Diplomatic and commercial discussions underway to secure rare earth elements from China

With recent curbs by China on exports of rare earth elements, India has stepped up both diplomatic and commercial efforts to help its domestic industry secure these materials, which are crucial for the automobile industry, especially for manufacturing electric vehicles (EVs) and hybrids.

Commerce Secretary Sunil Barthwal on Monday noted that China’s control on exports of rare earth magnets is “a global response” and not aimed at any particular country like India.

Since it is impacting the auto sector more, domestic industry associations such as SIAM and ACMA are holding consultations with their Chinese counterparts. Meanwhile, the Department of Commerce and Ministry of External Affairs are also engaging with China. “Both diplomatic and commercial discussions are going on. We are making all efforts to ensure that the imports of these essential items come to India,” Barthwal told reporters.

China had in April this year imposed stringent export controls on seven rare earth elements that are used for producing high-performance magnets, which has led to a disruption of supply chains. India relies heavily on these Chinese imports and its automotive sector is currently facing challenges.

A recent report by CareEdge Ratings had noted that China controls 70% of rare earth elements (REE) production and 90% of processing. “Delays in REE shipments for Indian auto OEMs may impact electric, Internal Combustion Engine (ICE) and hybrid vehicle production starting in July 2025, particularly higher-end models that depend on REE-based technologies,” it had said.

Meanwhile, the government is also monitoring the ongoing conflict between Israel and Iran and will be meeting shipping lines and container associations this week to discuss whether there has been any impact on India’s trade. “We will try to see the best way to address any issue that comes up,” Barthwal said.

Iran controls the Strait of Hormuz and according to reports is looking at closing it. “…a potential escalation of the Israel-Iran conflict could be damaging for the global energy trade as Iran notwithstanding the international sanctions for production, holds control over the Strait of Hormuz, a key chokepoint for world oil trade that witnessed nearly 27% of maritime oil trade volume in 2023,” noted a report by QuantEco Research.