Rare-earth minerals: What are they and why are they important for the global economy?

Rare-earth minerals aren’t just buzzwords in news headlines about geopolitical power plays. They are the building blocks of more than 200 products across a wide range of applications, including the very device you’re reading this article on.

Rare-earth minerals, also known as rare-earth elements (REEs), are used in consumer electronics products, electric vehicles, catalytic converters, batteries, wind turbines, MRI machines, cancer drugs and more. In fact, they form a crucial part of the semiconductor industry.

While a very small amount of REEs are actually used in a product, they’re incredibly important for the device to function properly. For example, although REE magnets make up a small fraction of the overall weight of a laptop, they are critical for hard disks to function.

What exactly are rare-earth elements?

REEs are a set of 17 metallic elements in the periodic table, including 15 lanthanides, along with scandium and yttrium.

Other REE’s include scandium, yttrium, lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium.

What makes them rare?

Interestingly, REEs are as common as copper and zinc. However, what makes them rare is the extremely difficult mining process.

The unique chemical composition of REEs has resulted in them being spread thinly across the surface of the Earth. However, occasional extreme acidic conditions under the Earth’s surface can increase the chances of them being clumped in a single area. Even then, extracting them is an extremely laborious process.

The difficult extraction process is also why some countries have large reserves but low output. For example, Brazil, the country with the second-largest rare-earth reserves in the world at 21 million metric tonnes, produced just 20 metric tonnes of REEs in 2024, compared to 2.7 lakh metric tonnes mined by China in the same year.

When were they first used?

After their discovery in the late 18th and early 19th centuries, REEs were first commercially used in the production of gas mantles in the 1880s. The introduction of coloured television sets in the 1960s resulted in the first significant commercial use of REEs.

How did China become a major producer?

When REEs started being used commercially for production in the 1960s, they were mainly being mined in California.

However, since producing REE is an extremely labour-intensive and polluting process, strict environment regulations in the US, led to the closure of the Mountain Pass mine in California by 2002.

Thus, China with its lower wages and weak labour laws, became the world’s biggest producer of REE in the 1990s. The country having the biggest rare-earth reserves also helped. In 1993, China was producing 38% of the world’s REE, followed by the US at 33%.

By 2000, China accounted for more than 95% of the world’s REE mining, and by 2011, this figure had surged to 97%.

Impact of China's REE export curbs on EV industry

The global electric vehicle (EV) industry valued at approximately $671.47 billion, heavily relies on REEs. While rare earth magnets (magnets made of rare earth metal alloys) make up less than 5% of a vehicle’s cost, they are integral for EV motors and electric steering vehicles.

In April 2025, amidst a tense tariff trade war with the US, China put an export restriction on seven REEs used in the the auto and defence sectors.

A Crisil report revealed that amid the current curbs, domestic automakers have four to six weeks of rare earth magnet inventory and prolonged delays could start affecting vehicle production. The report added that EV models could face deferrals or rescheduling from July 2025.

Way ahead

Given the REE supply chain risks, the Indian government and automakers are taking actions on two fronts. In the short term, the focus is to build strategic inventory, tapping alternalte suppliers and accelerating domestic assembly under production linked incentive schemes, the Crisil report stated.

Furthermore, the long term goal of reducing import dependency would depend on fast-tracked REE explorations, building local production capacity and investing in recycling infrastructure.