Rare Earth Elements

China imposed export restrictions on seven critical rare earth elements (REEs), impacting global supply chains. This has raised serious concerns for India’s automotive and defence sectors, both of which depend heavily on rare earth magnets sourced from China.

Rare Earth Elements and India’s Supply Chain Vulnerability

• What Are They?
  • A group of 17 chemically similar elements used in electronics, automotive, defence, medical, and renewable energy sectors.
  • Term “rare” refers to the complexity of extraction and refining, not scarcity.
• China’s Dominance
  • China holds:
    • ~70% of global mining output
    • ~90% of global refining and magnet production capacity

• Export Controls
  • Export restrictions now apply to seven REEs, including dysprosium and terbium, crucial for manufacturing high-performance magnets.
  • Special export licenses required; large numbers of applications remain pending or rejected globally.
• Affected Sectors
  • Electric vehicles (EVs), internal combustion components, sensors, and military-grade electronics all rely on REEs.
  • These curbs are expected to disrupt manufacturing and innovation

• Short-Term Effects
  • Indian automotive production is facing potential delays due to dwindling stocks of rare earth magnets.
  • EV production lines and critical vehicle components are under pressure as supply chains tighten.
• Long-Term Strategic Concerns
  • India holds fifth-largest global reserves of REEs but lacks industrial-scale processing and refining capacity.
  • Current domestic production is monopolized by a single public sector entity, limiting scalability and diversification.

• Immediate Measures
  • Diplomatic engagements to secure exemptions or expedite Chinese export licenses.
  • Interim alternatives: using ferrite magnets, importing from alternative Tier 2/3 global suppliers, and recycling from retired devices and vehicles.
• Strategic Direction Required
  • Building domestic refining and magnet manufacturing infrastructure.
  • Facilitating R&D in substitution and material recycling.
  • Encouraging foreign collaboration with REE-rich countries like Australia and Africa.

• REEs are critical for missile systems, radars, satellites, and energy-efficient technologies.
• China’s control creates monopoly risk, threatening India’s strategic autonomy.
• The crisis highlights the importance of integrating REE supply chains into the Atmanirbhar Bharat framework.

Way Forward

• Scale up domestic REE exploration and refining, with private sector participation and technology transfer.
• Launch a National Rare Earth Mission to coordinate extraction, processing, magnet production, and R&D.
• Promote rare earth recycling initiatives from end-of-life electronics and vehicles.
• Develop strategic partnerships with REE-rich countries to diversify sources.
• Include REEs under Production Linked Incentive (PLI) schemes to boost domestic capabilities.