Critical minerals, particularly rare earth elements (REEs), are crucial for the green energy transition. These REEs are a subset of critical minerals, comprising 17 elements in the periodic table (from 57 to 71) starting with lanthanum. They also include scandium and yttrium.
Although moderately abundant in the earth’s crust, REEs are not concentrated enough for economic exploitation. They play a crucial role in various industries, including defense, electronics, and energy systems, due to their unique properties. Rare earth magnets, for instance, are significantly more powerful than conventional magnets.
Alongside elements like lithium, REEs are essential for developing sustainable energy systems, including renewable energy technologies such as wind turbine magnets, electric vehicle motors and solar panel components.
Additionally, REEs have diverse applications in healthcare, medical devices, aerospace, and defense.
According to the International Energy Agency’s 2024 estimate, global REE demand was 93 kilotons (kt), with 18 percent used in clean technologies. With the ongoing clean energy transition across countries, the demand is expected to reach 180-202 kt by 2050, where clean technology usage is projected to increase to 32-39 percent.
All countries rely on REEs due to their widespread applications but only a few nations are significant producers and exporters.
China dominates the global REE market, leading in reserves, production, and exports. According to the Statistical Review of World Energy (2024), China holds the largest REE reserves, with 44 million tons (38 percent of global proven reserves), followed by Brazil (18 percent).
In 2023, China accounted for two-thirds of global REE production (240 kt out of 356 kt). The United States accounted for 12.2 percent. Notably, Chinese REE production increased by 14 percent compared to 2022.
China is the largest exporter of REEs, accounting for 64 percent of global export value and 86 percent of quantity in 2023.
Thailand ranks second, with a 28 percent share in value and 10 percent in quantity. Chinese REE exports grew at a compound annual growth rate (CAGR) of 11.6 percent from 2018 to 2023.
In contrast, Japan and Malaysia are the largest importers, with Japan accounting for 57 percent of global import value and 19 percent of quantity, and Malaysia accounting for 25 percent of value and 70 percent of quantity.
The majority of Chinese REE exports (85 percent by value) are destined for Japan, followed by South Korea (3.5 percent) and the United States (3.2 percent). China also imports REEs, accounting for 3.5 percent of global import value in 2023, while India’s share is only 0.7 percent.
India’s REE imports are primarily sourced from China, which accounted for 81 percent of India’s import value and 90 percent of quantity in 2022. India’s REE imports have grown at a compound annual growth rate (CAGR) of 10 percent since 2017, with imports from China specifically increasing by 8 percent CAGR.
The dependence on REEs for green energy technologies and the concentrated REE supply market have created unforeseen geopolitical implications. Unlike conventional energy markets, which are relatively diversified, the REE market is dominated by a few key players, making it vulnerable to disruptions.
As countries transition to low-carbon technologies, they become increasingly reliant on REEs, shifting their energy security risks from fossil fuels to critical materials.
For instance, China’s 2010 export restrictions on REEs to Japan, due to a maritime dispute, led to a 39 percent decline (between 2010-12) in Japan’s REE imports from China, along with sharp spikes in global REE prices, which impacted various industries in Japan.
This incident sparked a debate about energy security risks associated with the concentrated REE market, prompting Japan, the United States, and the EU to file a dispute settlement case against China at the World Trade Organization (WTO).
The WTO ruled in favor of the complaining countries, forcing China to withdraw some restrictions. However, this incident highlighted the need for diversified REE supply chains to mitigate energy security risks.
To mitigate energy security risks associated with rare earth elements (REEs), countries can consider three alternatives: recycling REEs from end-of-life products, exploring alternative import sources, and investing in research and development (R&D) to improve REE utilization or develop alternatives.
However, each option has its own drawbacks. Recycling is, in general, water and energy-intensive and requires a proper supply chain to collect end-of-life electronic-waste. R&D is financially expensive and time-consuming due to inherent uncertainties. And alternative import sources are often limited by geopolitical factors.
To address the geopolitical risk, India is exploring all three alternatives. Recently, the Indian Ministry of Mines initiated the designing of a Production Linked Incentives scheme to promote recycling of critical minerals.
The state-owned Indian Rare Earths Limited was established in 1950 to extract and process REEs and conduct related R&D.
The recent removal of IREL from export control list by the United States is expected to enhance India’s critical mineral supply chain, including REEs. Furthermore, IREL has commissioned a Rare Earth Permanent Magnet Plant (REPM) in Visakhapatnam, which will produce samarium-cobalt permanent magnets using indigenous technology, with an annual capacity of 3,000 kg.
This development is expected to play a crucial role in India’s quest for rare earth elements. Further, the formation of Khanij Bidesh India Ltd (KABIL), inclusion of India in the US-led Mineral Security Partnership and amendments to the Mines and Minerals (Development and Regulation) (MMDR) Act are also proactive measures in this context.
Kazakhstan, which has rich reserves of 15 out of 17 known REEs along with established extraction and processing capabilities, offers a promising alternative for India to diversify its REE imports.
Strategic partnerships with Kazakhstan can help India reduce its dependence on China, leveraging geographical proximity and geopolitical stability. Kazakhstan is not only India’s largest trading partner in Central Asia; India also has defense cooperation and civil nuclear agreements with Kazakhstan. Moreover, Kazakhstan has established relationships with major global partners, including the U.S., Japan, South Korea and the EU, demonstrating its commitment to reliable REE supply.
The India-Central Asia Rare Earths Forum (ICAREF) is exploring collaborations for joint mining ventures through private sector investment. Despite technical challenges, such as geographic hurdles and limited advanced extraction technologies, ICAREF aims to address these issues and establish a regional REE market for mutual benefit, facilitating a smoother transition to renewable energy with reduced dependence on China.
Originally published under Creative Commons by 360info.
