Since the Chinese Ministry of Commerce implemented export controls on seven rare earth elements in early April this year, countries around the world have been affected, prompting them to see clearly China’s intent to weaponize rare earths and the risks of over-reliance on Chinese rare earths. Therefore, countries have begun developing their rare earth industries to reduce dependence on China.
Bloomberg reported on July 9th that India has proposed a plan to encourage the localization of rare earth magnets, which has sparked interest from some large Indian conglomerates. India heavily relies on China for key materials in electric vehicles and wind turbine equipment, leading them to seek ways to reduce this dependency.
According to sources who declined to be named, the Indian government is planning to provide up to 25 billion rupees (2.9 billion US dollars) in incentive funding for private companies to produce these magnets. Mining giant Vedanta Group controlled by billionaire Anil Agarwal, JSW Group led by Sajjan Jindal, and electric vehicle parts manufacturer Sona BLW Precision Forgings Ltd. have shown keen interest in this plan.
The sources stated that the blueprint of this policy may soon be submitted for Cabinet approval. They mentioned that details are subject to internal discussions and may undergo adjustments before finalization.
China controls about 90% of global rare earth processing. During the US-China trade war, the Chinese government intensified rare earth export controls, disrupting the global automotive supply chain, including operations in India. To address the issue of rare earth shortages, India is accelerating efforts in this regard.
Over the weekend, Indian Prime Minister Narendra Modi emphasized the necessity of reliable supply of critical minerals at the BRICS Summit in Rio de Janeiro, Brazil. Modi stated, “It is important to ensure that no country uses these resources for personal gain or as weapons against other countries.”
According to sources and a policy proposal obtained by Bloomberg, India plans to support three to four large companies over the next seven years to produce around 4000 tons of neodymium and praseodymium-based magnets using locally mined raw materials.
The sources mentioned that the plan will have a two-year incubation period and incentives will be rolled out gradually over five years after commencement of operations. They added that India’s electric vehicle industry is booming, considering investments of up to 6 billion rupees (almost 70 million US dollars) per 1,000 tons of rare earth production capacity under this plan.
CEO of Sona BLW, Vivek Vikram Singh, told Bloomberg that local magnet production will help ensure the supply chain security for Sona BLW, one of India’s largest electric vehicle traction motor manufacturers. Singh added that the company may also seek partnerships to develop magnet technology.
Last month, Indian Minister of Heavy Industries H.D. Kumaraswamy mentioned during an event in New Delhi that India is considering incentives for rare earth magnet manufacturers, without providing detailed specifics.
While India’s efforts to promote the rare earth industry development align with global trends, with moderate budget and ambitious timelines, the construction of mines and processing facilities may require several years to materialize.
China’s monopoly on rare earth exports is mainly due to the lack of consideration of environmental costs in pricing advantage.
Data shows that the production process of rare earths causes severe pollution, with production of 1 ton of rare earth oxide resulting in 2,000 tons of tailings, 1,000 tons of heavy metal-containing wastewater, and 9,600 to 12,000 cubic meters of sulfides and hydrofluoric acid; refining 1 ton of rare earth oxide into metal yields 2 cubic meters of radioactive solid waste. The International Atomic Energy Agency information indicates that basic disposal costs for 1 cubic meter of rare earth radioactive solid waste amount to tens of thousands of dollars.
Hence, Western countries face strict legal restrictions on local rare earth processing, leading to high dependence on China.
China’s rare earth card playing has sounded alarms for the international market and countries with deep dependence on rare earths. The supply cutoff to Japan by China in 2010 served as a precedent, alerting Western countries. Since then, a “de-Chineseization” rare earth full industrial chain backup has gradually taken shape and improved.
Indian state-owned enterprise Khanij Bidesh India Ltd. is leading efforts to secure mining concessions in Latin America and is in negotiations with countries like Argentina, Zambia, and Australia.
According to the proposed blueprint, the Indian government will invite domestic companies to bid, with annual production capacity ranging from 500 tons to 1500 tons.
To qualify for bidding, manufacturers must meet strict requirements, including half of the final product value must come from locally produced neodymium-praseodymium oxide, a key material for producing high-performance magnets. The blueprint also notes that by the fifth year of production, the requirement for domestic procurement from India will increase to 80%.
The latest data from Chinese customs shows a 52.85% month-on-month decrease in China’s rare earth magnet total shipments in May, impacting countries worldwide. Shipments to Germany (China’s largest rare earth magnet customer) dropped by 55% compared to 2024, 81% to South Korea, and 57% to Japan.