India hunts for rare earth magnet alternatives as China tightens grip

China holds around 50% of the world's rare earth reserves, 70% of extraction capacity, and over 90% of processing capability

India is exploring alternative sources to import rare earth magnets amid ongoing supply disruptions from China, as there are no temporary domestic options available, according to a senior government official.

 

Following the escalating tariffs imposed by US President Donald Trump on China, Beijing enacted export restrictions on seven heavy and medium rare earth elements and magnets on April 4. These include samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, which are used in defence, energy, and automotive (auto) technologies. Chinese companies are now required to secure defence licences to export these resources.

 

Despite India assuring that these magnets will only be used by automakers and for domestic purposes — not in defence manufacturing — China remains concerned about the potential military applications of permanent magnets and the re-export of those to the US.

 

“While Delhi is in discussions with Beijing to resolve this issue, the Indian government is also looking into feasible alternatives, as there are no domestic options available,” the official said, without disclosing the names of potential countries.

 

Queries sent to the secretaries and spokespersons for heavy industries, commerce, and external affairs remained unanswered until the time of going to press.

 

Countries like Vietnam, Malaysia, Australia, Japan, and South Korea could serve as alternative sources; however, establishing a new supply chain will take time, and some of these nations currently produce rare earth magnets on a small scale, according to industry analysts and experts.

 

“Indian auto and auto component manufacturers see China’s restrictions as a wake-up call to diversify their supply chains and explore options beyond China. In this process, there are fundamentally three key areas to consider: rare earth reserves, extraction, and processing,” said Hemal N Thakkar, senior practice leader and director at Crisil Intelligence.

 

China holds around 50 per cent of the world’s rare earth reserves, 70 per cent of extraction capacity, and over 90 per cent of processing capability. Following China, the US, Brazil, and Australia possess sizeable reserves, with India holding 7–8 per cent. Despite this, neither Australia, Brazil, nor the US produces much in the way of rare earth magnets. Hong Kong accounts for 10–15 per cent of rare earth ore extraction, while Japan and South Korea contribute 2–4 per cent. Vietnam and Malaysia are responsible for 7–8 per cent of the processing, with the remainder occurring in China.

 

“Thus, while Malaysia and Vietnam may be options for rare earth element processing, we cannot ascertain whether they use their own technology or have licensed technologies from Chinese firms. For sourcing, alternatives could include Australia, Japan, and possibly Hong Kong,” Thakkar said. However, he cautioned that this may not be a viable solution due to the limited scale of their production.

 

For heavy rare earth magnets, India can still temporarily rely on China, while using light rare earth elements (LREEs) to meet domestic demand. However, this will require original equipment manufacturers (OEMs) to make design changes and align their value chains — a process that could take three to four months.

 

Heavy rare earth elements have a greater capacity to withstand extreme temperatures — up to 160 degrees Celsius — without compromising performance, compared to LREEs, whose capabilities may be more limited. Smaller magnets are preferable as they consume less space in vehicles, particularly in two-wheelers and passenger vehicles, although size may not be as critical for buses.

 

“If we transition from heavy rare earth to light rare earth magnets, we will need to implement design changes in the motors, which could take at least three to four months and result in production disruptions,” warned Thakkar. “To avoid redesigning the motors, OEMs could import sub-assemblies from China and assemble them into vehicles — this could serve as a temporary means to stabilise production.”

 

Another potential short-term solution is to identify magnet suppliers with established relationships with China, allowing them to source rare earth oxides or procure materials from other countries like Malaysia, said Nishant Nischal, a partner at Kearney’s energy and process industries.

 

“While temporary arrangements can be made, the long-term solution lies in achieving self-sufficiency. India must develop more rare earth projects, expedite the commissioning of rare earth oxide production, and create separated processing facilities, along with fostering a user ecosystem in parallel,” Nischal added. 

Changing dynamics  

• Vietnam, Malaysia, Australia, Japan, South Korea likely alternative sources
• Short-term solutions include switching to light rare earth magnets, imports of sub-assemblies from China or source via Beijing-linked suppliers
• For the long term, India needs to build a domestic supply chain
• China controls 50% of global reserves, 70% extraction, and over 90% processing
• India holds 7–8% of global reserves but lacks processing capacity