India Seeks to Elbow Out China on Rare Earths Export to Japan

A rare earths production plant is set to be developed in the coastal Indian state of Odisha. Allegedly the new facility could eventually produce up to 5000 tonnes of rare earths, the equivalent of around 5 percent of current global supplies.  

An official from state-owned Indian Rare Earths– an arm of the Indian Department of Atomic Energy– told that the facility is expected to produce rare earth oxides by processing monazite, a radioactive phosphate mineral found in beach sands.

The project is set to jointly benefit both Indian and Japanese industry, based on a previous agreement between Indian Rare Earths and Japan’s Toyotsu Rare Earths India, itself a branch of Toyota Tsusho.

Tokyo and Delhi signed an agreement in November 2012 for the Asian island nation to import up to 4,100 tonnes of rare earths a year from India.

However, a timeline for expected rare earths output from the Odisha plant has yet to be determined.

Rare earths supply

Rare earths are processed and utilised in the manufacturing of camera lenses, cars, iPhones, wind turbines, and other high-tech products and computerised systems – many of which constitute the backbone of Japan’s export economy.

In recent years Japan – the world’s largest importer of rare earths – has sought to build strategic trade partnerships with other countries such as Australia and the US in a bid to wean off reliance on Chinese rare earths exports following trade tensions around the minerals.

At present, China is estimated to produce up to 90 percent of rare earths, and yet it is responsible for less than 25 percent of the global supply, according to the US Geological Survey.

Japan, along with the EU and the US, also took China to the WTO over its imposition of rare earths export restrictions as well as over tungsten and molybdenum.

Despite the fraught case at the WTO over minerals supply, China is thought to possess only around 36 percent of worldwide rare earth deposits, which are relatively abundant elsewhere in the earth’s crust.  The US was once a leading producer of the minerals until the emerging Asian giant undercut world prices in the 1990s.  

The Asian economy has imposed a series of measures over the past four years to limit the export of such minerals, actions that sent importing economies scrambling to secure alternative sources and prompted the litigation action at the global trade arbiter in early 2012. The three complainants in the case argued that the measures favoured China’s domestic industry and inflated global prices for rare earths.

Beijing rebutted that its policies were intended to protect natural resources and limit environmental damage as a result of extraction.

Rare earths extraction involves the use of sulphur, ammonia, and other chemicals, which can then leak into surrounding water supplies. Such problems are compounded when the mining takes place illegally, a challenge China has repeatedly attempted to tackle in recent years.

The case brought to light questions around how to design conservation measures while complying with global trade rules, as well as how to address the UN principle of sovereignty over natural resources.