Why India-UK deal on critical minerals points to New Delhi’s anxiety over Chinese grip

To further cooperation in critical minerals, the two countries will also establish a UK-India Critical Minerals Guild to “transform financing standards and innovation”, according to a joint statement by the two.

“Together, the two sides will prioritise processing (of critical minerals), R&D, recycling, managing risk to supply chains, market development etc. and will champion circular economy principles and advance traceability,” it said.

As part of the deal with the UK, the second phase of the UK-India Critical Minerals Supply Chain Observatory (SCO) will receive £1.8 million in new funding to set up a satellite campus at the Indian School of Mines in Dhanbad. The funding will also support developing the world’s largest digital data infrastructure on the critical minerals value chain, according to an official joint statement.

The SCO is housed within the Industrial Resilience Research Group at the University of Cambridge’s Institute for Manufacturing. The first phase, which involved sharing, monitoring, and analysing supply chain data on critical minerals like lithium, copper, nickel, and cobalt, was launched in collaboration with IIT Bombay in October last year.

Countering Chinese dominance

Critical minerals, which include rare earth elements (REEs), are an important component of various cutting-edge hardware, ranging from semiconductors and electric vehicles to jet fighters.

Rare earth magnets, especially neodymium-iron-boron (NdFeB) magnets, are crucial for EV manufacturing, particularly in electric motors. They provide the strong magnetic fields needed for efficient and powerful electric motors, including traction motors that drive EVs. These magnets also play a major role in other EV components such as power steering systems, wiper motors, and braking systems. China has a near monopoly over the production of these rare earth magnets.

UK Prime Minister Keir Starmer and Prime Minister Narendra Modi pose for a photo after the free trade agreement was signed on Thursday. (Photo: AP)

Following US President Donal Trump’s tariff onslaught on other countries in April, China implemented specifically designed bureaucratic hurdles for foreign companies looking to source critical minerals from the country.

While the availability of rare earth metals is not limited to China, it is in the efficient processing of these critical elements where Beijing has a substantial lead, which was once enjoyed by the US and Japan.

In recent years, Japan has been able to restart some of its minerals processing industry owing to government policies, but countries like the US and India are heavily dependent on Chinese exports of these metals.

In response to the US administration’s reciprocal tariff heat, China restricted exports of seven heavy rare earth metals including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, as well as rare earth magnets. Earlier, it had also banned exports to the US of gallium, germanium, antimony, and other key high-tech materials with potential military applications.

India’s car industry faces the heat

India’s nascent but slowly growing EV industry has faced a direct impact of Chinese restrictions on export of rare earth magnets. None of the applications made by Indian carmakers to source the critical minerals have yet been accepted by Beijing, with automakers staring at shortages and potential setbacks to production plans.

China requires companies to secure an end-user licence, along with an endorsement from the local government that the minerals will not be used for military applications. However, the fact that China has not yet cleared any application from Indian entities is a cause of concern.

Worrying still is a fresh insistence from Beijing that instead of sourcing magnets separately, carmakers buy entire electric motor assemblies from Chinese companies, or simply wait for the Chinese authorities to issue export permits to local rare earth magnet producers, as has been done, according to Reuters, for at least four magnet producers that include suppliers to Volkswagen — the first granted since Beijing restricted shipments earlier this year. The German carmaker is said to have lobbied hard with Beijing to get this done.