New Delhi: Japanese rare-earth magnet giant Proterial Ltd says that New Delhi should be selective in backing large players to kickstart domestic rare-earth magnet manufacturing, as excessive production and initial high competition can make economic returns on the business unviable for companies.
Proterial, formerly known as Hitachi Metals, is evaluating whether it can set up a rare-earth magnet plant in India, where it already has customers for its magnets, a top executive told Mint.
“We're looking at how big the market is first and foremost. And [we are] also looking at it in the context of the government looking to get the right players,” Proterial’s global chief executive Sean Stack said in an interview.
“We want to make sure that they're not overdoing it at the start, because if there's too much production at the start, it may be a market that never really takes off, because there's going to be so much competitive tension that it may not generate the right economic return,” Stack said.
The comments from the Bain Capital-backed Japanese firm come at a time when the government is finalizing the application process for its marquee ₹7,280 crore rare-earth magnet scheme, which will incentivize domestic production of rare-earth magnets.
Moreover, the government announced in the Union budget last month that four rare-earth corridors will be established in Andhra Pradesh, Odisha, Tamil Nadu, and Kerala to build a mining-to-magnet manufacturing ecosystem in the country.
Such magnets are used in electronic systems, electric vehicle motors, and sound systems, among others, in an automobile, making them critical for any EV and internal combustion engine vehicle.
Companies ranging from Sona Comstar, JSW, Midwest Materials, and Bharat Forge are said to be interested in exploring domestic manufacturing of rare earths, Mint reported on 8 October.
Steady support of large firms
“You really need to build the market in a way that it can be economically viable for the long term,” Stack said.
“We're one of the companies in the world that brings real credibility to the ability to not only set up the manufacturing, but day in and day out to be able to deliver the quality and the kind of components that the automotive companies would expect,” he said.
Tokyo-based Proterial was formerly known as Hitachi Metals, which was part of the Hitachi group before it was bought by a Bain-led consortium, which closed the deal in 2022. It has a presence across various industrial segments, including speciality steel, rare-earth magnets, electric wire and cables, and auto components.
In the fiscal year ended 31 March 2025, Proterial posted revenue of ¥768.6 billion (about $5.2 billion). Currently, it has two plants in Japan and China, where it primarily manufactures rare earth magnets.
Mint reported on 6 August that the Japanese company plans to manufacture its flagship Neodymium Ferrite Boron (NdFeB) permanent magnets in the country under its NEOMAX brand. Moreover, it has also developed a heavy, rare-earth-free magnet that can power two-wheelers, three-wheelers, and small four-wheeled vehicles.
The developments are significant since April, when China began restricting exports of heavy rare-earth elements and magnets to other countries, threatening automobile production in India. China holds a dominant share of rare-earth magnet production, accounting for more than three-fourths of global supply.
While China began approving licenses to Indian firms in October, companies in India are already working to break dependence.
- Proterial is actively considering setting up its first magnet plant in India to serve its existing local automotive clientele.
- Proterial’s CEO warned that if the government incentivizes too many players, competitive tension will undermine ROI, potentially causing the market to fail.
- Proterial is pitching its ‘heavy rare-earth free’ magnets as a solution to bypass Chinese export restrictions on minerals like dysprosium and terbium.
- Both the company and industry consultants are advocating for the government to back established, high-tech global players rather than opening the floor to all-comers.
- The proposed strategy focuses on a ‘mine-to-magnet’ ecosystem in India, specifically leveraging light rare earths to ensure long-term autonomy.
Changing focus
Auto companies, including suppliers such as Sona Comstar, Bajaj Auto, and Ather Energy, have all noted a transition away from heavy rare-earth magnets to light rare-earth magnets, whose exports are not restricted.
Stack explains that India has a strong business case to build a domestic ecosystem for light rare-earth magnets, which will be crucial to localizing the rare-earth magnet ecosystem.
“The ability to put together that whole supply chain system, mine all the way to the magnet, and then obviously the recycling process that will follow, can all be done with our technology, you know, here in India, and be completely independent from the need for heavy rare earths,” Stack mentioned.
Domain experts suggest there is a case for backing large players who can follow through on substantial capital investments and the required technology to build a domestic ecosystem for rare-earth magnets in India.
“The initiation and establishment of rare earth permanent magnet (REPM) manufacturing facilities in India should focus on attracting large, established global players, while simultaneously prioritizing the development of the upstream value chain, rather than emphasizing open competition at the initial stage," Suvendu Bose, partner-Metals and Mining at Grant Thornton Bharat, said.
The two key critical success factors for rare-earth magnet production are the quality and pricing of REPM, according to Bose. “The quality of REPM is highly dependent on proprietary technologies, which are currently controlled by a limited number of globally established R&D institutions and manufacturers,” he added.
Anurag Singh, an adviser at consultancy Primus Partners, suggests that backing large, proven players with access to technology might be more successful.
“There are hardly any small candidates who have developed technology or have some competitive advantage across the value chain. The investments are large and risky. This puts large players who have access to capital and know how to manage risk as more likely successful candidates,” Singh said.