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Rare earth elements (REEs) have emerged as a critical geopolitical and economic lever in the 21st century, underpinning technologies central to defence, clean energy, electronics and advanced manufacturing. Recent developments including China’s temporary easing of export controls have highlighted that any relief to global markets is likely to be short-lived. The episode reinforces a deeper structural reality: China’s dominance over rare earth mining, processing and magnet manufacturing gives it enduring strategic leverage.

China’s Rare Earth Dominance

Rare earths comprise 17 chemically similar elements used in high-performance magnets, phosphors, batteries, wind turbines, electric vehicles, missiles and fighter aircraft. While these elements are not geologically rare, economically viable and environmentally manageable deposits are scarce. Over the past three decades, China has systematically built control over the entire value chain from mining to refining to manufacturing.

China’s share in global rare earth mining rose from about 38% in 2020 to nearly 70% in 2023. Its grip is even stronger in processing and refining, where it supplies 85–95% of global demand. Beijing has reinforced this dominance through overseas investments in Africa and Latin America, stakes in processing facilities in Malaysia, and strategic influence in companies such as Australia’s Lynas. Rare earths were formally designated a “strategic mineral” by China in the 1990s, enabling the state to weaponise supply during diplomatic or trade disputes.

Japan’s 2010 Shock: A Strategic Lesson

The clearest early warning came in 2010, when China informally halted rare earth exports to Japan following a maritime dispute. At the time, Japan imported nearly 90% of its rare earths from China, leaving its automobile and electronics industries exposed. Prices surged almost tenfold within a year, revealing the costs of overdependence.

Japan responded with a multi-pronged strategy: stockpiling critical minerals, investing in overseas mines (notably in Australia and Vietnam), expanding recycling, and developing technologies that reduce rare earth intensity. By 2023, Japan had reduced its dependence on China to about 60%. However, the experience also revealed limits partial diversification still leaves room for coercion, while full independence demands sustained, high-cost investment. The fading urgency after crises subside underscores the danger of complacency.

Renewed Global Push: US and EU

China’s recent export restrictions including controls on seven rare earths such as dysprosium, terbium and yttrium have revived concerns in the US and Europe. The US is stockpiling magnets, investing in domestic mining and processing (including Pentagon-backed stakes in firms like MP Materials), and prioritisingdefence supply chains. The European Union has expanded its critical minerals list, pushed for domestic refining, and encouraged recycling and deep-sea mineral research. These efforts reflect a broader “de-risking” approach: reducing vulnerability without severing economic ties.

Implications for India

For India, the immediate impact of China’s controls is limited, but long-term risks are significant. India holds around 6.9 million tonnes of rare earth reserves, mainly in Odisha, Andhra Pradesh, Tamil Nadu and Rajasthan, placing it among the top five globally. Yet production remains minimal about 2,700 tonnes of rare earth oxides in 2023, compared to China’s 2,24,000 tonnes.

Recent policy reforms aim to increase private participation and accelerate exploration. Output has begun to rise, touching nearly 2,900 tonnes in 2023-24 and projected to reach around 5,000 tonnes in coming years. However, slow development, environmental concerns, and limited processing capacity remain constraints. As demand surges from clean energy and defence sectors, India risks strategic vulnerability unless it builds end-to-end capabilities.

Way Forward

The global rare earth challenge underscores three lessons: diversification must be continuous, processing capacity matters as much as mining, and strategic stockpiles are essential. Japan’s experience shows that resilience is built over decades, not crises. For India, aligning mineral policy with industrial strategy, investing in processing and recycling, and forging trusted international partnerships will be critical to safeguarding economic and strategic autonomy in an era of resource geopolitics.