India looks to diversify rare-earth supply via FTAs with Peru and Chile, startup-led processing

The move comes after China, the world’s dominant supplier, imposed export restrictions in April this year on seven rare earth elements and finished magnets.

India is looking to diversify its rare earth sources by negotiating trade deals with Chile, Peru and other countries and boosting domestic exploration by working with startups by recycling critical minerals, commerce minister Piyush Goyal said on October 17.

The minister’s comments comes as China, which dominates the global trade earlier this month significantly escalated its export controls on rare earth elements and finished magnets, which are used in consumer electronics, EVs to military equipment, building on curbs it imposed in April.

“Why am I doing FTAs (free trade agreements) with Peru and Chile in the first place? It gives you the answer. Even Australia, the potential is there,”  the minister said, referring to the three countries that are emerging as important sources of rare earths.

The government is also talking to startups for recycling waste to extract rare earth and explore the possibility of create a processing facility in India, “which is currently concentrated in one geography”, Goyal said at Assocham AGM in New Delhi.

The ninth round of negotiations with Peru is scheduled between November 3 and 5, while a third round will be held with Chile from October 27 to 31.

Permanent magnets derived from rare earth elements are considered vital for producing power windows, speakers, and propulsion systems in electric vehicles, and generators in renewable energy infrastructure.

FTAs in the work

India imports almost all of its rare earth permanent magnets. Government estimates place domestic demand at around 4,010 tonnes a year, which is expected to almost double to 8,220 tonnes by 2030.

India is estimated to have 7.23 million tonnes of rare earth oxide trapped within 13.15 million tonnes of monazite deposits, primarily located along the coasts of Andhra Pradesh, Odisha, Tamil Nadu, Kerala, and parts of West Bengal, Jharkhand, Gujarat, and Maharashtra.

The mines ministry has, so far, completed five rounds of auctions, putting 55 critical and strategic mineral blocks under the hammer, of which 34 have been successfully awarded.

The sixth tranche of auctions was launched in September to further expand exploration and production.

Goyal also asked the industry to assess its supply chains “and see whether we are overly dependent on any particular geography, it need not be one country. it could be a dependence on a western country, but on any product, if we are overly dependent on one country, you are prone to vulnerability particularly in a world where trade is being weaponised, we have seen weaponistation of supply chains”.

The minister urged the industry to make supply chains self-sufficient and robust, and to ensure that there are enough options so the country is not exposed to what he called an "existential risk."

Recent reports said the government is preparing to launch the National Critical Mineral Stockpile (NCMS), a programme aimed at safeguarding the country’s access to rare earth elements crucial for clean energy and high-tech industries.

The NCMS is said to complement India’s broader strategy to promote domestic production of rare earth magnets.

Goyal reiterated that India is discussing FTAs with the United States, European Union, Chile, Peru, Oman, and New Zealand.

“Tell me if anybody feels any of these affect your businesses or supplement your businesses? So, this is a well thought out strategy to support national interest. We are working with advanced economies, we are working with confidence and also working to create a competitive environment in India through ease of doing businesses, decriminalisation of laws, so we can leverage both the India and the export opportunity,” Goyal said.

Trade and tariff

While trade and tariffs are important, they have to be systematically and carefully planned in the best interest of the country to ensure it does not hurt the Indian interest, the minister said .

“Of course, there is always a give and take, one has to look at the balance of things. In 100 items, there may be one or two items where you may have had to compromise, that is a part of trade negotiations,” he added.

The Trump administration has slapped a 50 percent tariff on most Indian goods, among the highest in the world. The two sides have held several round of talks for a trade deal.