China’s recent move to tighten restrictions on the export of rare earth magnets and associated minerals has triggered significant concern globally, with ripple effects already felt across critical sectors—particularly the auto and electric vehicle (EV) industries. The situation was discussed in depth by Sarda Bushin Moanti, Director of Finance and CMD at Indian Rare Earths Limited (IRL), in an interview with one Business channel. His insights shed light on the depth of the crisis and India’s current positioning.
According to Mr. Moanti, the restrictions imposed by China are already causing notable disruptions in the rare earth supply chain. China currently controls approximately 90% of the world’s rare earth magnet production, leaving countries like India, which heavily rely on these imports for their automotive and EV sectors, especially vulnerable. Japan holds a 7% share, while Vietnam accounts for about 1%. With demand for electric vehicles, especially two-wheelers, increasing sharply, the supply squeeze is expected to have a cascading impact globally, not just in India.
He highlighted that the disruption is a significant setback to India's auto industry, which is dependent on China for neodymium-iron-boron (NDF) magnets—a key component used in EV motors. The sudden imposition of export controls has placed added pressure on supply chains, especially given that this sector is already under stress due to high technological barriers, cost inefficiencies, and an inverted duty structure in India.
Despite the challenges, India is not without options. Moanti pointed out that while the country has been advancing its domestic manufacturing ambitions under the “Make in India” initiative, the technological and economic hurdles in the rare earth space remain considerable. India currently has the fifth-largest reserves of rare earths, with approximately 6.9 million tonnes. However, actual production capabilities are limited. India is capable of producing up to 4,000 metric tonnes of high-purity rare earths annually, but due to a shortage of feed material, only about 2,000 metric tonnes are currently being produced. Of this, around 500 metric tonnes of NDPR oxide are used to manufacture 1,500 metric tonnes of magnets, which is insufficient to meet the nation’s present requirements.
India's rare earth processing infrastructure is still evolving. While India does produce rare earth oxides, it has limited capabilities in refining, alloy production, and magnet manufacturing. Moanti explained that producing magnets involves a complex value chain—from mining to chemical separation, oxide production, refining, metal alloy creation, and finally, magnet manufacturing and end-use application. This makes setting up a fully integrated supply chain a long and capital-intensive process.
To reduce reliance on China, India is considering alternative mineral sources such as xenotime and carbonatite, in addition to monazite. Hard rock sources are also under exploration. However, developing these supply chains will require significant time and investment, as the gestation period for such facilities is long.
In terms of policy support, Moanti confirmed that the Indian government is evaluating the introduction of a Production-Linked Incentive (PLI) scheme specifically for rare earths and magnet manufacturing. This move could help address several key issues, such as the high capital costs, lack of domestic technology, and low ore quality compared to China and the U.S. India's ore deposits have a rare earth content of only 0.056%, while China has 6%, making Indian ore less economically viable without strong policy support.
The proposed PLI scheme is still under discussion, but it could include components like viability gap funding, capital expenditure subsidies, custom duty exemptions for imported equipment, and tax breaks to attract world-class technologies and private sector participation. Moanti acknowledged that while the sector is open to private investment, the high cost of operations and guarded nature of processing technologies have deterred significant private involvement so far.
In conclusion, the Chinese export restrictions have exposed the fragility of global rare earth supply chains and brought into focus the urgent need for India to build self-reliance in this strategically critical sector. While immediate solutions are limited, a focused and long-term approach—backed by robust government policy and industry collaboration—could help India weather the current storm and emerge stronger.
Disclaimer: This article is for informational purposes only. It is based on public interviews and industry insights and does not constitute investment or policy advice. Readers are advised to consult with experts or official government releases for authoritative information.
