Rare Earth Tensions: Diversification Urged Amid China's Export Controls

Neha Mukherjee from Benchmark Mineral Intelligence calls for urgent diversification of rare earth sources. With China tightening export controls, global industries face potential disruption. Mukherjee stresses the immediate need to reduce dependency on China to mitigate supply chain risks, particularly in defense and high-tech industries.

Neha Mukherjee, an expert in rare earths and Research Manager at Benchmark Mineral Intelligence, has highlighted the urgent need for countries to diversify their sources to prevent a global supply chain breakdown. "The entire world is structurally dependent on China," Mukherjee stated, adding, "For a secure supply chain, diversify your sources as much as possible."

Her call for action comes amid escalating tensions over China's increased control of rare earth exports. The imposition of new export restrictions by China on several critical rare earth materials, crucial for defense, clean energy, and high-tech manufacturing, has begun to impact global industries significantly.

"We are days, if not weeks, away from a crisis," Mukherjee warned, outlining the severity of potential supply disruptions. The troubles started in April when Beijing launched export controls on a few rare earth elements, coinciding with rising trade tensions. The situation has since worsened with more heavy rare earths added to the restricted list.

Although not an outright ban, Mukherjee emphasized that the restrictions have far-reaching effects, given China's dominance. "The export restrictions are in place to limit supply to defense manufacturing organizations," she said, indicating that companies involved in making missiles or fighter jets would be particularly affected. "The criticality lies in the fact that 95% of these materials come from China," Mukherjee noted.

The implications reach beyond defense. "Defence will be most affected, but e-mobility, consumer electronics, and robotics will also suffer," Mukherjee added. India is responding by aiming to diversify its rare earth supply through imports, domestic mining, and international collaborations. Furthermore, the government is investing in R&D to boost domestic refining and processing abilities.

The Indian government has earmarked Rs 1,345 crore to incentivize the production of rare earth magnets domestically. This move comes in the wake of China's overwhelming control of over 90% of the world's magnet production capacity, posing significant vulnerabilities to global industries. Beyond China, very few alternative suppliers for critical minerals exist.

(With inputs from agencies.)