India-Australia rare earth supply chain collaboration
By Neha Mishra, an Associate Fellow at the Centre for Air Power Studies (CAPS)
Global demand for rare earth elements is expected to reach 315,000 tonnes by 2030, driven largely by the global shift towards clean energy technologies such as electric vehicles, wind power, and solar power. China’s dominance in the supply chain of rare earth elements (REE) is leading to collaborative alliances amongst several countries. Australia and India as emerging partners can collaborate to strengthen the rare earth supply chain and build resilience.
The rare earth supply chain is comprised of upstream (extraction and separation of REE oxides), midstream (processing REE metals and alloys), and downstream (manufacturing of permanent magnets and end-products) elements. Upstream and midstream capacities have been increased in most countries, but cooperation is required to reduce over-reliance on China in the downstream capacities.
Lynas Rare Earths, Arafura Rare Earths, and Iluka Resources have helped the Australian rare earth industry develop upstream and midstream levels in the supply chain.
Australia, the fourth-largest rare earth producer with a 24,000-tonne yearly capacity, has profited most from a sharp rise in its demand. This output is small compared to China’s 168,000 tonnes, but represents significant growth from 1,995 tonnes in 2011. Lynas Rare Earths, Arafura Rare Earths, and Iluka Resources have helped the Australian rare earth industry develop upstream and midstream levels in the supply chain. Since 2011, Lynas has increased neodymium-praseodymium production, while Nolans by Arafura Rare Earths aims at expanding downstream processing through the production of the most economically important neodymium iron boron (NdFeB) magnets and permanent magnets. The Australian government invested A$30 million in this effort as part of their A$240 million rare earth industry investment to lessen reliance on China.
For India, increased domestic demand for REE is principally driven by the demand for permanent magnets used in defence and environmental technology. Indian Rare Earth Limited (IREL), India’s sole rare earth producer, has given top priority to meeting defence needs. IREL also plans to quadruple its upstream mining capacity of rare-earths-bearing ore to 50 million tonnes per year by 2032 and increase REE production to 13,000 tonnes from the current 5,000 tonnes.
Despite possessing the fifth-largest rare earth reserves (6.9 million tonnes) and upstream mining capacity, IREL imports manufactured rare-earth magnets, primarily from China. India’s ability to grow downstream processing has been limited since the Indian government banned mineral exploration by private companies in 2019, citing their illegal mining, exports, and corruption as reasons.
For India, increased domestic demand for REE is principally driven by the demand for permanent magnets used in defence and environmental technology.
Even though India lacks a strategic plan for its REE industry, the government is taking steps to promote the industry, such as Bhopal’s “Rare Earth Theme Park.” The Atomic Minerals Directorate for Exploration and Research and the Geological Survey of India are also investigating new REE deposits, such as the recent discovery of light REE deposits in South India.
India, which is still in the exploration phase, and Australia, which is the second-leading producer in the REE business, have begun working together on critical minerals since their memorandum of understanding (MoU) in 2020. Collaborations, such as the Supply Chain Resilience Initiative (SCRI) and the Quad, have taken shape at all bilateral, trilateral, and multilateral levels.
The recent bilateral announcement to partner on five target critical mineral projects (three cobalt and two lithium) also represents their strengthening supply chain collaboration. In 2022, Australia updated its India Economic Plan to 2035, to give priority status to the Mining Equipment, Technologies, and Services (METS) sector in India. Since then, one of the five priorities of the Australia-India Business Exchange (AIBX) has been mining and resources, and by 2022 about 40 Australian companies were reportedly involved in the Indian mining industry.
Recent changes to Indian law to accredit 13 private agencies to undertake mineral exploration in India has further potential to open up exploration rights for Australian firms. Australian and Indian firms, such as Tata Group, Aditya Birla, Mahindra Limited, Permanent Magnets Limited, and Dura Magnets, may collaborate on projects to explore heavy and light REE in India, just as they have done with iron ore and copper.
One of the five priorities of the Australia-India Business Exchange (AIBX) has been mining and resources, and by 2022 about 40 Australian companies were reportedly involved in the Indian mining industry.
India and Australia should work together to create a sustainable eco-system for mining, processing, and manufacturing of REE. This system should be built up gradually, beginning with ensuring more advanced and reliable upstream mining in both countries, followed by efforts to develop midstream processing downstream manufacturing. Every stage of the rare earth supply chain needs to be secured to enable a sustainable ecosystem, as only reliable upstream mining would ensure stable access to the raw rare earth oxides for processing into REE in the midstream stage, and the successful processing would ensure the manufacturing of end products and rare earth magnets.
In addition, REE sourced permanent magnets and rare earth alloys, like neodymium iron boron and samarium cobalt, which are used for the manufacturing of military weaponry, could stimulate further India-Australia cooperation to meet their defence production goals.
India’s scale, market size and low-cost manufacturing coupled with Australia’s comparative strength in raw materials, critical minerals and innovative research can lead to mutually beneficial outcomes through partnerships between Indian and Australian companies. Australia, with its advanced upstream-midstream rare earth facility and third-largest REE-producing capacity, can aid the productivity and efficiency of India’s mining industry through an extended relationship involving METS, investments, technology transfers, and information support.
There is no doubt in Australia’s potential to become a rare-earth supply-chain powerhouse, but it is important to keep in mind that excessive mining depletes deposits and creates supply-chain insecurity. As an example, China’s percentage of global rare earth reserves has dropped from 70 percent in the 1990s to 38 percent today due in part to excessive mining. Australia would be able to develop a sustainable ecosystem and secure access to rare earth oxides if it had access to India’s untapped deposits and low labour costs. This will allow Australia to confidently plan its long-term rare earth projects and guarantee supply chain sustainability.
This article was written as part of the Australia India Institute’s Defence Program undertaken with the support of the Australian Department of Defence. All views expressed in this article are those of the author only. This piece was originally published on the Observer Research Foundation website.