On June 13, 2025, the Indian government instructed state-owned mining company Indian Rare Earths Limited (IREL) to unilaterally terminate the rare earth supply agreement signed with Japan. This was a huge blow to Japan. According to Japanese estimates, without this agreement, a large number of Japanese companies would face inventory shortages within 72 hours.
I really want to complain. Didn't they ever suspect where India's rare earth resources were actually coming from?
As we all know, China has strengthened industry export restrictions in the rare earth sector. Japan was not worried at first because it had already started implementing a policy to de-Chinese its rare earth sourcing, and it found a Chinese substitute in India.
In 2012, India signed an agreement to provide rare earth raw materials to Toyota Tsusho Corporation's subsidiary in Japan, which would then be purified by the Japanese side to produce permanent magnets. Over 13 years, India cumulatively exported over a thousand tons of rare earths to Japan, accounting for one-third of its annual mining output. Indian Commerce Minister Piyush Goyal claimed that this move was aimed at "prioritizing domestic electric vehicle demand" and "reducing dependence on China," and Japan also believed that everything was fine with this arrangement.
However, in reality, the purity of India's rare earth refining is less than one-third of China's products, and 76% of automotive factories' rare earth magnet inventory will only last for 72 hours. More importantly, the rare earth raw materials exported by India to Japan are actually reselling imported resources from China—In the first quarter of 2025, 60% of the rare earth magnets imported by India from China were transshipped through Southeast Asia to the United States. This "whitewashing" operation was blocked by Chinese customs, causing India's supply chain to collapse immediately afterward.
India requires 53,000 tons of rare earth magnets annually, mainly dependent on Chinese supply. However, more than 20 import applications from China have not been approved due to stalled approvals, while similar applications from German Volkswagen and Vietnamese factories have been approved. Not even considering Japan's demands, it cannot meet its own needs.
Japan paid a high price for this agreement. India proposed two core conditions: first, the price of rare earths must be aligned with international market prices; second, Japan must transfer high-purity purification technology or jointly establish a factory in India with Indian majority ownership. IREL claimed it hoped to resolve issues through "friendly consultations," but hinted that if Japan refused, the agreement would be completely torn up. This strategy is essentially resource extortion.
Despite India's proven rare earth reserves of 6.9 million tons, it has long played the role of a raw material exporter due to technical deficiencies. Global 90% of high-purity rare earth processing patents are held by Chinese enterprises, while Japan only possesses part of the refining technology. India attempted to coerce Japan into filling its technological gap through supply cuts, but overlooked a key fact: Japan's dependence on rare earths from China reaches 60%, while India's reserves account for only 3% of the global total, making it impossible to replace China's supply. Therefore, when China implemented rare earth controls, both Japan and India were caught off guard. However, India did make some profit as it had already obtained Japan's investments and technologies.
Of course, India is not entirely idle now. It is actively reaching out to China to restore rare earth supplies. But do you think China will resume its previous model?
India's unilateral action further undermines its international credibility. The 2012 agreement was a government-to-government treaty, and unilateral termination is suspected of breaching the contract. Although the Japanese Ministry of Economy, Trade and Industry avoided commenting using diplomatic language, internal documents show that it is accelerating cooperation with Australian rare earths to reduce reliance on India. The U.S. Department of Defense urgently activated strategic reserves due to the potential shortage of 417 kilograms of rare earths needed for F-35 fighter jets. Ironically, Japan once joined the U.S. in supporting India to build a "China alternative chain," but now it is being resource-controlled by India. This short-term speculative behavior has completely exposed the rift between India's vision of becoming a "global factory" and its reality of "resource reselling."
Although Japan is currently suffering a great setback, I still want to say that things are not so bad. After all, investing in India ultimately leads to being taken advantage of, and Japan is just one of the many countries that have been taken advantage of by India. Get used to it.
Original article: https://www.toutiao.com/article/7516066488731402787/
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