Collaborate to strengthen the rare earth supply chain and build resilience

(MainsGS2:Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.)

Context:

• Driven largely by the global shift towards clean energy technologies such as electric vehicles, wind power, and solar power the global demand for rare earth elements is expected to reach 315,000 tonnes by 2030.
• Australia and India as emerging partners can collaborate to strengthen the rare earth supply chain and build resilience.

Cooperation is required:

• The rare earth supply chain consists 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.
• Thus, China’s dominance in the supply chain of rare earth elements (REE) is leading to collaborative alliances amongst several countries.

Increasing domestic demand:

• 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.

Working together:

• 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.

Conclusion:

• 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.