India Likely to Suspend Rare Earth Exports Deal with Japan in Bid to Counter China’s Dominance

India has directed state-owned miner IREL (India) to suspend a 13-year-old rare earth export agreement with Japan, two sources told Reuters, as part of a strategic move to secure domestic supply and reduce reliance on China. The decision comes amid growing global concerns over China’s tightening grip on rare earth exports, which are critical for high-tech industries and electric vehicles.

IREL also aims to ramp up India’s domestic processing capacity for rare earths—a sector currently dominated by China—as geopolitical tensions and trade wars increasingly make such resources a tool of economic leverage.

One of the sources informed the news agency that commerce and industry minister Piyush Goyal, during a recent meeting with auto and other industry executives, asked IREL to stop its exports of rare earths. He mainly emphasised on neodymium, a key material used in magnets for electric vehicle motors.

Under a 2012 bilateral agreement, IREL has been supplying rare earths to Toyotsu Rare Earths India, a subsidiary of Japanese trading giant Toyota Tsusho. The processed materials are exported to Japan, where they are primarily used in manufacturing industrial magnets.

In 2024 alone, Toyotsu shipped over 1,000 metric tonnes of rare earths to Japan, according to the report. This accounted for roughly one-third of IREL's total rare earth production of 2,900 tonnes, it said. While Japan still depends heavily on China for its rare earth needs, the Indian supply has been a strategic alternative.

Historically, India exported these materials due to limited domestic processing capabilities. However, with recent curbs on Chinese exports disrupting global supply chains, IREL is now looking to retain its output to strengthen domestic mining and processing. The company is awaiting statutory approvals for four mines as part of this expansion, a second source said.

Despite this shift, India may not be able to immediately halt exports to Japan, as the shipments are governed by a binding intergovernmental agreement, the news agency noted.

US-China Deal 'Done'

Recently, US President Donald Trump has claimed that a trade agreement was reached between the US and China, pending final approval from him and Chinese President Xi Jinping. He also said that China would resume the supply of essential magnets and any necessary rare earth materials to the US.

On April 4, Beijing has announced imposed restrictions on the export of seven rare earth elements and magnets made from them as a retaliation for Trump's tariff announcement. Beijing still holds 90% of global rare earths while maintaining its refining monopoly, leaving importing nations vulnerable.