With China Restricting Supply Of Rare Earth Minerals In Response To Trump’s Tariff War, There Is Opportunity For India To Shine

As the name suggests, rare earths and critical minerals are rare in availability and critical for many high-tech applications, including defence, space-tech, electric mobility and so on. China is a dominant producer and exporter of many of these minerals.

Instead of feeling rattled by the imposition of stiff tariffs by the US, China has quietly restricted the supply of rare earth and critical minerals. This is seen as a moderated response. Currently, export restrictions have been placed on seven rare earth elements that are used for high-tech applications.

To be sure, these rare earth minerals and special magnets made therefrom are crucial for the world’s automotive, semiconductor, energy and aerospace industries. These can now be shipped out of China only with special export licenses.

Interestingly, Beijing has barely started setting up a system for issuing the licenses. In other words, in the short run, supplies of critical minerals and products outside the country could get tight. This is sure to impact the high-tech industries of the US.

China has adopted non-tariff measures too. The Asian major has expanded its export controls. There are restrictions on the export of critical minerals (tungsten, molybdenum, bismuth, indium, etc.). Exporters in China have to obtain licenses from the Chinese ministry of commerce. This can potentially disrupt the supply chains of the US companies that rely on these materials.

That’s not all. According to reports, China has added US companies to its ‘Unreliable Entity List’ on grounds of national security concerns. Under this list, restrictions on trade and investment may be imposed. Additionally, it is reported that China has initiated anti-monopoly investigations into US companies operating in China.

Many are asking if the recent Chinese move on critical minerals creates an opportunity for India. Is India well equipped to capitalise on this opportunity?

India produces a variety of minerals, some of which are considered critical due to their importance in various industries, especially in clean energy tech and defence. There surely are some critical minerals produced in India that may be of interest to the US.

GRAPHITE: India is among the world’s top producers. Natural graphite is a critical mineral for lithium-ion batteries used in electric vehicles and energy storage.

MANGANESE: India has significant manganese reserves. This mineral is critical for steel-making and is used in some battery technologies.

TITANIUM: It is vital for aerospace and defence industries due to its high strength-to-weight ratio. We have reserves of titanium-bearing minerals like ilmenite.

MICA: We have large mica reserves. Mica is used in electrical and electronic applications.

BAUXITE: India ranks as the world’s 5th largest producer with rich reserves. Bauxite is the primary ore for aluminium. For the US, it is a critical material for energy, as it is used in various sectors, including solar energy tech and light-weighting vehicles. Aluminium is increasingly replacing copper, which is admittedly a heavy and more expensive metal.

CHROMITE: India ranks as the world’s 3rd largest producer. Chromium derived from chromite is essential in producing stainless steel and other alloys that are crucial for industrial and defence applications.

COPPER: India has large copper reserves. This metal is increasingly important for clean energy tech, energy storage and electronics. The US lists copper as a critical mineral for energy.

In addition, India is actively trying to increase domestic production of some critical minerals like lithium and cobalt to meet its domestic demand. India has identified its own list of 30 critical minerals, including lithium, cobalt, gallium, copper, tin, nickel, silicon, phosphorus and potash.

It is important to note that some of the critical minerals produced in India overlap with the US list. This makes India a potentially important partner of the US for sourcing some critical minerals, although we may not be able to satisfy all of the US’ needs.

India should start investing in the mining and production of critical minerals to meet the emerging demand for high-tech applications. This calls for a transparent, predictable and long-term policy without compromising on environmental concerns. Foreign direct investment possibilities must be explored.

By nature these projects involve a gestation period running perhaps to a few years. Yet, it is necessary to take the initial steps right away, as India itself would need all of these critical minerals to meet its energy transition targets.

G. Chandrashekhar is economist, senior editor and policy commentator specializing in commodity markets. He provides policy inputs for the government. He serves on corporate boards as Independent Director. Views are personal

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