Rare Earths Opportunity for India

Rare earths have been a crucial input to high-tech innovations in recent years, including hybrid cars, cell phones, silicon chips, high-strength magnets, next-generation rechargeable batteries, biofuel catalysts, advanced juvenile guidance systems, etc. The world is looking for alternative supply chains, and India, with its reserves of rare earth elements, would take advantage of this.

In 2018, the global reserves of rare earth elements are estimated to be about 132 million tons, distributed in several countries, with the largest reserves in China, Brazil, Russia, and Vietnam. However, the mining and processing of rare earth elements is quite complex, energy-intensive, and generates radioactive waste. In view of this, only a few countries have been able to develop a rare earth metals industry.

Initially, REE mining and processing was concentrated in the United States. However, with growing environmental concerns, REE mining and processing began to shift to China in the early 1990s, and China took advantage of lax environmental regulations and other financial incentives to virtually monopolize the REE supply chain, particularly in the metal refining segment.

China's success in rare earths initially provided a great deal of convenience to advanced countries, as it ensured a low production price without causing environmental damage in the West. However, as China joins the global technology race and the possibility that the monopoly of rare earth elements will be used as a tool for trade and diplomacy, global technology leaders are forced to explore alternative sources of rare earth elements.

India has rich reserves of rare earth elements and the country has 7 million tons of resource reserves, accounting for more than 5% of the global rare earth resource reserves and ranking fifth in the world. The country began its efforts to develop domestic production capacity for rare earth resources in the 1950s, when the Indian Rare Earths Limited (IREL) was established to mine and process rare earth resources.

However, despite its rich reserves and early start, the country has failed to develop a rare earth industry and its share of the global rare earth market remains insignificant. More ironically, IREL, a company established to produce rare earth elements, has never actually focused on the production of rare earth. Instead, IREL focused more on thorium and other minerals such as ilmenite, zircon, rutile, etc. As a result, REE production in the country has consistently stagnated at around 2,000 tons over the years, increasing to 4,215 tons in 2018-2019.

The extremely low domestic supply of rare earth has ensured that India has almost no rare earth industry, forcing Indian manufacturers to rely on imports of finished rare earth derivatives from China to meet the booming domestic consumer electronics, computing equipment, power machinery, solar panels, etc., resulting in a large trade deficit.

The growing global demand for rare earth and the urgent need to find alternative REE supply chains in some developing countries provides an opportunity for the development of the Indian rare earth industry. All of these countries are exploring opportunities for technical and financial cooperation with comparable countries that have REE reserves. In particular, Japan and the U.S. have recently deepened their cooperation with Australia to enhance rare earth mining and processing outside of China. India has twice as many rare earth element reserves as Australia and therefore has great potential to cooperate with these countries.

Collaboration with Japan, Australia and the United States could help the country bridge the gap in technological and financial feasibility for the development of the rare metals industry.

The development of the upstream rare earths industry has the potential to be a boon for the country. The availability of REEs can be a very effective tool for attracting foreign direct investment in high-tech manufacturing industries that use REEs. India could also use REE reserves to stimulate economically more valuable downstream high-tech manufacturing.

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