India–Germany Rare Earth Partnership: Reducing China’s Supply Chain Dominance

Context

India and Germany are intensifying cooperation on rare earth elements (REEs) amid growing concerns over China’s dominance in critical mineral supply chains.

How India and Germany Complement Each Other in REEs

• Resource Availability vs Demand Security: India possesses the third-largest rare earth reserves globally, mainly in monazite sands, while Germany faces acute shortages due to heavy dependence on Chinese imports. India can supply raw materials; Germany offers assured long-term demand.
• Manufacturing Potential vs Industrial Utilisation: India is building domestic capacity through the National Critical Mineral Mission, rare earth corridors, and permanent magnet manufacturing programmes. Germany provides a stable and advanced industrial market.
• Cost-Effective Production vs High-End Technology: India provides cost-competitive manufacturing, whereas Germany contributes advanced engineering and precision standards. This combination enables globally competitive rare-earth value chains outside China.
• Processing and Recycling Synergies: Germany’s expertise in recycling technologies and circular economy models complements India’s mineral base. Joint ventures in processing, magnet-making, and recycling can reduce China’s dominance in downstream REE segments.
• Offshore Wind Energy as a Strategic Anchor: Germany’s ambitious offshore wind targets (30 GW by 2030) require large quantities of permanent magnets, while India has identified 70 GW offshore wind potential but lacks experience. Technology transfer and component manufacturing can benefit both sides.
• Shared Goal of Supply Chain Resilience: Both countries aim for reduced strategic vulnerability. Cooperation allows diversification of suppliers, stabilises prices, and strengthens energy security by reducing reliance on China.

Challenges

• Exploration Risk: India’s rare earth reserves are mostly inferred, meaning exact quantity and quality are uncertain, making private investment risky.
• Regulatory Complexity (Thorium Issue): Rare earth minerals often occur with radioactive thorium, which brings strict safety, environmental and legal controls.
• Cost Premium of Diversification: Moving supply chains away from China is costlier; it is unclear whether governments, companies or consumers will bear this extra cost.
• Speed and Skills Gap: Rapid scale-up needs trained manpower, advanced processing skills and technology transfer, which India is still developing.

Way Forward

• Reducing Exploration Risk: Joint India–Germany funding for geological mapping, pilot mining projects and data sharing can reduce uncertainty and attract private players.
• Managing Thorium & Regulatory Issues: Germany’s safety standards and India’s atomic expertise can help develop safe mining, handling and regulatory frameworks for thorium-linked minerals.
• Handling Higher Costs of Diversification: Long-term supply contracts, government subsidies and strategic stockpiling can absorb initial cost premiums of non-Chinese supply chains.
• Bridging Technology & Skills Gap: Technology transfer, joint R&D centres, workforce training and industry-academia collaboration can speed up India’s manufacturing readiness.

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