In a strategic policy shift aimed at reducing dependency on China and boosting domestic capabilities, the Indian government has asked its state-run miner, IREL (India) Limited, to suspend a 13-year-old agreement that facilitates rare earth exports to Japan, according to sources cited. The directive comes at a time when global trade tensions over critical minerals, especially rare earth elements, are intensifying.
Rare Earths and National Strategy
IREL has been supplying rare earth materials—primarily neodymium, crucial for making magnets used in electric vehicle motors—to Toyotsu Rare Earths India, a subsidiary of Japan’s Toyota Tsusho. These materials are then processed and exported to Japan. In 2024 alone, Toyotsu shipped over 1,000 metric tons of rare earths to Japan, which accounted for nearly one-third of IREL’s total output of 2,900 tons.
Commerce Minister Piyush Goyal, in a recent meeting with industry executives, emphasized the importance of safeguarding India’s rare earth supplies for domestic industries. The focus is now shifting toward building indigenous rare earth processing capacity, a field currently dominated by China, which has been using its control over the global rare earth supply chain as a geopolitical lever.
China’s Influence and India’s Response
China’s decision to curb rare earth exports since April 2025 has placed pressure on the global tech and auto industries, leading countries like India to reassess their own export policies. The fear of supply chain disruptions has revived memories of China’s 2010 rare earth export halt to Japan, which had earlier prompted Japan to partner with India for alternative supplies.
India holds the fifth-largest reserves of rare earths in the world, with approximately 6.9 million metric tons, yet lacks facilities to manufacture magnets from them. As a result, the country continues to import finished rare earth magnets, mainly from China. In FY25, India imported over 53,700 metric tons of these magnets for use in automobiles, wind turbines, medical equipment, and other high-tech applications.
Future Outlook and Diplomatic Considerations
Although the Indian government is keen on suspending the existing export arrangement, the move may not be immediate due to its foundation in a bilateral agreement between India and Japan signed in 2012. Sources indicate that IREL prefers an amicable resolution, given Japan’s status as a key strategic partner.
Meanwhile, IREL is awaiting statutory clearances for four new mining sites, indicating its intent to scale up domestic production and processing capabilities. The government is expected to push for accelerated development of a rare earth-to-magnet value chain within the country.
Japan’s Trade Ministry refrained from commenting on the developments, citing a general policy of not discussing bilateral exchanges publicly.
Conclusion
As global supply chains grow more volatile amid geopolitical tensions, India’s decision to prioritize its rare earth reserves for domestic use signals a clear shift toward self-reliance and strategic autonomy. While it could temporarily affect Japanese manufacturers, it also reflects a broader realignment in critical mineral policies worldwide, driven by the growing urgency to counterbalance China’s global resource dominance.
