Are Rare Magnets Rare, And Why Is India Dependent On China for them?

The global auto supply chain is currently disrupted due to the unavailability of one particular type of material – Rare Earth Magnets. These tiny, unglamorous materials are currently causing chaos like a toddler in a China shop. Pun intended. Rare earth magnets are, quite literally, the heavyweight champions of the magnetic world, the strongest type of permanent magnets known to humankind. These little guys generate magnetic fields so powerful that they can lift objects thousands of times their own weight. They’re made from alloys of what we dramatically call ‘rare earth elements.’ But don’t let the name fool you. There are enough reserves of rare earth magnets; in fact, India is sitting on the fifth-largest stash globally.

Why Are They Rare?

What makes a rare earth magnet such a challenge is due to its extraction process. You have to literally wrestle them out of the ground, and the emission from such mining processes, especially the toxic fumes, becomes another bigger problem, while trying to find a solution to one. Making the situation more scarce is the fact that 90% of the world's magnet-making muscle is flexed by one country, and that is China. 

With one player virtually controlling the entire supply chain of a component critical for your cars, phones, drones, and even air fryers, geopolitics comes into play — and that is exactly what has happened now. 

What Is The Ongoing Magnet Crisis All About?

Recently, China decided to impose restrictions on rare earth export permits for medium and rare earth metals, alloys, magnets and other related materials. This was an attempt to stop the magnets from being used for defence and weapon requirements, due to which China imposed a new mandate. The mandate requires exporters to have a new license to ship rare earth metals, based on provisions of an End User Certificate (EUC). The approval for this license needs to come from the Directorate General of Foreign Trade (DGFT) and the Ministry of External Affairs, and at the same time has to be endorsed by the Chinese embassy as well. 

Indian automakers are now stuck in the queue to get approvals. While the US has started negotiations with the Chinese government, European manufacturers have started to receive their license. India is also conducting its own negotiations and has already sent a delegation of head honchos of some automotive companies, coupled with a few ministers and bureaucrats, but are yet to receive a green signal from Beijing.  

If the current momenin a research report published by ratings and research firm Crisil warned that the ongoing shortage could decelerate India’s automotive ride – and that has rung the alarm bells of major automotive OEMs.