India Halts Rare Earth Exports To Japan, Amid Severe Crisis Due To China

The Indian government has instructed state mining company IREL to halt a  export arrangement with Japan for rare earth materials that was signed 13 years ago. This is been done in order to prioritise domestic supply security as ongoing talks with with China continue, as per Reuters. The decision reflects India's strategy to reduce reliance on Chinese rare earth supplies whilst building its own processing capabilities. China currently dominates global rare earth processing and has restricted exports since April, creating pressure on car manufacturers and technology companies worldwide.

India possesses the world's fifth-largest rare earth reserves at 6.9 million metric tons but lacks domestic magnet manufacturing capabilities, relying heavily on Chinese imports. Since 2012, IREL has supplied rare earth materials to Toyotsu Rare Earths India, owned by Japanese trading firm Toyota Tsusho, which processes these materials before shipping them to Japan for magnet manufacturing. Customs records show Toyotsu exported over 1,000 metric tons of rare earth materials to Japan in 2024, representing one-third of IREL's total 2,900-ton output. However, Japan's rare earth needs are primarily met by Chinese suppliers.

Government data reveals India imported 53,748 metric tons of rare earth magnets in the fiscal year ending March 2025, used across automotive, wind energy, medical equipment, and manufacturing sectors. However, immediate cessation of Japanese supplies may prove difficult given the bilateral government agreement framework. IREL seeks an "amicable resolution through negotiation given Japan's status as a friendly nation," sources stated to Reuters. 

IREL maintains exclusive rights to rare earth mining in India, supplying the Atomic Energy Department for nuclear and defence projects. IREL operates a rare earth extraction facility in Odisha state and a refining plant in Kerala. The company, established in 1950, aims to produce 450 metric tons of extracted neodymium by March 2026, with plans to double this output by 2030, according to the second source. The firm is also seeking corporate partnerships for rare earth magnet production targeting automotive and pharmaceutical markets.

India is finalising incentive schemes to encourage companies to establish rare earth processing and magnet manufacturing facilities for domestic market supply, sources familiar with the plans told Reuters earlier this month.

(Source: Reuters)