China accounts for 58 per cent of global rare earth elements (REEs) production. Additionally, China produces 85 per cent of rare earth finished products, and 85 per cent of rare earth oxides (REOs) and controls 95 per cent of rare earth manufacturing. China dominates both mining and extraction (upstream process of REE), and manufacturing of finished products (downstream process of REE). Thus, China controls the entire world market.
The COVID-19 pandemic caused massive supply chain disruptions, the world over. Therefore, a group of western nations led by the US is cooperating to develop alternatives to China to ensure uninterrupted industrial supplies as part of a global ‘China-plus-one’ strategy. The group consists of Australia, Canada, Finland, France, Germany, Japan, the Republic of South Korea, Sweden, the UK, the US, and the European Commission. The arrangement this group has formed is known as the Minerals Security Partnership (MSP).
The group will focus on the supply chain of minerals such as Cobalt (Co), Nickel (Ni), Lithium (Li), and also the 17 REEs. According to the US Geological Survey, the Chinese government has begun to limit both Chinese and Sino-foreign joint ventures that could export REEs from China.
Why the Need of MSP
In order to break the dominance and reduce the dependence on China in mining and processing of REEs, the US announced the formation of a global alliance called the MSP at the World’s Premier Mineral Exploration & Mining Convention, held in Toronto, in June 2022. This alliance will secure supply chain of critical minerals as their demand has increased because they are essential for clean energy and other technologies.
The goal of the alliance is to catalyse investment from governments and the private sector to develop strategic opportunities across the value chain. The group would adhere to the highest environmental, social, and governance standards. MSP would support the ability of countries to realise the full economic development benefit of their geological endowments.
Rare Earth Elements and Their Importance
Rare earth elements are mineral deposits with high economic vulnerability and high global supply chain risk. REEs comprise 17 elements, and are classified as light REE (LREE) and heavy REE (HREE). These elements include 15 Lanthanides—Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Promethium (Pm), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Holmium (Ho), Erbium (Er), Thulium (Tm), Ytterbium (Yb), and Lutetium (Lu) having atomic numbers from 57 to 71, respectively—and Scandium (Sc) and Yttrium (Y) with atomic numbers 21 and 39, respectively. Each REE has unique properties, and could not be substituted by another mineral.
The importance of REEs is evident by their use in emerging and diverse technologies as they are considered indispensable in defence systems and advanced technologies. Minerals such as Cobalt, Nickel, and Lithium are used in the manufacture of batteries for electric vehicles. REEs are essential components of high-tech consumer products like cellular phones, computer hard disk drives, flatscreen monitors, and television. Besides, these minerals are also used in manufacturing fighter jets, drones, radio sets, and other critical equipment. Hence, they have critical applications in aerospace, communications, and defence industries.
The amount of REE used in a product may not be a significant part of that product by weight, value, or volume. However, REE is necessary for the device to function. For instance, magnets made of REE often present only a small fraction of the total weight, but without them, the spindle motors and voice coils of desktops and laptops do not function.
The major producers of REE, globally, include Chile, Indonesia, Congo, China, Australia, and South Africa. China is the leading processor followed by Chile and Japan. Many countries depend on countries such as China, for HREEs, as these countries produce an estimated 70 per cent share of the global production.
REE in India and India’s Concern
India has the world’s fifth largest reserves of REEs and is home to La, Ce, Nd, Pr, Sm, etc. However, still the country is not self-sufficient in REEs. The mining and extraction of REEs are capital intensive, and consume large amounts of energy. The mining process also releases toxic by-products. Also, processed minerals usually take the form of a REO, which then needs to be converted into a pure metal before using it for the manufacturing of anything.
At present, the Indian REE ecosystem is being managed by a single government-run corporation, IREL (India) Limited which produces REOs. REOs are then sold to foreign corporations for extraction and manufacturing of finished products. This process is a part of the upstream industry, which is low-cost and low-returns. India’s downstream REE industries are not well-developed, and hence, the country is dependent on import of these critical minerals.
India is moving towards clean energy and use of battery technology. Several potential improvements to the Li-ion technology, with alternatives, are being tested, and are in advanced stages of commercialisation. India also aims to convert a large percentage of its transport to electric for which HREEs are required.
In this context, if India is not able to explore and produce these minerals, it would have to mainly depend on China or other countries to power its energy for transition to electric vehicles. Hence, there is a lot at stake for India for want of REEs. Industry experts opine that India was not given a place in the MSP grouping for lack of any technical expertise on the processing of REEs. Australia and Canada have reserves as well as the technology to extract and process REEs. Japan too has the technology to process REEs.
The Ministry of External Affairs is, therefore, in the process of exploring the possibility of India joining the 11-member MSP.
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