By Joshua Pidek, Oregon Catalyst International Affairs Reporter
India, the world’s second most populous country and one of its fastest growing economies, is currently also the second largest producer of rare earth elements (REEs). It possesses 2% of the global market share, and is set to expand production from 2,700 metric tons to 7,700 metric tons by late 2011. New Delhi is allocating 1.4 billion rupees (approximately $32 million USD) toward the construction of a 5,000 metric ton capacity processing plant for REEs, to be run by the state-owned Indian Rare Earths Limited in Orissa.
This is only a small step in Indian expansion into the rapidly expanding field of rare earths production. R.N. Patra, chairman and managing director of the company, stated that, based on current Indian domestic demand, the company will be producing more than enough REEs to export. Many of those exports will go to Japan under a new long-term supply agreement signed between Indian Prime Minister Manmohan Singh and Japanese Industry Minister Akihiro Ohata. This agreement is only a small part of the burgeoning Indo-Japanese economic relationship. While bilateral trade between the two countries is unremarkable at present, mutual distrust of China in the wake of recent aggression and continued belligerence over the South China Sea incident are pushing India and Japan closer together.
China, which produces 95% of the world’s rare earths, recently cut REE exports and is set to cut exports even more severely in 2011, even as demand continues to grow. Fears of Chinese export restrictions or market manipulation have pushed demand higher as developed countries like Japan, Germany, and the United States scramble to build up their reserves of REEs.
Even as Beijing implemented cuts of 72% in the latter half of this year, and the 31 Japanese companies that handle rare earth element imports to Japan stated that supply is still disrupted, China denied any design to block exports. The Chinese state-run media group has criticized the United States for making what it sees as “unreasonable” demands on valuable resources China claims it needs for its own industrial development.
As China continues to pressure domestic mining companies to limit their exports, and to use its near-monopoly on REEs as a lever to force the hand of countries like Japan in disputes over economic issues, the United States must do everything it can to secure its own supply. This includes bolstering supply from domestic sources, as well as streamlining the acquisition of REEs from new overseas sources, such as the new mines being opened in India, Mongolia, or Australia.
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