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Governance & Social Justice
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Defence & Security
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- GS 1 || Geography || Indian Economic Geography || Mineral Resources
Why in the news?
The newly elected left-wing party ‘Inuit Ataqatigiit (IA)’ of Greenland has recently opposed a Chinese-sponsored rare-earth mine in the island country.
What are ‘Rare earth elements’?
- Rare earth elements are a group of seventeen chemical elements that occur together in the ‘Periodic Table’.
- The group consists of yttrium and the 15 lanthanide elements namely- lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium.
- Scandium is also a unique rare earth element and the International Union of Pure and Applied Chemistry (IUPAC) includes scandium in their rare earth element definition.
- The rare earth elements are all metals, and the group is often referred to as the “rare earth metals.”
A brief history of Rare Earth Metals production and trade:
- Prior to 1965: Before 1965 there was relatively little demand for rare earth elements. At that time, most of the world’s supply was being produced from placer deposits in India and Brazil.
- Colour Television Ignites Demand: The demand for rare earth elements saw its first explosion in the mid-1960s, as the first colour television sets were entering the market. Europium was the essential material for producing the colour images.
- China’s entry to the REEs market: China began producing notable amounts of rare earth oxides in the early 1980s and became the world’s leading producer in the early 1990s. Through the 1990s and early 2000s, China steadily strengthened its hold on the world’s rare earth oxide market. They were selling rare earths at such low prices that the other countries were unable to compete and stopped operation.
- China became the dominant consumer and got absolute control over the global supply chain of RREs: In addition to being the largest producer, it also became the dominant consumer.
Use of Rare earth elements:
- Appliances of daily uses: Rare earth metals and alloys are used extensively in appliances of daily uses such as computer memory, DVDs, rechargeable batteries, cell phones, catalytic converters, magnets, fluorescent lighting and much more..
- Industrial uses: Rare earths are also used as catalysts, phosphors, and polishing compounds. These are used for air pollution control, illuminated screens on electronic devices, and the polishing of optical-quality glass.
- Critical defence uses: Rare earth metals have also been extremely important for manufacturing critical defence equipment such as night-vision goggles, precision-guided weapons, communications equipment, GPS equipment, batteries, and other defence electronics, etc.
- Rare earth elements are not as “rare” as their name implies.
- Thulium and lutetium are the two least abundant rare earth elements – but they each have an average crustal abundance that is nearly 200 times greater than the crustal abundance of gold.
- However, these metals are very difficult to mine because they are found in so abysmal concentration that extraction is not economically viable in most cases.
- The most abundant rare earth elements are cerium, yttrium, lanthanum and neodymium
Global Distribution of Rare Earth elements:
- Rare earths are relatively abundant in the Earth’s crust, but discovered mineable concentrations are less common than for most other ores.
- Most of the world resources are contained primarily in bastnäsite and monazite.
- Bastnäsite deposits in China and the United States constitute the largest percentage of the world’s rare-earth economic resources, while monazite deposits in Australia, Brazil, China, India, Malaysia, South Africa, Sri Lanka, Thailand, and the United States constitute the second largest segment.
Rare Earth elements in India:
- India has the world’s fifth-largest reserves of rare earth elements, nearly twice as much as Australia.
- But it imports most of its rare earth needs in finished form from its geopolitical rival, China.
- Rare earth minerals are extremely important for India’s economic growth
- It contributes a total value of nearly $200 billion to the Indian economy.
- According to the Economic Survey 2018-19, the Indian REE industry could potentially net a capital employment of about Rs 121,000 crore, including Rs 50,000 crore worth of foreign exchange.
Bottlenecks in production of rare earths in India:
- No capacity for conducting large scale mining: Though India does have significant reserves of rare earth minerals, it has not yet acquired the skills, technology and capital to do the mining process. The mining and extraction processes of rare earths are capital-intensive, consume large amounts of energy, and release toxic by-products.
- Post mining limitations: Processed rare earth minerals usually take the form of a rare earth oxide (REO), which then needs to be converted into a pure metal before it can be used to manufacture anything.
- Monopoly of PSUs: The existing policy of the government provides government corporations such as Indian Rare Earths Limited (IREL) a monopoly over the primary mineral that contains REEs.
- Export of low concentration REEs oxides: IREL produces rare earth oxides, essentially a low-cost, low-reward “upstream processes”, selling these to foreign firms that extract the metals and manufacture end products (high-cost, high-reward “downstream processes”) elsewhere.
- Production at minuscule level: IREL accounts for only a minuscule fraction of the world’s production: only 2265 tonnes of REOs in 2016-17, providing almost no value to domestic manufacturers and consumers.
- Opening up the sector for investments: India must open its rare earth sector up to competition and innovation, and attract the large amounts of capital needed to set up facilities to compete with, and supply to, the world.
- New institutional framework for growth of the sector: The government can set up a new Department for Rare Earths (DRE) under the Ministry of Petroleum & Natural Gas, drawing on its exploration, exploitation, refining, and regulation capabilities.
- It should also create an autonomous regulator, the Rare Earths Regulatory Authority of India (RRAI), to resolve disputes between companies in this space and check compliance.
- Financial incentives: The DRE could secure access to REEs of strategic importance by offering viability gap funding to companies to set up facilities in the upstream sector. This could make Indian REOs globally competitive.
- Prevention of export of Rare earths: Since the demand of rare earth would further go up, India should not exceedingly export its rare earth minerals oxides.
Geopolitics on rare earth minerals:
- China’s absolute monopoly: China today controls nearly 90% of global rare earth production, posing a vulnerability to manufacturing industries. In addition, China is also rapidly buying stakes in rare earth mining projects across the world.
- Even though China has ample resources and large mines, it has only gained its near monopoly on the global supply of rare earth elements by controlling the processing steps that remove the elements from the rest of the rock in which they are found.
- This implies China has absolute control of the entire supply chain of rare earth metals and its impacts have been felt by the world several times.
- For eg: In 2010, when China abruptly halted the export of rare earth ores, salts and metals to Japan. Following the ban, the US had dragged China to WTO several times for its decline to export REEs.
- Impacts of China’s domestic actions on the world is disproportionate: China has recently cracked down on the illegal mining of rare earth metals which resulted in skyrocketing the prices of REEs at the international market. Also, China has capped the production of REEs 180,000 mt Tonnes by 2022 on environmental conservation and other grounds
- Countries increasing production: Many countries have been trying to increase their domestic production of REEs. For eg: Australia was able to increase its production of REEs with a new, environmentally controversial processing facility in Malaysia.
- Explore alternatives: Recycling and technological adjustments to reduce the amount of rare earth elements needed or a move to an entirely alternative technology.
- Domestic reforms to augment the total production: The countries need to take efforts to increase the domestic production of REEs. India and Australia are among such countries .
- Scale up Recycling of REEs: since rare earth elements do not degrade substantially during the lifetime of their products, used products could also provide recyclable material. But at present any recycling efforts are too small in scale or will take too long to develop to offer realistic supply chain protection in the near future.
With few immediately viable alternatives, the global rare earth supply chain will remain vulnerable in the near term. Ultimately, shifting global energy priorities will eventually increase demand enough that the market must make real, concerted progress in developing new resources. But the world and rapidly growing countries such as India will remain more vulnerable during the gradual diversification process.
Model Mains Question:
- Explain why despite having one of the most rich reserves of Rare Earth Elements (RREs), India is vulnerable to supply of RREs from its geopolitical enemy China?