India has requested state-run miner IREL to pause a long-standing agreement on exporting rare earths to Japan in order to prioritize domestic needs and reduce reliance on China, according to two sources familiar with the situation. IREL is also aiming to enhance India's capacity for processing rare earths, a sector currently dominated by China and entangled in escalating trade disputes. China has restricted its rare earth exports since April, impacting global automakers and high-tech manufacturers.

In a recent meeting with industry leaders, Indian Commerce Minister Piyush Goyal urged IREL to cease its exports of rare earths, particularly neodymium, a vital material for electric vehicle motor magnets. The Commerce Ministry, IREL, and the Department of Atomic Energy, which supervises IREL, have not yet commented on the matter. The sources chose to remain anonymous due to the sensitivity of the issue.

Under a 2012 agreement, IREL supplies rare earths to Toyotsu Rare Earths India, a subsidiary of Toyota Tsusho, for processing and export to Japan. In 2024, Toyotsu shipped over 1,000 metric tons of rare earth materials to Japan. However, Japan primarily relies on China for its rare earth supply.

IREL has been exporting rare earths due to limited domestic processing capabilities, but following disruptions in Chinese supplies, it aims to retain these materials domestically and expand mining and processing operations. However, halting supplies to Japan immediately may be challenging due to existing bilateral agreements.

IREL seeks an amicable resolution with Japan, considering it a friendly nation. Japan's Trade Ministry refrained from commenting on the matter.

China's recent export controls on rare earth materials have significantly impacted the global auto industry, leading to concerns about supply chain disruptions. In 2010, China briefly halted rare earth shipments to Japan, prompting Japan to seek alternative sources like India.

India, with the world's fifth-largest rare earth reserves, lacks domestic magnet production and relies heavily on imports, primarily from China. In the fiscal year ending March 2025, India imported over 53,000 metric tons of rare earth magnets. The country's rare earth mining is limited to IREL, which supplies materials for nuclear projects and defense applications.

IREL, established in 1950, plans to increase neodymium production and is seeking a corporate partner for rare earth magnet production. India is also considering incentives for companies to establish rare earth processing and magnet production facilities to meet local demand.