India has suspended a 13-year-old rare earth export agreement with Japan, as it recalibrates its supply priorities in response to China’s recent rare earth export restrictions. The move reflects a growing urgency to reduce dependency on Chinese processing and secure critical materials for domestic industries such as automotive, defense, and renewable energy.
Background: Why Rare Earths Matter
Rare earth elements are vital for high-tech industries, powering everything from electric vehicles and smartphones to wind turbines and defense systems. While India holds the world’s fifth-largest reserves (6.9 million metric tons), it lacks domestic magnet manufacturing capabilities, leading to a heavy reliance on China.
China’s Export Ban: The Global Domino Effect
In April 2025, China tightened rare earth exports, disrupting supply chains for major economies. As Beijing dominates global rare earth processing, this move impacted automotive and technology companies worldwide, including Japan and India.
The Japan-India Agreement: What’s Changing
Since 2012, IREL (India Rare Earths Limited) has supplied materials to Toyotsu Rare Earths India, a subsidiary of Toyota Tsusho, which processes the materials and ships them to Japan for magnet production. In 2024 alone, Toyotsu exported over 1,000 metric tons of rare earths—one-third of IREL’s total output.
But now, under government instructions, IREL is pausing these exports to preserve domestic reserves. The change marks a significant departure from previous bilateral arrangements.
Domestic Strategy: Focus on Processing & Manufacturing
India is now accelerating its efforts to build an end-to-end rare earth value chain:
- IREL has rare earth extraction plants in Odisha and Kerala.
- It aims to produce 450 metric tons of neodymium by March 2026, with plans to double output by 2030.
- The company is actively seeking partnerships for magnet production, targeting automotive and pharma sectors.
Diplomatic Balancing Act
While the halt is strategic, IREL is pursuing a negotiated resolution with Japan, acknowledging the diplomatic sensitivity and Japan’s status as a key ally. The government remains cautious, as abrupt cessation might affect bilateral trust.
Key Figures & Stats
- Rare Earth Magnets Imported by India (FY25): 53,748 metric tons
- India’s Rare Earth Output (2024): 2,900 metric tons
- Exports to Japan via Toyotsu: 1,000+ metric tons
- Target Neodymium Production by 2026: 450 metric tons
What’s Next?
As global competition for rare earth resources intensifies, India is reshaping its role in the global rare earth ecosystem—not just as a supplier, but as a manufacturer. Strengthening domestic refining, magnet production, and technology partnerships will be crucial as the country navigates geopolitical pressures and economic self-reliance goals.
Bottom Line:
India’s decision to halt rare earth exports to Japan underscores a strategic shift toward supply chain sovereignty and economic security, while also positioning itself for long-term leadership in the rare earth materials market.
