Investment manager Louis O’Connor protects his company’s most valuable assets deep behind a World War II-era vault on the outskirts of Frankfurt, Germany. The hidden treasure? elements of rare earths.
“Make no mistake about it, there’s 3 1/2-meter walls and doors and armed security,” says O’Connor, CEO of Strategic Metals Invest, a company that allows individual investors to purchase rare earth reserves.
Although many so-called rare earth elements are relatively common and are mined all over the world, China has a near monopoly on their refinement for use in both vital defence equipment like fighter jets and popular electronics like smartphones and speakers
How did China monopolise the manufacturing of rare earth elements (REEs)?
With good fortune, diligence, and perhaps manipulation. It was fortunate that REEs were concentrated in this region due to geological changes over billions of years. Its reserves are estimated to be 44 million tonnes, significantly more than those of the US (1.9 MT) and India (6.9 MT).China thus has a chokehold on the minerals, and they are using its dominance as a key bargaining chip for any talks.
In nature, rare earth metals are tightly bonded to one another. Large amounts of acid and numerous rounds of chemical reactions are needed to separate them, especially the heavier rare earths.
Both the US and the USSR had developed comparable methods for separating rare earths during the 1950s and 1960s. However, their methods were expensive, requiring costly nitric acid and stainless-steel pipes and vats.
Instead, the Chinese experts discovered a way to extract rare earth elements using cheap plastic and hydrochloric acid.
China’s rare earth refineries were able to undercut Western rivals due to the cost advantage and lax enforcement of environmental regulations. Nearly all of the refineries in the West were forced to close due to stricter environmental restrictions.
China produces roughly 61% of rare earth elements and processes 92% of them. This indicates that it now controls the supply chain for rare earths and has the authority to determine which businesses can and cannot obtain rare earth supplies. Six supersized, mostly state-owned firms, nicknamed the Big Six in Chinalargely control both supply and price. And just few months back China decided to tighten exports of these critical resources. This has raised serious concerns globally, especially for countries like India, which heavily depend on Chinese rare earth processing.
How is India reacting to this tight spot situation?
The demand for rare earths extends far beyond the automotive industry. India’s REE reserves are overwhelmingly skewed toward light rare earth elements (LREEs), which have bulk industrial applications. Heavy rare earth elements (HREEs), essential for high-tech, strategic, and defence applications, are present but not in extractable concentrations.
For India to meet its 2070 net-zero target, a reliable supply of rare earth elements, alongside lithium, cobalt, and nickel, is crucial. Neodymium and dysprosium are especially important for wind turbines, with each megawatt of wind capacity requiring about 200 kg of rare earth materials.
The Indian rare earth industry is currently government-dominated. Indian Rare Earths Ltd (IREL), operating under the Department of Atomic Energy (DAE), plays a central role in mining monazite and producing mixed rare earth chlorides.The primary issue with India’s reserves is that the purity and concentration of REEs ores is low (for example, neodymium and praseodymium at 0.0011 to 0.012 percent in beach sand ores), leading to higher recovery costs and technological inefficiencies. Due to this, many semi-processed rare earth elements are supplied to countries like Japan.
The Indian government has implemented several initiatives and reforms to ease these constraints:
- The National Critical Minerals Mission (NCMM)
- Amendments to mining laws
- Incentives for private and foreign investment
The National Critical Mineral Mission was started by the government with a ₹16,300 crore investment.The goal of the mission is to support important mineral exploration, processing, and recycling, including REEs. In June 2025, India ordered Indian Rare Earths Limited (IREL) to halt a long-standing export deal with Japan in order to keep neodymium and other vital REEs for domestic use, marking a dramatic change in policy.”We are looking to create a two-month stockpile of rare earth elements”, said a government official. This is India’s first step toward resource sovereignty. New Delhi is indicating that it wants to become a net stabiliser in the mineral markets of the Indo-Pacific by accumulating rare earths.
Additionally, if India can close its refining gap, it will be positioned as a prospective strategic partner for essential mineral resources, which is in line with Western diversification goals.
Government recently passeda mining bill with three main aims:
Liberalise and modernise India’s mineral sector,
Ensure domestic availability of critical and strategic minerals, and
Promote transparency, sustainability, and global competitiveness in the mining sector.
The amended bill eased mining of certain critical minerals which were otherwise categorised as atomic minerals, restricting their exploration. In most cases, the non-atomic uses of these minerals far outweigh their atomic use. Upon removal of these minerals from the list of atomic minerals, exploration and mining of these minerals will be open to private sector.
Allowing private companies to conduct exploration on a license basis is another important feature of this bill. Involvement of private agencies in exploration would bring advanced technology, finance and expertise in exploration for deep-seated and critical minerals. The proposed exploration licence regime is foreseen to create an enabling mechanism where in the exploration agencies will bring in expertise from across the world in geological data acquisition, processing and interpretation value chain and leverage the risk-taking ability for discovery of mineral deposits through adoption of expertise and technologies.
Other salient features of the bill include removal of sale cap for captive mines (from 50% to 100%), creation of regulated electronic trading platforms for transparent mineral trade thereby encouraging overseas acquisitions and partnerships for critical minerals.
To stimulate substantial investment, the government plans to offer capital and production-linked subsidies to approximately five businesses.
Businesses like the Adani Group are venturing into the rare earth industry. They intend to mine, refine, produce oxides, and even make permanent magnets. Additionally, to promote knowledge transfers and guarantee supply chain security, strategic international partnerships with Japan, Australia, and the US are in progress.
More than just a mineral opportunity, India’s rise in the rare earth market offers a gateway to sophisticated technology, industrial resilience, and strategic autonomy.
–Dr Subramanian S Iyer
