India's mineral supply chain at risk; CII calls for swift action

2025-07-06 general

New Delhi, Sunday, 6 July 2025.
The Confederation of Indian Industry urges government and industry to collaborate on rare minerals. This is reminiscent of the semiconductor policy’s success. CII President Rajiv Memani admits there is no quick fix. He stresses a long-term strategy to avoid supply chain disruptions. Semiconductors and automotive are particularly at risk. He notes Japan has been working on rare minerals for a decade, achieving only 40% value addition. Some minerals are radioactive, requiring the Department of Atomic Energy’s involvement. This collaboration is essential for companies like TSMC, NVIDIA and ASML.

Rare mineral dependencies and india’s strategy

Rajiv Memani, President of the Confederation of Indian Industry (CII), advocates for government and industry collaboration to tackle India’s rare mineral dependencies [1]. He draws parallels with the successful semiconductor policy [1]. Memani recognizes the absence of a short-term solution, emphasizing the need for a long-term strategy to mitigate supply chain disruptions affecting sectors like semiconductors and automotive [1]. He suggests India needs to identify major risks in its supply chains and create a mineral strategy to address them [1]. This strategy would involve domestic production or import diversification, supported by government assistance to the private sector [1].

Global rare earth landscape and india’s position

The global landscape reveals a complex interplay of nations vying for dominance in rare earth elements (REEs) [GPT]. These elements are crucial for advanced technologies [1]. A ‘rare earth alliance’ has formed, comprising the United States, Japan, Australia, and India, aiming to reduce reliance on China [2]. Despite possessing the world’s third-largest rare earth reserves, India faces challenges in processing these minerals into exportable products [2]. This lack of processing technology hinders India’s ability to compete effectively in the global rare earth market [2].

China’s export controls and their impact

China, a dominant player in the rare earth industry, accounting for over 80% of global production, has tightened its export controls [9]. This has disrupted India’s role as a middleman, impacting companies that previously imported rare earths from China for resale to the US and Europe [9]. In 2023, India imported 120 tonnes of rare earths from China for this purpose [6][9]. However, stricter export regulations imposed by China have curtailed this practice, reducing India’s import volume [9]. These restrictions are driven by increased domestic demand and a strategic effort to maintain control over this critical resource [9].

Automotive sector implications and chinese oems

The automotive industry, particularly the electric vehicle (EV) sector, relies heavily on rare earth minerals [9]. A potential trade conflict between the US and India could further pressure India’s automotive supply chain, creating opportunities for Chinese original equipment manufacturers (OEMs) [3][4]. Companies like BYD, MG, Xiaomi, and Deep Blue are strategically positioned to capitalize on this situation [3][4]. BYD’s Hai Shi 07 EV has already achieved a record of 478 deliveries per month in a single store, indicating strong market acceptance [3][4]. These companies may leverage technology and localized production to gain market share [3][4].

Investment considerations and risk factors

Investors should note several risk factors. These include potential retaliatory tariffs on Chinese EVs if the US and India engage in a trade war [3][4]. Also, India’s mandate for 50% localization within five years could be challenging due to China’s rare earth export policies [3][4]. Political risks, such as arbitrary actions against foreign investors, also exist [3][4]. Despite these risks, the situation presents a strategic window for Chinese firms to exchange supply chain technology for market access [3][4]. Investors should favor companies with strong localization plans and strategic partnerships to mitigate these risks [3][4].

Bronnen

supply chain rare earth minerals