Rare earth magnets will come to India from China: Started giving licenses to Indian companies; Most used in EV, Electronics, Medical

China has started issuing licenses to export ‘Rare Earth Magnet’ (REM) to Indian companies and foreign companies operating in India. According to government officials, China’s Commerce Ministry has started processing and approving these applications.

For some time, there was concern in the Indian automobile and electronics industry due to stoppage of supply of these important raw materials, which may now gradually go away.

Companies getting licenses include Jai Ushin, Indian units of German auto component maker Continental AG, vendors of Mahindra and Maruti Suzuki as well as suppliers of Honda skates and motorcycles. Although officials say that it is still a slow start, the industry has heaved a sigh of relief as the process has started.

Why is rare earth magnet important?

Rare earth magnets are essential for automobiles, electronics, medical devices and defense industries. They are most commonly used in the motors of electric vehicles (EVs).

China currently leads the world in terms of production and capacity of rare earth magnets. From April 4, China had banned the export of these magnets, due to which the supply chain of the entire world was affected.

Where are rare earth materials used in vehicles

Rare materials are used especially in electric vehicles. These are used to make compact and high performance magnets for permanent magnet electric motors.

These magnets, made from elements like neodymium, dysprosium and terbium, make the motors smaller, lighter and more efficient than other options, which is essential to improve the range and performance of EVs.

They are also used in auto components like catalytic converters used in ICE vehicles. Apart from this, these metals are used in many systems installed in both EV and ICE vehicles, from sensors to displays.

China has about 70% stake in mining of rare materials.

Globally, China’s share in mining of rare materials is about 70% and about 90% in production. China recently banned the export of 7 precious metals (rare earth materials) amid the escalating trade war with the US.

China has also stopped the shipment of magnets required for assembling everything from cars, drones to robots and missiles at Chinese ports. These materials are very important for automobile, semiconductor and aerospace businesses.

The dispute with America affected India

Beijing had implemented these export licensing rules in response to the US increasing tariffs on Chinese products. Under these rules, Chinese sellers get export clearance only if the importer guarantees that these materials will not be used for defense related purposes or for ‘dual-use’. This process is quite complex and lengthy, due to which the supply was getting delayed.

Effect of Indian Government’s talks

The Indian government was in constant touch with the Chinese authorities for the last 6 months. In June, during his visit to New Delhi, Chinese Foreign Minister Wang Yi had assured External Affairs Minister S Jaishankar that Beijing would ease restrictions on the export of rare earth minerals.

The Indian automobile industry had warned the government that if there is a delay in supplies from China, the production schedule of companies and especially the manufacturing of electric vehicles will be badly affected.

Chinese Foreign Minister Wang Yi and Indian Foreign Minister S. Jaishankar.

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