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India is fast becoming a center of attention as more and more consumers seek new rare earth sources.
Although the rare earth market is experiencing a challenging period, with lower prices acting as a drag on the sector, many countries are still maintaining a bullish outlook and are seeking to ramp up production.
While China, Australia and the US continue to dominate rare earth element (REE) industry column inches, more investors are casting their attention to developing nations and the potential production opportunities that they hold. India is fast becoming the center of attention in this regard as it becomes more vocal about its intent to enter and compete within the REE sphere.
Processing plant running by 2013
According to a local media report, India has set itself the target of having a monazite processing plant with a capacity of 10,000 tonnes up and running by December 2012. Monazite is a mineral that contains rare earth metals such as cerium, lanthanum and thorium. The facility will be based in Odisha’s Puri district, the second region to show potential following the discovery of REE deposits in the coastal areas of the Ganjam district.
Meanwhile, Indian Rare Earths (IREL), a government-owned firm, has been awarded the rights to mine REEs in Odisha after a survey by the Atomic Minerals Directorate for Exploration and Research revealed that it contains deposits of REEs.
“The Odisha plant could be commissioned by December. We will carry out dry runs, and hopefully, start production early next year,” Mineweb quoted R.N. Patra, chairman of IREL, as saying. The plant’s production would constitute 4 percent of current global REE production.
Patra outlined that the plant will cost $25 million and will be able to handle 2,250 tonnes of REEs at any given time. The refined product will be separated at IREL’s Aluva facility in Kerala for domestic consumption, and the remaining quantities will be exported. No official estimates in relation to India’s export capabilities have been outlined yet.
India not new to the REE game
It is not the first time that the South Asian giant has shown potential within the sector. Until 2004, India was actively involved in building its REE production capabilities, but suspended operations when it could no longer compete with Chinese prices. Having noted the global call for an expanded source of REEs, the manufacturing powerhouse is once again taking steps to compete within the market.
In 2010, Toyota Tsusho (TSE:8015) and the company’s Indian subsidiary, Toyotsu Rare Earths Orissa Private, announced a partnership aimed at constructing a manufacturing plant for the processing of rare earth oxides in the country’s Orissa state.
While progress on the project has been somewhat stagnant, both companies recently outlined their commitment to the promotion of local REE capabilities. At India’s first ministerial-level economic dialogue in New Delhi earlier this year, officials from both countries confirmed that the project will be moving forward. According to the parties involved, elements to be produced include lanthanum, cerium and neodymium, and it is estimated that production at the plant will reach 4,000 tons per year. Most of that amount will be exported to Japan, and is enough to meet 14 percent of that nation’s annual consumption.
According to Japan Oil, Gas and Metals National, India currently has access to 1.1 million tons of rare earths — the world’s fifth-largest reserve base — but it produces no more than 2,700 tons per annum. Both parties hope that Japan’s booming technology sector will have the knock-on effect of promoting rare earth production in resource-rich India while also improving its recovery efficiency.
REE deep-sea mining capabilities
India surprised analysts earlier this year when it announced that it too has joined the race to explore and develop deep-sea mining for REEs. The push reflects its concern that China’s deep-sea excavations will further increase its dominance over the sector.
Deep-sea mining will help meet the “critical and strategic needs of the country, particularly in the area of access to rare earth materials,” said Ashwani Kumar, India’s minister of planning, science and technology, and earth sciences, during the announced deep-sea deployments.
The government currently has two ships prospecting for reserves off the southern coast of India, and while REE deposits are abundant on the ocean floor, India has never undertaken any mining there on an industrial scale, according to The Wall Street Journal.
India’s intent to become a force within the REE market is clear. Its manufacturing ability and large labor force might very well allow it to rise through the ranks of the REE supply chain a lot more swiftly than most. At the same time, many analysts and investors might be questioning the timing of its re-entry into the market as rare earth prices are currently on the decline.
Even so, speculators would do well to note the ever-more-vocal call for a more diversified production base from REE-dependent nations. India has done well by setting up partnerships with nations, including Japan, that have been clearly trying to decrease their dependence on Chinese stockpiles. Many will view relationships such as this as a positive sign for the country, while the region’s expanding middle class will very likely lead to an increase in domestic demand over the medium to long term.
While India is still in the early stages of the REE game, it boasts a wealth of reserves and production potential and seems to have the ability to become a global force in the future.
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.