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Even as a proposal has been floated to halt exports of refined rare earth oxide, India is considering a relook into its 13-year-old agreement on this with Japan, two people privy to the matter told Business Standard. This comes amid uncertainty over permanent magnet supply from China and depleting domestic inventory.
Under a government-to-government (G2G) agreement signed in 2012, Irel (India) Ltd, formerly India Rare Earths Ltd, supplies rare earth oxides or elements to Toyota Tsusho, which processes them for exports to Japan in the form of magnets.
“There has been a request to potentially stop exports to Japan, but we have a long-term G2G agreement. So, we will possibly put some constraints. If we are exporting rare earths to them, they should give something in back. This is just a way for us to reset the arrangement,” said one of the people quoted above.
“Earlier, we were merely exporting everything and didn’t seek anything. Now we are saying if you want our rare earth, please supply us magnets in return. It will be good if we can have a technical agreement with Japan where we share the scope of magnet manufacturing between both nations. You manufacture some magnets and let us also manufacture them,” said an auto industry executive who has been part of government discussions.
“We have some leverage with Japan, and the government is certainly talking about getting back magnets from Japan to meet at least 30-40 per cent of our needs. This is the only place where we have true leverage because Japan does not have raw materials. So, the Indian government is considering relooking at this G2G agreement,” the executive explained.
An official at the Japan Embassy in New Delhi said: “The supply chain is not simple. We import raw materials and process them into magnets. Those magnets are assembled into motors or as a magnet component. We are exporting those to India, but the volume may be negligible. We are discussing the matter with our government.”
Queries sent to secretaries and spokespeople for commerce, external affairs, heavy industries and electronics ministries, and the Japan Embassy in New Delhi, remained unanswered at press time.
Toyota Tsusho produced about 1,000 tonnes of magnets from raw materials received from Irel, Entellus, NFTDC and Midwest, the industry executive said.
India has significant deposits of refined rare earth oxide, primarily within monazite mineral sands in Andhra Pradesh, Odisha, Kerala, and Tamil Nadu, with Kerala’s monazite sands being particularly rich. The primary source of rare earths in India is monazite, a mineral containing 55-50 per cent refined rare earth oxide and thorium. It contains neodymium and praseodymium, two key rare earth elements to produce permanent magnets used in electric vehicle motors, wind turbines, aerospace, defence, etc.
As of 2023, the annual production of monazite in India was around 5,000 tonnes, though Irel (India) has a processing capacity of about 10,000 tonnes. The plan is to increase the production capacity of rare earth bearing ore (raw material) to 50 million tonnes per year by 2032, which means production of 13,000 tonnes of refined rare earth oxide (processed product) annually, according to an official statement.
Japan's current demand for permanent magnets, particularly NdFeB (Neodymium-Iron-Boron) magnets, is estimated at around 7,500 tonnes, while India’s consumption is over 50,000 tonnes, according to official data.
“For dysprosium and terbium, two heavy rare earth elements (HREEs) with unique properties, particularly in the realm of magnetism — and not available in extractable quantities in India — India may negotiate with Japan to get them from Australia. Japan has access to DYTB (dysprosium and terbium) from Australia,” the industry executive said.
China has restricted its rare earth mineral exports since April 4, hurting automakers and high-tech manufacturers globally, including in India. China is the world’s largest producer with an estimated 210,000 tonnes of mined REEs and 175,000 tonnes of refined REEs in 2022 — accounting for 70 per cent of global mined production and 87 per cent of global refined production — according to Natural Resources Canada, Government of Canada.
