As China Restricts Rare Earth Exports Again, Why India Could Face Supply Issues
The Wire Staff
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New Delhi: On Thursday (October 9), China placed more restrictions on the exports of rare earth metals and related technologies, per a news report by Reuters. To its ‘control list’ of products that will come under export curbs, China has now added five more rare earth elements, extra scrutiny for semiconductor users and several components of refining technology, per the news agency.
The move comes just before talks between the Chinese and American presidents later this month. In April, China had already placed restrictions on exports of seven rare earth elements after US President Donald Trump announced steep tariffs on many trading partners including China.
China's hold over rare earths
Rare earths are a group of 17 elements including 15 silvery-white metals called lanthanides. Thanks to their several magnetic, luminescent and electrochemical properties, these minerals are crucial components of not only high-tech consumer electronics such as smartphones and televisions but also electric vehicles, aircraft engines and even military applications such as missiles and radar systems.
Though the US was the world’s top producer of rare earths from the 1960s to 1980s, China today accounts for about 61% of rare earth production, and 92% of their processing according to the International Energy Agency.
On Thursday, China’s Ministry of Commerce announced that it was adding five more critical metals to the list of products that are under restrictions for export to other countries. The five metals added to the list are holmium, erbium, thulium, europium and ytterbium.
They join seven others (including gadolinium, which is used in MRI machines for its magnetic properties) that China already placed under export restrictions in April, which meant that companies had to obtain special licenses to send these overseas.
Per the latest restrictions, these export licences are required for goods that contain Chinese rare earths or are made using Chinese machinery. To obtain such a licence, foreign companies must describe the intended use of the product they wish to make using Chinese rare-earth metals.
Per the restrictions, Chinese companies also cannot enter into overseas joint ventures or collaborations without official approval. According to the Financial Express, applications linked to defence or advanced semiconductor manufacturing will experience “broad denials or lengthy reviews”, with Beijing citing “national security” concerns.
Al Jazeera quoted a Chinese spokesperson as saying on Thursday that certain foreign organisations and individuals have been directly transferring – or processing and then transferring – controlled rare-earth materials originating from China to “relevant organisations and individuals directly or indirectly for military and other sensitive applications”.
“This has caused significant damage or posed potential threats to China's national security and interests, adversely affected international peace and stability, and hindered global non-proliferation efforts,” the report quoted the spokesperson as saying.
According to other reports such as this one, China has also asked India for a guarantee before it re-starts rare earth exports to India: that India will use the heavy rare earth magnets supplied by China domestically and not re-export it to the United States. Only once this written guarantee is provided would China resume rare earth magnet shipments to Indian firms, per the report.
On Thursday, China also placed restrictions on the export of specialist technological equipment used to refine rare-earth metals, according to Al Jazeera. Most of these restrictions will kick into effect from December 1.
Why India will feel the pinch
Though these restrictions are targeted at the US given that Chinese President Xi Jinping and Trump are set to engage in talks later this month, there are concerns that India too could be hit by the latest export curbs.
India relies heavily on China for rare earths. In 2023-24 alone, China, Hong Kong and Japan were the leading exporters of rare earth metals to India. From China alone, India imported 699 tonnes – three times more than what it imported from Hong Kong.
That year, India also imported from China 780 tonnes of organic and inorganic compounds extracted from rare earth metals.
In April when China first announced export restrictions on seven rare earth metals, India felt the pinch. Indian importers now had to witness a 40 to 45-day procurement process, and the documentation and paperwork that came with it.
Importers had to also be authenticated by the Directorate General of Foreign Trade, and this authentication in turn needs to be submitted to the Chinese embassy in New Delhi, China’s Ministry of Commerce and exporters, according to Frontline.
The restrictions led to several impacts on the auto industry with regard to electric vehicles, per its report.
For instance, Bajaj Auto which sells India’s best-selling electric scooter, Chetak, manufactured just 10,824 units of the Chetak in the country in July, as compared to 20,384 units during the same period last year – due to rare earth shortages.
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