CHINA RESTRICTION ON RARE EARTH MATERIALS: ECONOMY

CHINA RESTRICTION ON RARE EARTH MATERIALS: ECONOMY

NEWS: China restricts exports of rare earths: What will be the impact?

WHAT’S IN THE NEWS?

China’s export restrictions on rare earth elements have raised global concerns over supply security, given their critical role in defence, electronics, and green technologies. India, though rich in REE reserves, must overcome technological and dependency challenges to secure its mineral future.

Context: China Restricts Export of Seven Rare Earth Elements

  • In response to escalating trade tensions and tariff impositions by the United States, China recently announced export restrictions on seven key rare earth elements (REEs):
  • Samarium, Gadolinium, Terbium, Dysprosium, Lutetium, Scandium, and Yttrium.
  • These restrictions are strategically significant given China’s dominant position in the global REE market, and their vital role in modern technologies and defence industries.

What Are Rare Earth Elements (REEs)?

  • Rare Earth Elements are a group of 17 chemically similar elements in the periodic table, including lanthanides along with scandium and yttrium.
  • Despite their name, they are relatively abundant in nature, but economically viable, concentrated deposits are difficult to locate and extract.
  • They typically appear silvery in color and possess unique magnetic, catalytic, and optical properties, making them critical for several high-end applications.

China's Dominance in Critical Minerals

  • China has controlled the global REE supply chain since the 1990s, currently accounting for:
  • 85–95% of global REE supply
  • 87% of rare earth processing capacity
  • Large shares in lithium, cobalt, graphite, and silicon refining
  • This dominance extends to processing, refining, and downstream manufacturing, giving China significant leverage in global tech and defence markets.
  • The new export controls are strategically timed to affect high-tech and defence industries in rival countries, particularly the U.S. and its allies.

Importance of Rare Earth Elements

  • REEs are essential for manufacturing advanced technologies used in multiple sectors:
  • Clean Energy: Wind turbines, electric vehicle motors
  • Consumer Electronics: Mobile phones, LCD/LED screens, headphones, and cameras
  • Automobile Industry: Magnets for power steering, sensors, and window motors
  • Defence: Guidance systems, fighter jets (e.g., F-35), precision missiles (e.g., Tomahawk), radar systems, and submarine propulsion
  • Their high magnetic strength and lightweight nature make them indispensable in miniaturized, efficient systems.

Impact of China's Export Restrictions

  • The new restrictions are likely to:
  • Cause supply chain disruptions across industries globally
  • Trigger a surge in REE prices, raising production costs of electronics and defence equipment
  • Prompt countries to search for alternative suppliers or revive domestic mining and recycling
  • Countries highly dependent on Chinese REEs—such as the U.S., EU, Japan, and India—are now accelerating diversification efforts.

Environmental Concerns in REE Mining

  • The mining and refining of rare earths is highly polluting, generating toxic waste materials such as arsenic, cadmium, and radioactive thorium.
  • Improper disposal of by-products leads to soil contamination, water pollution, and health risks to local populations.
  • China's dominance partially stems from less stringent environmental regulations compared to other nations.

India’s Position and Challenges

  • India possesses significant REE reserves, particularly in:
  • Monazite-rich beach sands of Kerala, Odisha, Andhra Pradesh, and Tamil Nadu
  • Other reserves in Karnataka and Jharkhand
  • Despite this, India faces:
  • Lack of advanced extraction and processing technologies, especially for minerals like lithium
  • Over 40% import dependency on China for six key minerals:
      • Bismuth (85.6%), Lithium (82%), Silicon (76%), Titanium (50.6%), Tellurium (48.8%), and Graphite (42.4%)
  • India is particularly vulnerable to supply shocks, affecting sectors like electronics, renewable energy, and national security.

 

Recent Developments: India’s Critical Minerals Strategy

  • In 2023, India identified 30 critical minerals vital for economic security, energy transition, and defence preparedness.
  • These include lithium, cobalt, nickel, REEs, and graphite, many of which are largely imported.
  • The government has initiated policies to:
  • Strengthen domestic exploration
  • Invest in recycling technologies
  • Promote joint ventures and overseas mineral asset acquisition
  • Join international partnerships like the Minerals Security Partnership (MSP) with the U.S., Australia, and other allies.

Way Forward for India

  • India must take multi-pronged steps to reduce dependency on China and secure long-term access to critical minerals:
  • Invest in indigenous processing technologies for rare earth extraction and separation
  • Promote public-private partnerships to develop domestic capacity
  • Frame a national strategy for rare earths with time-bound targets and incentives
  • Strengthen international alliances for strategic sourcing and knowledge exchange
  • Ensure environmentally sustainable mining practices to minimize ecological harm
  • Recycling of e-waste, old electronics, and batteries must be a key focus area to recover REEs and reduce reliance on imports.

Conclusion

  • Rare Earth Elements are at the heart of modern technology and national defence, making them strategically vital.
  • China’s restrictions signal a geoeconomic shift, compelling countries like India to accelerate diversification, innovation, and self-reliance.
  • India’s future lies in developing a comprehensive, long-term critical mineral policy that balances strategic security, industrial growth, and environmental sustainability.

 

Source: https://indianexpress.com/article/explained/explained-economics/china-restricts-exports-of-rare-earths-impact-9945497/