India has reportedly instructed a state-run miner to suspend rare earth exports to Japan under a 2012 bilateral deal, aiming to secure a domestic supply and reduce reliance on China amid tightening Chinese export controls and rising global demand for critical minerals like neodymium used in electric vehicle magnets.
Strategic shift to secure domestic supply
India has reportedly directed state-owned miner India Rare Earths Ltd (IREL) to halt rare earth exports to Japan under a 2012 bilateral agreement as part of a broader effort to secure domestic supply and reduce dependence on China, according to sources familiar with the matter who spoke to Reuters.
The order, reportedly discussed in a recent high-level meeting led by Commerce Minister Piyush Goyal, targets neodymium exports. While IREL has been supplying materials to Toyotsu Rare Earths India, a subsidiary of Toyota Tsusho, these are processed and exported to Japan for use in magnet production. However, any immediate halt to exports may be complicated by the standing government-to-government agreement with Japan.
IREL, which has exclusive mining rights in India, is developing its processing infrastructure with extraction plants in Odisha and refining facilities in Kerala. The company aims to produce 450 metric tons of neodymium in fiscal 2026 (April 2025 to March 2026) and double that by 2030. It is also exploring partnerships to manufacture rare earth magnets locally for the auto and pharmaceutical industries.
China tightens export grip on critical materials
China has tightened export controls on seven key rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, as well as related magnets, effective April 2025. These materials are essential for industries including defense, electric vehicles, semiconductors, and renewable energy. While not a full ban, the new rules require exporters to obtain individual licenses for each shipment.
The move primarily targets the US, which relies heavily on Chinese rare earths and lacks sufficient domestic processing capacity for heavy rare earths. However, the measures also impact other countries, including Japan, Germany, and India.
Multi-pronged approach to reduce dependency
India is adopting a comprehensive strategy to mitigate the impact. The government is pursuing diplomatic channels to stabilize trade flows, with ongoing discussions between Indian and Chinese officials aimed at improving supply chain predictability, according to Foreign Ministry spokesperson Randhir Jaiswal.
At the same time, India is accelerating efforts to build self-reliance in rare earth magnet production. Given that China currently controls around 90% of global magnet processing, India is planning fiscal incentives to support local manufacturing. These may include production-linked subsidies and other financial measures to bridge the cost gap between domestic and imported magnets.
Additionally, India has launched the National Critical Mineral Mission (NCMM), a strategic policy initiative to secure a stable supply of critical minerals, including rare earth elements. The NCMM focuses on scaling up domestic production and securing foreign procurement channels, positioning India to reduce its long-term dependence on Chinese supplies while strengthening its critical mineral value chain.
Article edited by Jerry Chen
