Rare earth turns even rarer as China sets new rule; world stares at the unknown, India fumbles for options

China has suddenly tightened its grip on the single major power source that governs many critical areas of the modern economy, making the situation even more awkward for other countries already deeply upset by Trump’s barrage of brutal punitive tariffs.

Beijing announced on October 9 the expansion of export restrictions on rare earth metals and related technologies, citing concerns about national security and military applications of advanced components.

Under the newly published rules, exporters will need official licenses to transport technologies and equipment used in rare earth mining, smelting, separation, magnet production, recycling and even maintenance, repair or upgrade of rare earth production lines.
The measures also restrict overseas cooperation. Chinese companies and foreign partners now need approval to undertake rare earth-related projects abroad.

Why China’s new restrictions are more significant for India is that this time China is demanding India provide assurances through end-user certificates that heavy rare earth magnets supplied to India will not be diverted to the US or weapons production.

Indian companies have offered such certificates, but New Delhi has not officially accepted all of China’s terms. Beijing has framed these limits as necessary to prevent rare earth elements from being diverted to sensitive or “dual-use” applications, particularly in the defense or semiconductor sectors. This latest move is a continuation of China’s gradual approach on this issue. Xi & Co first began imposing export licenses and restrictions on certain minerals in July 2023 and has since gradually expanded the scope of controlled products.

China’s dominance over magnet production and its reluctance to share export data with the public further strengthens its bargaining position.

Jam in supply lines

While diplomatic initiatives between India and China had previously appeared to ease tensions, China continued to block approvals of Indian companies’ magnet export applications, especially heavy rare earth magnets.

In August this year, Beijing lifted export restrictions on a select list of products, including rare earth magnets, to be sent to India in response to India’s diplomatic requests. But rather than signaling structural change, analysts say this exemplifies how China uses access as a lever, turning supply on and off depending on political and strategic objectives, The Economic Times reported.

Rare earth elements (REEs), although not very rare in nature, are difficult to process economically. Value lies not only in mining but also in refining, separation, alloying and magnet manufacturing. According to an ET report, while China produces 60-70% of global raw rare earths, its share in magnet production and processing is even larger; some estimates put it at over 90%.

These elements power critical technologies, including high-performance engines, wind turbines, advanced electronics, semiconductors, precision instruments, defense systems and electric vehicles, among others. Disruptions in supply or production can span multiple sectors.

Indian Industry looks into the unknown

China’s export restrictions began to strain industries in India, creating supply bottlenecks across all sectors. Below is a breakdown of the main effects and responses:

Automobiles, including electric vehicles: Indian electric vehicle manufacturers face delays and shortage of rare earth magnets. China’s export restrictions have created supply constraints, prompting ministries to hold consultations and seek alternative sources, the Lok Sabha heard recently.

Automakers have seen more than 50 import applications for heavy rare earth magnets that remain in regulatory limbo in China since April. Some companies are resorting to design changes to reduce dependence, turning to motors that use lighter rare earths or even magnet-free designs.

Electronics and advanced manufacturing: India’s electronics industry has also felt the pinch as shortage of magnets and components delayed production timelines.

Industrial and banking sectors: An analysis by State Bank of India cited by ET warned that curbs may ripple across industries such as transport equipment, machinery, base metals and electrical/electronics.

Analysts said the looming disruption could lead to slower production cycles, idle capacity or idle inventory, pressure on working capital and loss of export competitiveness.

Indian banking is also likely to face increased financial stress due to its exposure to affected sectors.

I’m looking for a way out

India is actively exploring rare earth resources beyond China. Commerce Minister Piyush Goyal confirmed that Indian companies are engaging with global partners and pursuing alliances abroad.

India is also pushing for more bilateral arrangements. The Ministry of Mines has signed agreements with countries such as Australia, Argentina, Zambia, Peru, Zimbabwe, Mozambique, Malawi, Ivory Coast and international organizations such as the IEA to secure critical mineral supplies.

Efforts are also being made to develop magnet-free and alternative motor technologies. According to an ET report, the Faridabad firm (Sterling Gtake E-Mobility) is conducting fast-track tests on EV motors that do not use rare earth magnets. Several automakers are evaluating these designs with the hope of making them available for commercial use within a year, Reuters news agency reported in September; This is faster than early 2029 targets.

The Indian government is engaging with China through commercial and diplomatic channels. Commerce Minister Sunil Barthwal noted that there is coordination with automobile manufacturers (SIAM), parts associations (ACMA) and dialogue with Chinese counterparts.

New Delhi is pushing for more predictable exports, consistent enforcement and access guarantees.

Just temporary relief?

Although China recently lifted restrictions on rare earth magnet exports to India, analysts and industry veterans warned that the delay was tactical. The underlying dependency still leaves India vulnerable to future pressures.

China’s latest tightening reflects a more assertive use of export controls as a strategic tool. The restrictions are broader in scope and more assertive in terms of implementation than previous measures.

Essentially, India is in a difficult situation here. The recent easing of magnet restrictions provides some relief, but the on-off control model underscores that inherent risk remains.

To reduce this vulnerability, India needs to make more efforts on some fronts, analysts say. These include developing end-to-end domestic capacity in rare earth processing and magnet production, strengthening partnerships and supply lines with non-Chinese sources, accelerating research into alternative technologies and magnet-free designs, harmonizing industrial policy (PLI, incentives, regulations), etc. It is located.