India will review the rare earth export agreement with Japan again; Know why the decision was taken

The Government of India ordered the Indian Rare Earths Limited (IREL), a public sector mining firm, to suspend the current rare earth export deal with Japan for the moment. This move is being made in order to supply rare minerals needed by the country and lessen the reliance on China. According to media reports, this instruction has come at a time when concerns are growing worldwide about China's control over the supply of rare earths. These rare minerals play a very important role in electric vehicles, renewable energy and high-tech manufacturing.

The agreement between IREL and Toyota Group company Toyotsu Rare Earths India in 2012 allowed Japan to export mainly rare earths like neodymium. In the year 2024 itself, Toyotsu sent more than 1,000 metric tons of rare earth from India to Japan, which was about one-third of IREL's total production of 2,900 metric tons. However, Japan still imports a large part of rare earth from China. Because China is a global leader in both production and processing in this field.

IREL continued to export rare earth till now because its processing capacity in India was limited. But after China imposed restrictions on the export of rare earth from April 2024, India's thinking has changed. Now IREL's focus is on developing mineral resources within the country and using them here.

According to media reports, recently Commerce Minister Piyush Goyal advised IREL to give priority to domestic needs in a meeting with industry stakeholders. However, it is not possible to end the existing agreement immediately as it is a bilateral agreement. But IREL is now trying to resolve the issue diplomatically. India considers Japan a strategic partner.

India has the world's fifth largest rare earth reserves, which is about 6.9 million metric tons. Despite this, the technical and infrastructural capacity to produce magnets on a large scale has not yet been developed in the country. In the financial year ending March 2025, India imported about 53,748 metric tons of rare earth magnets, most of which came from China. These magnets are used in electric vehicles, wind turbines and medical equipment.

Only IREL has the right to mine rare earth in India. And this company supplies minerals required for the nuclear and defense sector to the Department of Atomic Energy. But self-sufficiency has not been achieved due to the lack of a complete supply chain and necessary technology in the country.

IREL currently runs an extraction unit in Odisha and a refining plant in Kerala. The company plans to produce 450 metric tons of neodymium by March 2026. And the target is to double it by 2030. Along with this, IREL is now looking for a corporate partner who can start making rare earth magnets for the automotive and pharma industry.

The government is also taking steps in this direction and is preparing a special incentive package with the aim of encouraging investment for domestic processing and magnet manufacturing. So that the country can be made self-reliant and foreign dependence can be reduced.