Daybreak - India said no to pollution. China took the rare earth crown

Episode Date: June 5, 2025

Like much of the world, India is heavily reliant on China for its rare earth supplies. In FY25 alone, we imported 870 tonnes of rare earth magnets, worth over ₹300 crore. China controls about 60–70% of global rare earth production and around 90% of the world’s refining capacity. Decades ago, while other countries hesitated over environmental and social costs, China made a ruthless, calculated bet — sacrifice land, people, and air to dominate the rare earths future.Now we are in that future and China has thrown a spanner in the works. It has imposed fresh restrictions on magnet exports, threatening to bring India’s EV ambitions to a grinding halt.Indian importers are caught in a bureaucratic maze. Chinese suppliers now demand end-use declarations. That kicks off a long certification process — multiple approvals from Indian authorities, and even sign-off from the Chinese embassy in Delhi.And after all that, final clearance must come from China’s commerce ministry. That’s the bottleneck. Several Indian auto component makers have jumped through every hoop — yet they’re still waiting.So, where does that leave us?Tune in.Tell us what you thought of this episode. You can text us your feedback on WhatsApp at [phone]Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.Want to attend The Ken's next event on health, fitness and wellness? Buy tickets here. Here's your chance to help us shape the conversation: https://theken.typeform.com/to/bZhqWl2g

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcast, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

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Some bodies have really sounded the alarm bells saying that this could literally bring EV production to a grinding halt. Would you go to the extent of saying that... It is concerning, yes, but actually it is concerning. It could bring it to a halt. That was Suddarshan Venu, the MD of TVAS Motors, in an interview with CNBCT, TV 18 three days ago talking about how China's restrictions on the export of rare earth magnets

could potentially bring India's EV industry to a grinding halt. Just a few days before this, Bajajos executive director Rakeh Sharma made a rather ominous warning of his own during the company's queue for earnings call. He said, and I quote, there is a dark cloud on the horizon. Now, Sharma didn't mince words. He said the entire auto industry in India could see production disruptions as early as July. All because EV makers like TVS and Bajaj are finding it harder to get their hands on these magnets. Like much of the world, India relies heavily on China for rare earth supplies.

In the financial year 2025 alone, India imported 870 tons of rare earth magnets worth over 300 crore rupees. But now, China. has thrown a spanner in the works. Indian importers, meanwhile, are caught in a bureaucratic bind. Chinese exporters are asking buyers to declare how their magnets will be used. Then comes a lengthy certification process involving multiple approvals both from Indian authorities and the Chinese embassy in Delhi. And even when that's done, the final clearance has to come from China's commerce ministry.

And that is where things are stuck. Several Indian auto component makers, despite jumping through every hoop, still have not received the green flag. Now, this is a big deal. After all, China controls 90% of the world's production of red earth magnets and more than half of its supply. While India does have a smattering of deposits of its own, it'll take us decades to become truly self-reliant. Because as it turns out, mining these minerals that are so, so crucial for our transition to clean energy is a pretty dirty business. It's costly, complex, and not to mention, hugely polluting. So, where do we go from here? Hello and welcome to Daybreak,

a business podcast from the Ken. I'm your host Nick Dha. And I'm Rahil and we don't usually chase the news cycle, but today we are. Every day or the week, we come to you with one new story that is worth understanding and worth your time. Today is Friday. This is Friday. This is a 6th of June. Have you heard of Buy an Obo? It is a mine in China that has the world's largest known deposits of rare earth metals. In fact, I would like you to open Google Maps on your phone right now and type Bain-O-O-Mining District. It's B-A-Y-A-N-O-B-O. Now, look at that. It is like a scar that is carved deep into the earth, like a festering wound. The mine stretches endlessly across the barren landscape of Inner Mongolia.

And once upon a time, this region was full of forests and pastures. Now, this post-apocalyptic-looking wasteland just buzzes with trucks and cranes and drills and machines all cutting, breaking, hauling these precious rocks that contain rare earth elements that are said to hold the key to our survival as a planet. You see, there are 17 rare earth elements. I'm not going to name all of them, but some of the most. commonly used ones are neodymium and praceodiamium. These two are used to make permanent magnets used in EV motors and wind turbines.

Then there is Lanthanum, which is used in camera lenses and lighting. There is also Serium, which is used in catalytic converters, which reduce combustion engine emissions. So, basically, we need them for EVs, for smartphones, satellites, windmill, everything that is required to build the green energy infrastructure that is going to save our planet. Naturally, the powers that be wanted to control the supply of these metals. But environmental risks, resources and lack of infrastructure came in the way. As I'm telling you this, I realize how this story has the perfect plotline for a dystopian

sci-fi movie. Because you see, now, decades later, China controls about 60 to 70 percent of global rare earth production and around 90% of the world's refining capacity. And China did not just win the rare earth metal scheme. It broke the rules to own the entire board. While other countries were hesitating over environmental and social costs, it made a ruthless and calculated bet. Sacrifice land, people and air to dominate the future.

Fortunately or unfortunately, we can't tell. But that bet paid off and now China has a chokehold on the so-called global green economy. And at the heart of the strategy, as you now know, lies in Mongolia. Just 120 kilometres away from the mine lies the city of Batu that processes these minerals. You see, mining is just the first 10% of the journey. The rest is refining. And refining rare earth metals is like extracting a drop of perfume from, from a puddle of sewage.

It is chemically complex and dirty and nobody wants to do it without experience, tech and scale. And this is where China won. They invested in the trickiest part of the process for decades. They subsidized and perfected it and built massive industrial parks for this purpose. The country vertically integrated the entire chain.

From ore to electric vehicle motors, they now control every step. and this gave it pricing power and technological depth. But what is left behind in Batu? A huge lake of toxic sludge. It is black, radioactive and it is leaking into the land and water. Rivers have been poisoned, villages had to be evacuated, people started getting all kinds of diseases, cancer, deformities.

And a lot of the mining was also illegal with zero oversight. waste was being dumped everywhere. Toxic gases, radioactive residue, acid wastewater, all the byproducts of a supply chain that the world now depends on. Every ton of rare earth's mind produces nearly 12,000 cubic meters of toxic gas, 75 cubic meters of acidic wastewater and a full ton of radioactive waste. Between 2001 and 2006 alone, China ramped up, production from 81,000 to 120,000 tons, and now it is more than double to 270,000 tons.

But China got what it wanted, right? Which is total control over the building blocks of the green economy. And now, the rest of the world faces a brutal choice. Stay dependent on China's toxic supply chain or recreate it at home and risk the same environmental destruction. And this right here is the whole paradox of green energy. To save the planet, we are depending on things that are destroying it. So, what should India do? Because it is not that India does not have the rocks or the raw materials. It's just that we don't have the recipe or the kitchen.

Hi, I am briefly pausing this episode to make a very special announcement. On June 21st at the Bangalore International Centre, the Ken is bringing together a pretty extraordinary panel for a one-of-a-kind discussion on how we can lead healthier and happier lives. We'll be joined by Olympic swimmer Nisha Millett, vice chairman of the Narayana Health Hospital Group, Erin Chetty, and finally, Dr. Syriac Abby Phillips, aka the Liver Dog. Join us for what promises to be an insightful, vibrant discussion

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So what can India do? Well, in the short term, honestly, not much. But that said, the Indian government is crambling for workarounds to reduce our reliance on China. Some reports suggest that a delegation of auto industry leaders may be sent to Beijing very soon to negotiate some sort of solution. That, of course, is just a diplomatic band-aid at best. We need to think long-term.

And in the long-term, India has been pushing the self-reliance narrative. We spoke to our colleague Suprita Anupam, who covers electric mobility for the ken, and he said that India has been trying to build domestic capabilities in rare earth mining and processing. Of course, that will take time. And time, unfortunately, is a luxury that the EV industry may not have, especially if China chooses not to budge. So, what are our other options here? Are there other sources of rare earth magnets we can turn to?

Well, yes, they can be found scattered around the world. In fact, India has a rather modest reserve of its own, weighing in at about six. million tons in Odisha, in Tamil Nadu, even on the beaches of Kerala. So far, mining those rare earth elements was dominated by just one public sector firm called India Rare Earths Limited or IREL. For a long time, IREL was primarily focused on extracting monazite sand from beach minerals for nuclear use. Then the government realized that we would have to shift focus to other rare earth elements on the spectrum as well, including the magnets that are so vital for EVs.

So the IREL commissioned the rare earth permanent magnet plant in Mishaka-Patnam with the sole objective of producing samarium cobalt permanent magnets on home turf. The plant has an annual capacity of about 3,000 kgs. Now, that's a tiny drop in the ocean for automakers, just about enough for one automaker at best. Which is why, India recognized it was essential for it to dilest. diversify its sourcing. So the government recently opened up

REE exploration for private entities. A couple years ago, India set up a joint venture between three PSUs called Kabul, which is short for Khanij Badesh India Limited. Now, Kabul has been saddled with a pretty ambitious goal. It has to pull off what only Japan has managed to do so far, which is identify and acquire sources of these critical minerals abroad. Kabul has since signed an MOU with Australia,

which also happens to be one of the world's biggest suppliers of lithium and cobalt. But it's not like they can just fire up their drills and go for it. You see, drilling for rare earth elements is phenomenally polluting and toxic. That's exactly why it's so heavily regulated and was until quite recently limited to IREL alone. The biggest challenge in all of this is refining these elements domestically. For context, in 2023, China was able to process 2 lakh tons of rare earth elements, whereas IREL handled 10,000 tons. Now, bridging that gap will take both time and concerted effort, which is why, in parallel, India and the rest of the

world are also exploring other alternatives to mining. On top of that list is rare earth recycling, essentially recovering rare earth elements from e-waste, things like EV batteries, smartphones, and, of wind turbines. But there are multiple limitations here. For starters, there just aren't enough EVs and mobile phones to go around. Apart from that, India lacks recycling technologies at an industrial scale. Most R&D is still in pilot phases, so we are a long way off from this being a viable solution to our problem. So where does that leave us? Well, for now, we are stuck playing catch-up. On one hand, we are trying with limited success to reduce our dependence on China. But that doesn't just mean identifying and acquiring new mines. It also means building our

capabilities across the rare earth value chain, from exploration and extraction to refining and eventually recycling. Not to mention, the supply chain stakeholders need to start demanding ethical sourcing. Basically, it is a long road ahead. But if India wants to meet its EV goals and get ahead in the global EV race, it has no choice but to go all out on all fronts. The bottom line is, no matter what, we are risking localized environmental destruction to avoid global ecological collapse. And that is the paradox. And that is all for today, dear listeners. If you like this episode, please don't forget to drop a comment and rate us on whatever podcast platform you're tuned into. You can also message

us on WhatsApp. Our number is in the show notes. See you next week. and have a great weekend. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras.

Head to the Ken.com and click on the red subscribe button on the top of the Ken website. Today's episode was hosted and produced by Rahal Philippos and I, Sinkda Sharma, and it was edited by Rajiv Sien.