It is encouraging to note that the government has decided to invest large sums of money in support of rare earth magnet manufacturing and substantially improve the country’s rare earth-based metals production to escape China’s global chokehold in this strategic sector. Presently, there are a few small Indian companies engaged in manufacturing rare earth magnets. The industry needs a big push to feed the new generation of industries – from electric vehicles to fighter aircraft engines, wind turbines, and laptops to mention a few. Lately, it has come into a big focus as the world is moving towards electric vehicles. Rare earth magnet is a crucial component of electric vehicles (EVs). Fortunately, India has large rare earth deposits. Globally, it ranks third after China and Brazil.
Last week, the union cabinet’s clearance of a Rs 7,280-crore rare earth permanent magnet scheme to cut import dependence on China came at a time when China — by far the world’s largest owner of rare earth deposits, component manufacturer and exporter — used the magnet to make US President Donald Trump swiftly swallow his US-China trade tariff tantrums to strike a new bilateral trade deal. President Trump even offered to visit China to hold a summit meeting with his Chinese counterpart, Xi Jinping.
Trump plans to visit Beijing in April and invited Chinese President Xi Jinping for a state visit later next year, following a phone call between the two leaders. The US hi-tech industry is heavily dependent on China for rare earth magnets due to China’s dominance in the complex processing and refining of these materials. The reliance on China strongly impacts various sectors of the US industry, from consumer electronics and electric vehicles to defence systems such as fighter jets and missiles, creating vulnerabilities for the US supply chain through significant investment and production efforts.
The US is making efforts to develop a domestic rare earth supply chain through significant investment and production initiatives although the country is placed lowly in terms of global rare earth deposits. China controls a vast majority of around 90 percent of the world’s rare earth element refining capacity, which is a complex and crucial step in making the elements usable for manufacturing. Even rare earth materials mined in the US are often sent to China for processing. This dependence makes US industries vulnerable to potential supply disruptions, as seen in the past when China implemented export restrictions during trade tensions.
India, aspiring itself to become a global player in manufacturing new-age consumer electronics products, electric vehicles and defence systems, has finally undertaken a bold scheme to support the production of sintered rare earth permanent magnets with an expected installed capacity of 6,000 tonnes per annum. Under the model approved, five beneficiaries will be selected through a global competitive bidding process with each allotted a production capacity of up to 1,200 tonnes per annum. The scheme will run for seven years from the date of the award of contract. It will include two years for the setting up of full-scale manufacturing facilities and five years during which beneficiaries will receive incentives linked to sales.
The demand for rare earth magnets in India is expected to increase sharply in the coming years, driven by the expansion of EV manufacturing, increasing electronics output, defence production, industrial automation and renewable energy generation. For the present, the country uses rare earth magnets to the extent of 4,000 tonnes per year, mostly through imports. Among the companies currently manufacturing rare earth magnets in India are: IREL (India) Limited, Permanent Magnets Limited, Ashvini Magnets Private Limited, Star Trace, Eriez Magnets, Kumar Magnet, Sonal Magnetics, A to Z Magnet Mfg. Co. and Pragati Enterprises. The demand for rare earth magnets is projected to double by 2030. Lately, China has imposed restrictions on exports. Earlier this year, China slapped export licenses for seven types of rare earth elements and derivative products.
Hopefully, the latest government initiative will induce Indian entrepreneurs to use the country’s capability to emerge as a global player in manufacturing and even exporter of rare earth magnets considering the fact that it has a reasonably good deposits of rare earth spread across the country. Key locations include Kerala, Tamil Nadu, Odisha, and Andhra Pradesh. Hard rock deposits are located in Gujarat and Rajasthan. Smaller occurrences have been reported in states such as West Bengal and Jharkhand. The Atomic Minerals Directorate for Exploration and Research is believed to be actively exploring for rare earths in various terrains across the country, including coastal, inland, riverine, and hard rock areas. As of now, India’s proven rare earth reserves are estimated at 6.9 million tonnes, though far behind China’s reserves of 44 million tonnes and second-ranked Brazil’s 21 million tonnes. India had reportedly produced 2,900 tonnes of rare earth in 2024.
Brazil is also planning to gradually exploit its rare earth resources for industrial conversion. The country’s rare earths company, Serra Verde, began the first phase commercial production from its PelaEma deposits in 2024. By the end of next year, the mining firm hopes to produce 5,000 tonnes of rare-earth oxide annually. PelaEma is billed as one of the world’s largest ionic clay deposits. The company will produce four critical magnet rare earth elements: neodymium, praseodymium, terbium and dysprosium. Serra Verde claims that it is the only rare earths operation outside of China to produce all four of those magnet rare earths.
Sitting on the world’s third largest rare earth deposits, it does not make sense for India to spend crores of rupees on import of highly strategic rare earth magnets. In 2024-25, the country imported 53,748 metric tons of rare earth magnets, valued at Rs.1,744 crore, which is an 88 percent increase in quantity from the previous fiscal. This massive surge in imports might have been linked with China’s April 2024 export restrictions on rare earth elements. The development is expected to cause a supply crunch in India in due course. In effect, the country’s push for self-reliance in rare earth magnet manufacturing is a significant strategic move, aimed at securing a critical component for high-tech industries and reducing dependence on predominantly China-centred global supply chains. Right now, almost all permanent magnets used in the country are imported. The latest rare earth magnet manufacturing programme will hopefully make the country totally self-reliant in this vital area. (IPA Service)
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