Development and new discoveries in certain fields of application of modern technology like electronics, magnets, metallurgy, batteries, glass, ceramics, pigments, weapons etc. is resulting in an ever increasing demand for Rare Earth Elements (REEs). The REE mineral resources have thus undoubtedly emerged as those having significant strategic importance, and many countries, including USA, have identified them as ‘Strategic Minerals’, hence rendering them vitally important for ‘National Security’.
The credit for the discovery of REE is given to Lt Carl Axel of the Swedish Army. Their first commercial production started in the 1880s, in Sweden and Norway. Till about the 1980s, USA was its largest producer. China understood very early that in the future, REEs would become the backbone of some very strategically important manufacturing sectors, and took the early mover advantage. By the 1990s, China increased its production by more than 500%, taking advantage of substantial deposits and cheap labour force. As a result, a large chunk of the world’s need today of finished REE products are met by China. In 1987, Deng Xiaoping famously commented, “The Middle East has oil. China has rare earths”.
Before going further into the subject, let us have a brief look at what exactly is classified as REE. These elements take up 17 spots in the periodic table. Though they are termed ‘rare’, they can be found in many places around the globe in high enough concentrations for mining, but the process is difficult.
Scandium, Yttrium, Lanthanum, Cerium, Praseodymium, Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium, Erbium, Thulium, Ytterbium, and Lutetium, are the elements that constitute REEs. They share similar chemical properties that give them the ability to accept and discharge electrons. The elements are divided further into two sub-categories of ‘Light REEs’ and ‘Heavy REEs’, based on their atomic numbers. The heavy elements are often considered more valuable. When added in small doses to composites and alloys, REEs – because of their unique physical and chemical properties, allow them to interact with other elements, and the resultant materials give unmatched results.
REEs are often found together in varying concentrations of different elements amongst them. The mines use large-scale techniques like drilling, blasting, and hauling to extract them. The separation of these elements from the host rock and from each other is a multi-step and complex process. Fractional Crystallization, Solvent Extraction and Ion-Exchange are three main methods of separating and refining the REEs. The elements after separation are refined to meet industry standards for various applications.
High-performance magnets that are needed for the manufacture of electric engines, precision-guided munitions, and computer hard disk drives, amongst many other things with high market utility, are manufactured with neodymium, dysprosium, samarium and holmium.
Given the recent uncertainty in their supply to the world market – due to the periodic threats of denial of REE material by China; in recent years, exploration efforts have been intensified world-wide to identify REE resources. The exploration for REE in India began in the 1950s. However, India’s status as a player in the international REE industry remains very insignificant till date.
As the rivalry between USA and China keeps affecting the global economy, India can no longer take the global supply chains for granted. REEs contribute nearly $200 billion to the Indian economy and China controls nearly 90% of world production. This makes Indian manufacturing industries very vulnerable to Chinese muscle flexing, as it imports most of its requirement from China. Other members of QUAD like Australia and USA, are moving very fast to address this vulnerability that affects them too.
India has the sixth-largest reserve of REE in the world – almost four times that of USA. India should take these post-pandemic global geopolitical re-alignments to its advantage, in order to emerge as a major player in the rare earth supply chain of the world, and this can be achieved through a focused approach and minor tweaks in policy.
India has almost 6000 kms of coast line, which has rich deposits of monazite, xenotime, and garnet – minerals that bear REE. However, rich deposits alone don’t count for much, if we can’t utilize this wealth. As explained earlier, extraction is a complex and capital intensive process that consumes energy.
Indian Rare Earth Ltd. – established on 18th August 1950, holds the monopoly over monazite beach sand, because of existing Govt. policies. However, IREL only takes part in the upstream process – by selling rare earth oxides to foreign countries, where they get processed and ready for more profitable downstream supply, and find their way back to the global supply chain – including India. The quantity of RE oxides produced by IREL is also abysmally low.
Hence, the key challenge for Indian policy makers will be to find ways of scaling upstream production and establishing downstream process industry, hence enabling upward mobility in the value chain of global supply. The time is ripe to open the sector to competition. This will attract much needed capital inflow, and innovative ideas aligned with the market dynamics, which are independent of Govt. control and funding.
The way forward – as suggested by many, is to create a new Department for Rare Earths under the Ministry of Mines; which would aim to play the role of both regulator and enabler for industry. The Dept. should oversee policy formulation to deregulate the sector, and focus on attracting investment and promoting R&D. With the aim to ramp up production, it should get control of IREA, and change its focus from radioactive minerals to rare earth; and parallelly allow private sector companies to enter the sector, with adequate environmental safeguards. Rare Earths Regulatory Authority should also be constituted within its framework – for resolving disputes between companies, and ensuring compliance.
Also, the stakeholders need to increase at various levels – to infuse more capital in the sector. Along with encouraging private investments in the upstream processing, the downstream processes also need a public-private handholding approach – in order to not only attract investment, but also to put more efficient processes in place. This could result in Indian REOs becoming globally competitive.
At the international level, constituents of groupings of nations with converging geopolitical interests – such as the QUAD, can help each other by building up a strategic reserve, and hedging against global supply crises in the future. Also, collaboration at all points along the chain – from production to consumption, may be the key to collectively increase influence against Chinese hegemony.
Australia is already looking for new partners to replace its past dependency on China. USA and Japan are also looking for a collaborative and collective approach. If India’s current stalemate with China in the Northern sector continues, it can very well expect coercive economic diplomacy in the future. It leaves India with very little options but to integrate more with its QUAD partners, and other friendly countries of IOR, who face a common threat from China.
If India plays its card well, and effectively implements a coordinated approach at all levels – it is possible for India to emerge as a global leader in the field in the future. India could not effectively capitalise the earlier global wave of industrial manufacturing. Its REE reserves, and the current geopolitical and economic situation, offers it a perfect opportunity to capitalise on the next wave of high-tech manufacturing. India needs to get its act together and develop a long term strategic vision for REEs before it is too late – and the time is ‘now.’