Indian Companies Face Rare Earth Crunch

On April 4, China issued a directive that had nothing to do with India. Donald Trump, the President of the United States, had started a trade war with the whole world. As one of America’s biggest manufacturing hubs, China was especially affected but it was one of those countries which had the size and the means to retaliate. And one of the weapons in its arsenal was the near monopoly it held on rare earth minerals. It used the weapon on April 4, instituting a policy that export of seven rare earth minerals— samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—would be restricted.  Exporters would have to apply for special licences. These minerals are crucial for numerous sectors the world over, especially to make specialised magnets that are used in a wide variety of products, from drones to cars. As the supply of these magnets got squeezed, Indian companies have started to bear the brunt of it.

Automobile manufacturers, for one. Recently, Maruti, India’s biggest company in the sector, announced that it was cutting down near terms production target of its electric vehicle model e-Vitara from 26,500 to 8200, a decrease of almost 70 percent. It expects to meet its annual target once supplies resume.   Society of Indian Automobile Manufacturers reportedly told the government that auto production could soon totally stop. Inventories have started running low.

The renewable energy (RE) sector is also seeing a fallout. Developers of RE projects find themselves unable to meet deadlines and according to media reports might invoke force majeure–unforeseen circumstances beyond their control–to not be penalised. This might also eventually lead to a rise in tariff from wind and solar energy.

The Indian government is taking some steps to meet the crisis. It has stopped export of a rare earth neodymium to Japan to conserve for domestic needs. China has a monopoly because almost all the world’s processing of rare earths happens there. India is trying to develop its own processing ability. The present crisis might be short-lived, but the world and India now know that it can’t rely on just one country for its rare earth needs.

auto industryChina exportdysprosiumgadoliniumlutetiumRare earth mineralsrenewable energysamariumterbium