Rare Earth Elements (REE) have become an integral part of the global geopolitical competition. Once neglected or avoided due to the supposed damage their extraction could cause to the environment, the REE are now have rapidly gaining traction owing to their utility in various electronic products.

The REE are a set of 17 metallic elements that include 15 lanthanides on the periodic table plus scandium and yttrium. According to the US Geological Survey’s news release ‘Going Critical’, REE are necessary components of more than 200 products across a wide range of applications especially high-tech consumer products like cellular telephones, computer hard drives, electric and hybrid vehicles, flat-screen monitors and televisions as well as for defence applications like electronic displays, guidance systems, laser, radar and sonar systems. Despite the name, REE are not actually rare; however, their extraction and refining process remains complex as also there is always a concern of pollution their processing can cause. Due to these reasons not many countries had ventured into mining of REE for a long time, hence the name rare.

Currently China holds a competitive edge in the area of REE compared to other countries. Building a supply chain of REE from mining to applied field requires a time period of around 10 to 15 years. China possesses the advantage since it has developed this supply chain parallel to building its manufacturing capacity in the last 40 years. China’s manufacturing capability that is based on industrial processes is proving to be cost-effective compared to the US’s high-technology driven output. Further, China asserts its dominance owing to its expertise in mining and processing of some Heavy Rare Earth Elements (HREE) like dysprosium and terbium. While these HREE are found in many countries including Canada, Sweden and Australia, China possesses cost advantage since the deposit of ion-adsorption clay deposit allows China to extract the HREE at low cost compared to the western countries. HREE are essential for high-performance magnets in F-35 fighter jets and electric cars.

Although the US and China are engaged in a bitter competition for shaping the global order, Beijing’s upper hand in REE has resulted in Washington apparently taking a conciliatory tone. This was evident when the US President Donald Trump met Chinese President Xi Jinping in Busan, South Korea in October. Showing leniency on the tariff front Trump made sure that China continues to purchase American soya beans. In return Beijing hardly agreed anything substantial to reciprocate Washington’s apparent olive branch. The reason being China’s near-monopoly in REE and the US’s and the West’s dependence on China for the steady supply of the REE.

At present, China controls about 61% of rare earth production and 92% of their processing, according to the International Energy Agency (IEA). A US Geological Survey report points out that the US depended on China for 70% of its imports of rare earth minerals and compounds. In April this year, Beijing ordered restrictions on REE exports in retaliation to the tariffs imposed by Washington. The US’s heavy dependence on REE imports from China allowed the latter to use REE as a bargaining chip against the former.

In this regard, India could step up its role in the area of REE. REE could become a major factor for India in balancing its ties with the US and China. In the past one year India’s relations with the US have experienced friction after Donald Trump returned as the US president. Trump’s attempts to put pressure on India through trade tariffs on one hand and cozying up to Pakistan on the other has created some discomfort in the India-US engagements. For its part, China has apparently made some efforts to woo India away from the US and the West. Amid the flux in the India-US-China triangle, REE are set to become one of the important factors.

India has the fifth largest rare earth reserves in the world and has the potential to be an important player in the REE supply chain globally. To jump on the REE bandwagon, India would need to build resilient industrial processing and refining ecosystem. India possesses the scale and credibility for building the REE supply chain. With its vast manufacturing base, India can absorb downstream industries like magnets, motors and batteries.

To become a global supplier of REE and to gradually build an alternate supply chain to counter China, India will need to build partnerships worldwide. India could look to develop partnerships with countries like the US, Japan, Australia, Brazil, Singapore, South Korea and the United Kingdom (UK).

While India has infrastructure in mining, refining and recycling infrastructures need to be developed. Developing refining and recycling facilities would boost India’s capabilities in end-to-end rare earth ecosystem to support defence and aerospace sector. REE sector not only offers India an avenue to build partnerships with like-minded countries to counter China, it also allows India to strengthen its drive for indigenous defence manufacturing.

Mr. Niranjan Marjani is a political analyst and researcher based in Vadodara, India.