The REE opportunity

Rare earth elements (REE) are a series of seventeen substances that are present in the earth’s crust. Unlike what the name may indicate, rare earths occur plentifully in nature, but their rarity comes from the ability to isolate them chemically and make them usable in industrial applications. Heavy and light rare earths occur naturally in several countries, such as India, Brazil China, Myanmar, Japan, Australia and North Korea. However, China enjoys a near monopoly in global REE trade. The International Energy Agency estimates that China accounts for about 61 per cent of rare earth production and 92 per cent of their processing.

As the trade war between China and the US escalates, attention has been focused on the increasingly high levels of tit-for-tat tariffs the two countries are imposing on one another. But slapping reciprocal tariffs on Washington is not the only way Beijing has been able to retaliate. China has now also imposed export controls on a range of critical rare earth minerals and magnets. This has not only delt a major blow to the US economy but threatened to cause an unprecedented dent in global supply chain on the critical material. The move has turned a manageable dependency into a crisis.

As the world grapples with this shock, the lesson is clear: interconnected supply chains demand cooperation, not escalation. No doubt, the US and its allies need to accelerate REE diversification, but immediate relief requires de-escalating trade tensions. Otherwise, the global economy faces another painful disruption, proving that in a connected world, no one wins when supply chains break. There are lessons for India as well as the Government had far too long relied on the public sector to source and manage the supply of rare earths.

India is not immune to this dynamic. Although it holds the fifth-largest rare earth reserves in the world, it contributes only around 1 pc of global rare earth production. This is due to regulatory, environmental, and infrastructure barriers. The US and its allies actively seek to reduce their reliance on China for REEs. This enables India to become an alternative supplier, particularly in downstream value chains such as magnets, batteries, and high-end components.

A robust rare earth industry could enhance India’s economic security and bargaining power in international diplomacy. It can also reduce import dependency for key sectors such as defence and renewable energy. Developing a domestic rare earth value chain can create high-skilled jobs and foster innovation in materials science, metallurgy, and green technologies, which are critical for India’s economic growth.

The country’s rare earth sector is primarily led by Indian Rare Earths Limited (IREL), a public sector entity. The National Critical Minerals Mission, launched in 2024, aims to bolster domestic production. IREL plans to quadruple its mining capacity to 50 million tonnes annually by 2032, increasing REE output from 5,000 to 15,000 tonnes. Investments in processing and separation facilities aim to address India’s lag in midstream capabilities, though technical expertise remains a bottleneck. This is a significant shift from the earlier state-dominated regime. India has begun forging partnerships in the rare earth supply chain with like-minded democracies. At the same time, a coherent, industry-friendly policy framework is being put in in place. It is balancing its strategic autonomy while engaging in rare earth diplomacy.

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