India Aims to Preserve Rare Earths, Looks to Suspend Exports to Japan: Sources

India Requests Suspension of Rare Earth Export Agreement with Japan

According to a report from Reuters, India has requested that IREL, the state-owned mining company, put a hold on a 13-year-old agreement concerning the export of rare earth elements to Japan. This move is aimed at ensuring that domestic supply needs are prioritized, reflecting an effort by India to decrease its reliance on China.

Sources knowledgeable about the situation informed Reuters that IREL is also keen on enhancing India’s rare earth processing capabilities. Currently, the global market for these materials is largely controlled by China, which has recently been leveraging its resources amid escalating trade tensions. Since April, China has restricted exports of rare earth materials, impacting automakers and manufacturers of high-tech products on a global scale.

During a recent meeting with executives from the auto sector and other industries, Indian Commerce Minister Piyush Goyal encouraged IREL to halt its supply of rare earths—primarily neodymium, essential for producing magnets in electric vehicle motors—according to one source.

As per a 2012 governmental agreement, IREL is responsible for supplying rare earths to Toyotsu Rare Earths India, a division of the Japanese trading company Toyota Tsusho. This company processes the minerals for export to Japan, where they are utilized in magnet manufacturing. In 2024, Toyotsu exported over 1,000 metric tons of rare earth materials to Japan, accounting for approximately one-third of the 2,900 tons mined by IREL, despite Japan’s main supply being from China. Neither Toyota Tsusho nor Toyotsu provided comments when approached by reporters.

Given its historical lack of domestic processing facilities, IREL has been exporting rare earths. However, due to recent interruptions in Chinese supplies, the firm is looking to retain these materials domestically and expand its mining and processing operations. A second source mentioned that IREL is currently seeking necessary regulatory approvals for four mining sites.

Nevertheless, halting exports to Japan immediately might not be feasible for India since these transactions are governed by a bilateral agreement. IREL is reportedly interested in resolving this matter “amicably,” given Japan is considered a friendly nation.

In a statement to Reuters, Japan’s Trade Ministry remarked, “We would prefer not to address queries regarding bilateral exchanges in general, not just this specific issue.”

Impact of China’s Export Controls and Future Plans

China’s recent restrictions on rare earth exports have significantly affected the global automotive industry, which has reported imminent supply chain disruptions and potential production halts. In 2010, China similarly restricted shipments to Japan, a move that drove Japan to seek rare earths from India.

India possesses the world’s fifth-largest reserves of rare earth materials, totaling 6.9 million metric tons; however, the country currently has no indigenous production of magnets and depends largely on imports, particularly from China. In the fiscal year ending March 2025, India imported around 53,748 metric tons of rare earth magnets, as per government data. These magnets are essential in various applications, including automobiles, wind turbines, and medical devices.

Mining rare earths is exclusively conducted by IREL, which supplies materials for nuclear energy projects and defense applications to the Atomic Energy Department of India. Analysts indicate that India currently lacks the extensive technology and infrastructure necessary for large-scale rare earth mining, and the establishment of a viable domestic supply chain will take years to develop.

IREL operates a rare earth extraction plant located in Odisha, in Eastern India, along with a refining facility situated in Kerala, Southern India. Established in 1950, IREL aims to extract 450 metric tons of neodymium by the fiscal year ending March 2026 and has plans to double this output by 2030. Additionally, the company is in search of a corporate partner to assist in manufacturing rare earth magnets for the automotive and pharmaceutical sectors.

To bolster local demands, India is also formulating plans for incentives to encourage businesses to establish rare earth processing and magnet production facilities.