China’s rare earth dominance is a reality and it’s crucial for India to double down on self-reliance

What are rare earths? Rare earth elements are a set of 17 heavy metals on the periodic table. Fifteen of these, with atomic numbers from 57 to 71, are ‘lanthanides.’ Two other metals, scandium (Atomic No. 21) and yttrium (Atomic No. 39) are also rare earth elements. These typically occur in various chemical combinations and such minerals are called ‘rare earth minerals.’ Most often, these minerals are made up of rare earth oxides.

When refined, these oxides result in rare earth metals of high purity that are critical in today’s economy. These metals allow the manufacture of some of the most economically and strategically valuable products of the 21st century, from computer processors, advanced alloys and electric vehicles to consumer electronics and industrial machinery.

Why have rare earth metals suddenly become so central to global geopolitics? China dominates their refining and supply, with a nearly 90% market share. China has also shown its willingness to use this dominance as a non-tariff response in its trade conflict with the US. From a supply-chain point of view, the medium-term implications of this are so important to the US and other large economies that it is a credible ‘card’ for China to play.

Strangely, neither the term ‘rare’ nor ‘earths’ literally applies to these minerals. ‘Rare’ refers not to their scarcity, but to their earliest industrial application in glass colouring, which produced some ‘astonishing’ colours. ‘Earths’ comes from an equally antiquated usage and pertains to metal oxides referred to in the 19th-century as ‘muds’ or ‘earths.’ These minerals are relatively plentiful in many parts of the world, but are spread thinly in low concentrations, making it difficult for economically viable extraction at usable purity.

China has the largest concentration of these minerals, equal to the concentrations available in all of the next five countries combined (Brazil, India, Australia, Russia and Vietnam, to name them). China has also created a very large capacity to extract and refine these metals. The process is difficult and environmentally sensitive, since separating these metals that are very similar to one another is procedurally intense.

Contrary to popular understanding, China’s trump card is not permanent. In the long term, its dominance of the supply chain can come apart as others respond to political and economic imperatives.

Until the supply chain disruptions of the pandemic, few countries had an incentive to mine and process rare earth minerals because they were plentifully available at attractive prices. Now, with supplies tightening and prices rising, miners and refiners in other countries will find it financially viable to invest in local capacity, aided by the political will to accommodate the environmental impact for the cause of self- sufficiency.

A parallel effort to completely substitute the use of rare earth metals in magnets is also underway. Iron nitride and ferrite magnets are already available as alternatives and the design of electric motors to incorporate these alternatives will only accelerate. Also underway is an effort that involves using several weaker magnets in an array united by smart design and modern software. Since Samarium is a rare earth found locally, India has developed a Samarium cobalt magnet that can be used in high-temperature conditions, as aerospace and military sensors must bear.

Self-sufficiency efforts are evident. In 2017, a private company reopened the Mountain Pass mine in California, the only rare earth mine in the US. With the help of government subsidies, MP Materials has begun commercial production of neodymium-iron-boron (NdFeB) magnets for the first time in decades. Other companies like Energy Fuels, Idaho Strategic Resources and US Rare Earths are joining the race to mine and process rare earth minerals.

Magnets based on rare earth metals are in wide use globally because of their magnetic strength and coercivity (a measure of their ability to retain magnetism even when exposed to other magnetic fields).

India currently produces only about 1% of the world’s annual output of rare earths. That production has been flat for several years. Despite the clear geopolitical shots being fired across the bow, India has had a lethargic response to catalysing this.

In a Takshashila Institution discussion paper on rare earths that I co-authored in 2021, we suggested that India must (1) spin-off a new department of critical minerals from the Department of Atomic Energy; (2) open the sector to private players for development; and (3) actively partner with the Quad to map and develop the mining, separation and refining ecosystem, particularly for the heavier rare earth elements that are not abundantly available in the country.

Global supply chain disruptions, military conflicts and geopolitical tensions make this the right time for India to double down on expanding its production of rare earth minerals and build both upstream and downstream processing capacity.

P.S: “The only thing that will redeem mankind is cooperation,” said British polymath Bertrand Russell.

The author is chairman, InKlude Labs. Read Narayan’s Mint columns at www.livemint.com/avisiblehand