India Halts Rare Earth Exports to Japan to Boost Domestic Capacity

In a strategic policy shift, India has directed its state-run miner IREL (India Rare Earths Limited) to suspend a 13-year-old rare earth export agreement with Japan. The move comes amid growing global supply chain uncertainties, especially after China curbed rare earth exports, which are crucial to the global green economy. India aims to safeguard its resources for domestic use, reduce import dependence—particularly from China—and build its own value-added rare earth industry.

Why in News?

The Indian government has asked IREL to halt rare earth shipments under a bilateral agreement with Japan’s Toyotsu Rare Earths India, citing rising domestic demand and the need to develop indigenous processing capacity. This comes amid global disruptions triggered by China’s export restrictions on rare earths, which are key inputs for electric vehicles, wind turbines, and electronics. India seeks to establish a self-reliant rare earth supply chain and reduce dependence on imported magnets, especially from China.

Background & Agreement Details

• Agreement Year: 2012
• Parties Involved: IREL (India) & Toyotsu Rare Earths India (subsidiary of Toyota Tsusho, Japan)
• Nature: IREL mined rare earths, and Toyotsu processed them for export to Japan.
• Materials Involved: Mostly Neodymium, used in magnets for EV motors.

Key Highlights of the Current Decision

• IREL instructed to suspend exports to safeguard domestic supply.
• Commerce Minister Piyush Goyal conveyed the decision in a recent industry meeting.
• India wants an amicable resolution, given friendly diplomatic ties with Japan.

As of FY2024

• Toyotsu shipped 1,000+ metric tons to Japan.
• India mined 2,900 metric tons of rare earths.
• Domestic demand has risen due to Chinese supply cuts.

India’s Rare Earth Capabilities and Challenges

• India holds the 5th-largest reserves of rare earths (~6.9 million metric tons).
• Currently lacks magnet production facilities; depends heavily on imports.
• In FY2024-25, India imported 53,748 metric tons of rare earth magnets.
• Rare earth mining is restricted to IREL, under the Department of Atomic Energy.

India’s Expansion Plans

IREL aims to,

• Extract 450 metric tons of Neodymium by FY 2026.
• Double production by 2030.
• Plants located in Odisha (extraction) and Kerala (refining).
• Exploring corporate partnerships for domestic magnet manufacturing.
• Government incentive plans are in development for rare earth processing.

Global Context

• China controls over 80% of global rare earth processing.

Rare earths are used in,

• Electric vehicles
• Wind turbines
• Medical imaging devices
• Smartphones and defence applications
• China’s export restrictions since April 2025 have caused industry-wide alarm, reminiscent of its 2010 embargo on Japan.