In April 2025, China imposed strict export controls on seven rare earths and their associated magnets (including the NdFeB and samarium-magnets). These are are high-performance magnets which are used in a wide array of products ranging from common electronic gadgets, electric vehicles, medical equipment, and industrial sensors to strategic defence equipment.
As a result, industries ranging from electric vehicles (EVs) to wind energy in India now face the threat of supply chain shocks.
India is, therefore, “actively creating alternative supply chains” and aligning itself as a reliable partner for companies looking to diversify away from Chinese dominance. It is building capacity at home and also exploring sources abroad.
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Reviving domestic capacity
India has initiated a seven-year National Critical Mineral Mission aimed at increasing domestic production and processing of critical minerals, including rare earths.
Under the mission, the Geological Survey of India will undertake 1200 mineral exploration projects.
The aim is to develop a value chain from mining rare earths to converting them into oxides and metals, and manufacture magnets that directly enter Indian-produced EVs, wind turbines and missiles.
The government is also fortifying Indian Rare Earths Ltd , the state-owned rare-earth miner-processor. Reforms to the Mines and Minerals (Development and Regulation) Act have made certain rare earth element (REE) blocks available to private players if they dispose of radioactive by-products in a safe manner.
Encouraging refining and processing
After rare earths have been extracted from the earth’s crust, the subsequent processes of purifying and separating those elements to high purity remain China-dominated specialties.
The Indian Ministry of Heavy Industries has mooted a ₹ 1,345 crore (US $155 million) production linked incentive programme to encourage rare earth magnet manufacturing. Automakers are increasingly showing interest in establishing such facilities.
Friend-shoring beyond China
Realising that no other country in the present-day geopolitical situation can alone secure the entire rare earth minerals supply chains, building alliances overseas becomes important.
The US, EU, Japan and others are developing frameworks such as the Mineral Security Partnership (India became the 14th member of MSP) to align investments in new mines and processing facilities in aligned geopolitical jurisdictions.
In July 2025, ministers from the Quad grouping of countries – USA, Japan, India and Australia – launched a joint Critical Minerals Initiative to coordinate investments and technology in mining and processing of critical minerals in the four member countries.
Beyond multilateral platforms, in response to the 2025 supply chain disruptions, the Indian government has started broadening the source base for REE imports. Although the total import volume has declined year-on-year, the range of sourcing countries has expanded, signalling an early-stage diversification.
In Europe, countries such as France, Germany, the Netherlands, and Lithuania have significant potential for sourcing rare earth metals and alloys, backed by strong regulatory frameworks and advanced technological capabilities. Australia, a longstanding and trusted mining partner, emerges as a vital source for rare earth oxides.
In Southeast and East Asia, nations like Malaysia, Vietnam, Japan, and South Korea stand out for their supply potential and established refining infrastructure. The Lynas Advanced Materials Plant in Malaysia in particular, has been an active exporter (outside China) of REE compounds to Europe, East Asia and the United States of America. And perhaps, India should strengthen B2B ties with companies like Lynas to secure processed rare earths and enable mutual exchange of technological know-how in advanced processing.
India could partner up with the Philippines as a source of scarce heavy RREs taking advantage of their bilateral preferential trade agreement. Additionally, Africa and Latin America offer emerging opportunities, with countries such as South Africa, Brazil, and Argentina possessing untapped rare earth reserves and demonstrating growing interest in collaborative technology-driven partnerships.
Another avenue for India could be to set up magnet production cluster Special Economic Zones where extraction, refining, alloying, and assembly take place. The current Indian clusters that have the right eco-system are in Telangana and Tamil Nadu, as they have access to ports, shipping, logistics, and skilled labour.
India could also establish a South–South Critical Minerals Corridor to bring together Africa’s rare earth producers and India’s refineries. Southeast Asia’s manufacturers could also be linked by South–South investment in ports and rail by BRICS or other multilateral development banks.
Moreover, a consortium of Indian government-owned corporations such as Indian Rare Earths Limited, National Mineral Development Corporation, Khanij Bidesh India Limited and others could provide a mechanism to further de-risk foreign investment plans and project costs through joint offtake agreements and pooled investment.
R&D and substitution
India must simultaneously invest in rare-earth substitutes, e.g., ferrite and iron-nitride magnets which companies like Hitachi and Niron Magnetics are bringing close to commercialisation. Toyota and other auto makers are already changing the motor designs they use to reduce neodymium utilisation or altogether eliminate permanent magnets.
On the extraction front, bioleaching is one method of offering cleaner extraction of rare earths using bacteria as an alternative to toxic acids.
Recycling for resilience
Japan reacted to China’s 2010 embargo on rare earth exports by developing a full recycling ecosystem. Companies such as Hitachi have developed recycling technologies to recover rare earths from e-waste to supply Japan’s needs. The EU has a target of 25 percent recycling, with firms such as Solvay already using scrap magnets that replace mined materials.
Some have suggested that over a decade’s time recycling could supply as much as a quarter of rare earth magnets requirements, which is a huge requirement met with minimum geopolitical and environmental costs.
India has a potential goldmine of e-waste. The NCMM has also focused on the recovery of minerals from secondary sources, while Jawaharlal Nehru Aluminium Research Development and Design Centre and CSIR labs are investigating rare earth extraction from fly ash and red mud.
However, most of the recycling sector is informal and inefficient with pronounced regulatory gaps. This needs to change.
Strategic stockpiles
While strategic stockpiling of rare earths would not replace the prospect of domestic mining or recycling, it would add a buffer during industry disruptions, allowing the supply chain to stabilise. In addition to strategic stockpiles, encouraging private manufacturers to have buffer inventories will ensure made stocks are thoroughly used to reduce their risk.
Rare earth elements are politically strategic but commercially tricky. The reason why the world is facing a supply shortage is because the market prices did not reflect the strategic value of the rare earths. To course-correct, governments need to step in.
This means providing offtake guarantees for upstream producers to provide some certainty of demand, developing public-private partnerships between PSUs like IREL and private players, and designing long-term financial support measures with performance-based production linked incentives, such as tax incentives.
Regulatory reform can also help remedy the economics, such as streamlining approvals and clarifying handling of radioactive waste to remove barriers to entry. For international opportunities, using blended finance and sovereign risk coverage through Khanij Bidesh India Ltd. could help make investing in some high-risk geographies viable.
Mrunali Tembhurne is Associate Fellow; Souvik Bhattacharjya Director, and Krish Agarwalla intern at the Centre for Resource Efficiency and Governance, The Energy and Resources Institute (TERI), New Delhi. Originally published under Creative Commons by 360info
