China’s Continuing Rare Earth Dominance

China had used its dominance over rare earth elements (REEs) to effectively implement its ban on exports to Japan, ostensibly following the collision of a Chinese fishing vessel with Japanese coast guard vessels. Almost a decade later, as China threatens to ban exports to the United States (US), a replay of the same could be in the offing.

• The REEs are a set of 17 minerals used to make, among other things, permanent magnets which are used in defence equipment, including actuators, to control guidance systems for airborne smart missiles, as well as in aerospace applications for aircraft components and airstrip maintenance equipment.
• REEs are also used in electronic items like television sets and cell phones and renewable energy equipment like wind turbines and solar panels.
• However, of the 17 minerals, neodymium and praseodymium form the majority of minerals used in permanent magnets, while dysprosium is used in neodymium?iron?boron permanent magnets to improve their high temperature performance.
• Rare earths are not rare at all. In fact, they are found in several countries including China, the US, Australia, Brazil, Burundi, India, Malaysia, Myanmar, Russia, Thailand and Vietnam – with global deposit reserves estimated at 120 million tonnes.
• They are considered ‘rare’ as they usually exist as compounds fused with other metals, and they also oxidise quickly, making the process of refining and extracting them in commercially viable quantities very expensive, especially in countries with strict environmental and effluent standards.

The concern

• In the 1980s, China took the decision to make rare earths a strategic commodity. Due to the country’s low labour costs and lax environmental regulations, it soon became a market leader.
• Although it possessed around 40 per cent of the REE deposits, it produced around 80 per cent of the global supply.
• To put China’s position in the REE export market in perspective, it may be noted that the second largest supplier, which is Australia, produces around 20,000 metric tonnes as against China’s 120,000 metric tonnes.
• Moreover, in China, the REEs are mostly located in clay deposits which make it easier to extract. Also, the Chinese environmental standards are less stringent than in the US.
• The first signs of Beijing’s intention to use REEs as a strategic tool became apparent during its dispute with Japan in 2010; although some studies suggest that the decline in the REE exports to Japan was a result of China’s decision to cut worldwide exports due to environmental concerns.
• Beijing indicated that it may weaponise its rare earth resources in the event of an escalation of the trade war with the US.

Options for India

• India is one of the few countries that have substantial REE reserves. However, it ranks low in the REE market and is seen, at best, as a low-cost supplier of raw materials.
• Although over the years India has developed some expertise in extracting and processing rare earths from mineral ores (mainly monazite), it has yet to acquire the requisite expertise in the downstream sector, that is, in the manufacture of intermediate products like permanent magnets, phosphors, etc., mainly due to the volatility of the REE market prices.
• India imports most of the rare earths in finished form as electric vehicle manufacturing is still in its infancy.
• India and Japan had set up a joint venture company Toyotsu Rare Earths India in Visakhapatnam for the extraction and processing of rare earth oxides.
• While a beginning has been made with the announcement of a National Mineral Policy 2019, covering non-fuel and non-coal minerals, India must strive to acquire expertise in valorising these minerals and shift to developing its downstream sector.
• India should seek to leverage its ties with Japan and other countries that have the requisite technology for manufacturing downstream equipment so that it can set itself up as an alternative source of the REE-based technology, with its own supply chain of minerals and metals required for the same, instead of being content with being a mere supplier of upstream materials.