain, especially as the world shifts towards greater self-reliance.
'
'Given the current trajectory of our growing economy, it's imperative that the government introduces a Production-Linked Incentive (PLI) scheme specifically for rare earth magnets and critical mineral recycling.
This will be crucial in the mid-term for establishing a robust domestic supply chain,' he tells TOI.
'In the short run, we must leverage our diplomatic channels to engage with the Chinese government and resolve the immediate challenges around export control licenses. This is essential to prevent production stoppages in our industries,' he adds.
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What India is doing
India is currently negotiating with China regarding the procurement of permanent magnets made from rare earth minerals, whilst simultaneously exploring alternative supply channels for these vital components, according to commerce and industry minister Piyush Goyal.
The minister confirmed that the administration maintains regular communication with domestic industry stakeholders to accelerate the development of indigenous sources.
"There is a concern... our embassy is in dialogue with them (China)... commerce and industry ministry is also working," Goyal said, adding that the government had already begun work on developing alternate sources.
The minister addressed concerns regarding China's halt on permanent magnet exports to India, acknowledging its impact on the automotive sector, white goods and other industries.
He mentioned that whilst some companies have submitted applications, they anticipate favourable responses for permanent magnet approvals. Additionally, the government is collaborating with Indian Rare Earths Ltd to accelerate domestic resource development, Goyal stated.
When questioned about potential production-linked incentive schemes for magnets, Goyal confirmed discussions with the automotive industry and expressed confidence in finding a solution.
He noted that ongoing dialogues with innovators and startups indicate their willingness to support funding requirements and price adjustments necessary to stimulate sector growth and expansion.
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Regarding alternative solutions, the minister highlighted potential technological developments within India.
Goyal emphasised the collaborative efforts between government, industry, startups and innovators.
He acknowledged possible short-term challenges but expressed confidence in achieving success over medium to long-term periods.
Goyal recently said that the world must acknowledge the dangers of critical minerals and their supply chains being concentrated in a few geographies, as this concentration could impede economic progress of countries.
He said that India has initiated measures, including support for startups conducting research and development, to discover innovative and alternative solutions, he noted.
This will help reduce "our over dependence and over reliance on certain critical minerals," Goyal said.
Critical minerals like copper, lithium, nickel, cobalt and rare earth elements play a vital role in advancing clean energy technologies. These critical minerals are fundamental components in the manufacturing of wind turbines, electricity networks, electric vehicles and batteries.
As countries worldwide accelerate their shift towards clean energy, the requirement for these essential minerals continues to rise.
The government's initiative for recycling critical minerals, including copper, lithium, nickel, cobalt and rare earth elements, is approaching its conclusive phase, according to a mines ministry official's statement.
The National Critical Mineral Mission (NCMM) has received Rs 1,500 crore in the Union budget for recycling critical minerals, Dinesh Mahur, Joint Secretary in the Mines Ministry has said.
The government's earlier approval of the National Critical Mineral Mission, with a budget of Rs 16,300-crore and a total allocation of Rs 34,300 crore distributed across seven years, aims to boost self-sufficiency and expedite India's shift towards green energy.
The mission, which seeks to encourage exploration of critical minerals domestically and in offshore regions, anticipates a substantial contribution of Rs 18,000 crore from public sector enterprises.
The primary aims of this initiative include enhancing exploration activities, lessening dependence on imports, securing mineral deposits abroad, advancing processing technologies for these crucial minerals and establishing recycling mechanisms.
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