00:00:00
In today's episode, I'll talk about two
00:00:02
interesting stories. In the first one,
00:00:03
I'll talk about how India's top housing
00:00:05
finance companies are moving towards
00:00:07
affordable housing and what that really
00:00:09
means in a falling interest rate world.
00:00:11
And in the second story of the day, I'll
00:00:13
talk about how a bunch of obscure
00:00:15
sounding metals quietly became one of
00:00:17
the world's biggest geopolitical
00:00:19
weapons. Welcome to the Daily B Show by
00:00:21
Zerodha where our aim is to cut through
00:00:23
the noise and simplify the biggest news
00:00:24
and stories in the financial markets in
00:00:26
a way that is easy for all of us to
00:00:28
understand yet one level deeper as
00:00:30
compared to your traditional news
00:00:31
channels. I'm your host Analag Bansal
00:00:33
and today is Monday the 12th of
00:00:41
May. In the first story of the day,
00:00:43
let's talk about the latest quarterly
00:00:45
results of housing finance companies in
00:00:47
India. See in the previous quarter of FI
00:00:48
2025 four of the biggest players in this
00:00:51
particular space which is Baj Housing
00:00:53
Finance, PNB Housing Finance, AAS
00:00:55
Financials and Aadhaar Housing Finance
00:00:57
posted fairly strong results. Now at the
00:00:59
face of it, that's definitely great
00:01:01
news. But if you look a little bit more
00:01:02
closely, you'll start to spot clear
00:01:04
shifts in the air and one of that shift
00:01:06
could really reshape this entire sector
00:01:08
in the coming few years. I'll explain.
00:01:10
See, these companies may differ in size,
00:01:12
scale, and strategy, but there is one
00:01:14
theme that all of them seem to agree on,
00:01:16
which is that affordable housing is
00:01:18
becoming the new battleground for them.
00:01:19
Now, mind you, this is not because it's
00:01:21
trending or everybody's suddenly
00:01:22
interested in it. But it's actually
00:01:24
because it might be the smartest way to
00:01:25
grow in a market where margins are under
00:01:27
pressure and interest rates are sort of
00:01:29
headed downward. If that sounds
00:01:30
confusing, don't worry. I'll break it
00:01:32
down. See, when a company like Bajage
00:01:33
Housing Finance or Abas Financial gives
00:01:35
you a home loan, they make money on the
00:01:37
spread, which is basically the
00:01:39
difference that they earn on your loan
00:01:41
and what it cost them to borrow that
00:01:43
money from the market. But with interest
00:01:45
rates trending downwards, that spread is
00:01:47
starting to get squeezed a little bit.
00:01:48
Basically, loans are getting cheaper
00:01:50
faster than capital is. And that is
00:01:52
exactly where things get a little bit
00:01:53
tricky because when your yields start to
00:01:55
fall faster than your borrowing costs,
00:01:57
your profitability suddenly starts to
00:01:59
shrink. And while this does not
00:02:00
necessarily mean losses as such, what it
00:02:03
does mean definitely is thinner margins.
00:02:05
And that is why housing finance
00:02:06
companies are now looking for places
00:02:08
where they can still earn slightly
00:02:10
higher returns. And affordable housing
00:02:12
offers one of those very rare
00:02:14
opportunities. Let's take a look at how
00:02:15
each of these companies is actually
00:02:17
adopting to this new particular
00:02:18
landscape. Starting with the one that is
00:02:20
clearly leading the entire game, which
00:02:22
is Baj Housing Finance. Baja's assets
00:02:24
under management grew 26% year-over-year
00:02:27
and they now stand at about 1 lak 14,000
00:02:29
cr rupes. They operate across prime
00:02:31
housing loans, affordable segments,
00:02:33
lease rental discounting and even
00:02:35
developer financing. It's sort of like a
00:02:37
spread out play which allows them to
00:02:39
grow across different verticals without
00:02:40
really relying too heavily on any one
00:02:42
single segment. Now what stood out
00:02:44
specifically in their recent earnings
00:02:45
call was the management's clarity about
00:02:47
their future. They said, and I quote,
00:02:49
"The company has strengthened its
00:02:51
management team and will invest deeply
00:02:53
in strategic business units and
00:02:54
non-metro markets in FI 2026 to ensure
00:02:58
sustained growth." Now, that mind you is
00:03:00
a fairly strong signal that they are not
00:03:01
just growing, but they're actually
00:03:03
gearing up for even bigger bets in the
00:03:04
future, especially in smaller cities,
00:03:07
even while the market braces for a
00:03:08
softer interest rate environment.
00:03:10
Anyway, then there is PNB Housing
00:03:12
Finance, which has had a major comeback
00:03:13
in the recent times. Its retail assets
00:03:15
rose by 18% year-over-year to about
00:03:18
75,000 cr rupes. But the real story here
00:03:21
lies in the affordable housing segment
00:03:23
once again. The business has shot up
00:03:25
183% compared to last year and is now
00:03:28
touching 5,70 cr rupees. Now that mind
00:03:31
you at this point is not really a small
00:03:32
side bet. It is absolutely a full pivot
00:03:35
in many ways. Their MD said and I quote,
00:03:37
"Fi 2026 is going to be far better than
00:03:40
FI 2025 for the industry. By March 2027,
00:03:43
our retail loan book will hit 1 lakh cr
00:03:45
rupes with affordable housing at 15,000
00:03:48
cr rupes and emerging markets
00:03:50
contributing 25,000 cr rupes. In short,
00:03:52
they're basically placing their bets on
00:03:54
two main areas which is affordable loans
00:03:56
and expansion into newer and possibly
00:03:59
underserved regions. Anyway, moving on,
00:04:01
let's talk about AAS financials. See, in
00:04:03
contrast, they are taking a slightly
00:04:04
more conservative stance. Their AUM grew
00:04:07
by 18% and reached about 2 lakh cr
00:04:09
rupes. The standout move was the
00:04:11
expansion on the ground which is that
00:04:13
they opened 30 new branches in the last
00:04:15
year which took their total to 397. But
00:04:18
while they're expanding they aren't
00:04:20
chasing growth blindly as such. Their
00:04:22
managing director Sachin Binder made it
00:04:24
very clear when he said and I quote we
00:04:26
remain cautiously optimistic aiming to
00:04:28
sustain our growth around 20% of AUM. So
00:04:30
basically rather than swinging for the
00:04:32
fences in some sense AAS is actually
00:04:34
sticking to a steady measure pace.
00:04:36
Moving on, Aadhaar Housing Finance which
00:04:38
is the smallest among the four in terms
00:04:40
of book size also showed fairly solid
00:04:42
numbers here. Their AUM reached around
00:04:44
25,500 cr rupees and what is interesting
00:04:47
is their diversification strategy.
00:04:49
They've actually ensured that no one
00:04:51
state contributes more than 14% to their
00:04:54
loan book and that's pretty clever
00:04:55
because it reduces their concentration
00:04:57
risk to quite a great degree. They have
00:04:59
also entered new markets like Himachal
00:05:01
Pradesh and Assam which basically
00:05:02
suggests that they are looking to widen
00:05:04
their reach through newer geographies
00:05:06
rather than just deepening the existing
00:05:08
ones. Now moving on let's look at how
00:05:10
these companies are actually managing
00:05:11
the quality of their loan books because
00:05:13
the thing is in housing finance growth
00:05:15
is only as good as the repayments that
00:05:17
you get. See Bajach housing finance is
00:05:19
clearly at the top here. Their gross NPA
00:05:21
or non-performing assets are just at
00:05:24
0.29%. and their net NPA are even lower
00:05:27
at about
00:05:28
0.11%. But what makes their performance
00:05:30
even more interesting is their approach
00:05:32
to risk in general. See, despite having
00:05:34
industryleading asset quality, they have
00:05:36
gone ahead and increased their
00:05:38
provisioning coverage ratio to
00:05:40
60.25% which is up from 55.44% in the
00:05:44
previous quarter. Now, what this means
00:05:45
is that they're keeping aside more money
00:05:47
from their profits in order to cushion
00:05:49
against potential loan defaults. It's
00:05:51
almost like setting up a safety net when
00:05:53
the risk already seems low and that mind
00:05:56
you speaks volume about what their risk
00:05:58
appetite looks like. Anyway, Aadhaar
00:06:00
Housing Finance is doing well too
00:06:02
despite a riskier customer base in
00:06:04
general. Their gross NPA is just 0.21%
00:06:07
even though they focus heavily on the
00:06:08
lower income segments. Now that goes
00:06:10
against conventional wisdom in many ways
00:06:12
which says that lower income borrowers
00:06:14
are more likely to default. But Aadhar's
00:06:17
performance actually suggests a little
00:06:18
bit of the opposite. They seem to have
00:06:20
strong underwriting and efficient
00:06:21
recovery processes. Moving on, PNB
00:06:24
housing has been working very hard to
00:06:25
clean up its book as well. Their gross
00:06:27
NPA has improved to 1.08% up from 1.5%
00:06:31
just about 1 year ago. And this big
00:06:33
boost came from recovery efforts where
00:06:34
they managed to recover 336 cr rupees
00:06:37
from previously written off accounts.
00:06:39
Now that is a 236% jump compared to last
00:06:42
year. And clearly they're getting better
00:06:44
at dealing with past delinquencies. AAS
00:06:47
though saw a very slight uptick in their
00:06:48
gross NPA from 0.94% to 1.08%. Now on
00:06:52
its own this increase is not really
00:06:54
alarming as such but if you dig just a
00:06:56
little bit deeper you'll find a subtle
00:06:58
red flag here. Their oneplus DPD ratio
00:07:00
which basically measures the percentage
00:07:02
of borrowers who have missed at least
00:07:04
one EMI was at about 3.39%. Now these
00:07:07
are not NPS yet mind you but they are
00:07:09
definitely early warning signs. Every
00:07:11
bad loan begins with a missed repayment
00:07:13
and that's exactly what may be happening
00:07:15
here. But the good news is that AAS's
00:07:17
OnePlus DPD ratio has actually been
00:07:19
falling for the past few months and is
00:07:21
roughly flat compared to last year. So
00:07:23
while there is definitely some sort of
00:07:25
stress, their collection systems are
00:07:27
doing their job for now. So all of this
00:07:29
now brings me to the biggest challenge
00:07:30
that these companies are facing which is
00:07:32
keeping their profitability intact when
00:07:34
interest rates are actually falling.
00:07:36
Remember most home loans are tied to the
00:07:38
repo rate and when the repo rate falls
00:07:40
the loan rates also fall and very
00:07:42
quickly so but for housing finance
00:07:44
companies their cost of borrowing does
00:07:46
not fall at the exact same pace and that
00:07:48
is because they have already borrowed
00:07:49
funds earlier at higher rates. So while
00:07:51
their income from loans drop their own
00:07:53
interest expenses do not reduce as
00:07:55
quickly and this squeezes their spreads.
00:07:58
Aas financials felt this pressure in
00:07:59
quarter 4 because their spread shrank
00:08:01
slightly to 4.89% 89% from 5% in the
00:08:04
previous quarter and that is pretty
00:08:05
significant because this is the first
00:08:07
time in the last 8 years that their
00:08:08
spread has actually dropped below 5%.
00:08:11
Their CFO admitted this during their
00:08:12
earnings call and said and I quote in a
00:08:14
falling interest rate scenario there
00:08:16
will be some negative impact on spreads
00:08:18
but historically we found ways to
00:08:20
protect our margins effectively. PNP
00:08:22
housing on the other hand seemed fairly
00:08:24
more optimistic. Their management
00:08:25
believes that by focusing more on high
00:08:27
margin segments like affordable housing
00:08:29
and corporate lending, they will be able
00:08:31
to hold on to their net interest
00:08:32
margins, aiming to keep it stable at
00:08:35
around 3.6 to 3.65%. Baj housing also
00:08:38
saw a fair bit of a dip and their gross
00:08:40
spreads fell to 1.8% from 1.9% in the
00:08:43
previous quarter. Now, this is not quite
00:08:45
a one-off issue, and it reflects a
00:08:47
growing competitive pressure in general.
00:08:48
And that's because as most lenders
00:08:50
compete for the same set of borrowers,
00:08:52
it is very natural that yields will get
00:08:54
pushed down. And this pressure, mind
00:08:55
you, is not limited to only housing
00:08:57
finance companies. Care edge ratings
00:08:59
recently said that banks too have
00:09:01
reported their lowest NIMs in the last
00:09:03
eight quarters. Now, this quiz is fairly
00:09:05
widespread. Add to that some recent
00:09:07
regulatory changes and the rising
00:09:09
competition for deposits and it is
00:09:11
fairly very clear that NIMs across the
00:09:13
board are likely to remain under
00:09:15
pressure and that is why so much of the
00:09:17
future now rests on affordable housing.
00:09:19
PNB housing is already going all in on
00:09:21
this. Affordable loans made up 40% of
00:09:24
their retail dispersements last quarter.
00:09:26
Wali Seeker who heads their sales and
00:09:27
collections for this segment pointed out
00:09:29
that they closed the year with the loan
00:09:31
book of 5,70 cr rupees which is a 183%
00:09:35
jump from last year. Vajal Housing as
00:09:36
well has started a new business unit
00:09:38
dedicated to near prime and affordable
00:09:40
housing customers. And according to
00:09:42
them, this unit is already delivering
00:09:44
results exactly as planned. For AAS and
00:09:46
Aadhar, this is not a new game like you
00:09:48
may have figured because it has been
00:09:50
their core strategy right from the very
00:09:51
beginning. Over 84% of AAS's loans are
00:09:54
below 15 lakh rupees. And for Aadhaar,
00:09:56
66% of their book is made of loans to
00:09:59
economically weaker sections and
00:10:01
low-inccome groups. Now you might
00:10:02
wonder, won't the big players like
00:10:04
Bajage and PNB eat into the market share
00:10:06
of these smaller affordable focus
00:10:07
players? Now that is a very fair
00:10:09
question. But here is the thing. The
00:10:11
affordable housing finance market is
00:10:13
still severely severely underpenetrated.
00:10:15
There is more demand than supply is. And
00:10:18
because this business is deeply local,
00:10:20
lenders tend to focus on specific towns
00:10:22
and districts where they know the
00:10:23
customer and repayment behavior very
00:10:25
well. And there is actually room for
00:10:27
everyone to sort of grow without
00:10:29
stepping onto each other's toes. But
00:10:31
there are still few signs that call for
00:10:33
caution here. Aas Financials flagged
00:10:35
rising delinquencies in unsecured micro
00:10:37
finance loans and they warned that
00:10:39
customers are becoming more
00:10:40
overleveraged in many ways. In other
00:10:42
words, people are borrowing more than
00:10:44
they can realistically repay and that
00:10:46
could sort of spill over into other loan
00:10:48
segments and that is why AAS has
00:10:50
tightened its lending standards. Their
00:10:52
loan approval rate has dropped from
00:10:53
around 42% a year ago to 38% now. PNB
00:10:57
Housing saw its operating expenses go up
00:10:59
by 19.4% year-over-year, which is a
00:11:02
sharp rise and could start affecting
00:11:03
profitability if it is not bought under
00:11:05
control. Even Bajage Housing's yield
00:11:07
dipped slightly to 9.7% down by 10 basis
00:11:10
points. Now again this is not massive
00:11:12
but it is a sign that competitive
00:11:14
pressure might continue to squeeze them.
00:11:16
So the question then is where does all
00:11:18
of this leave us and what is it for us
00:11:19
to take away from here? See India's
00:11:21
housing finance story is still a
00:11:22
definite growth story. There is a
00:11:24
massive need for home loans especially
00:11:26
in smaller towns and lower income
00:11:28
segments. Government initiatives like
00:11:29
PMAY 2.0 add only more fuel to this
00:11:32
growth. But at the very same time
00:11:34
falling interest rates rising
00:11:35
competition and signs of borrowers
00:11:37
threats also point to a more complicated
00:11:39
future in general. But as AAS puts it,
00:11:41
FI 2026 is going to be far better than
00:11:44
FI 2025 for the industry. Now that may
00:11:47
well be true, but always the devil lies
00:11:49
in the details. On that note, let's move
00:11:51
on to the second story of the day and
00:11:53
talk about rare earth elements. See,
00:11:55
imagine you wake up one day and you
00:11:56
realize that your phone did not ring,
00:11:58
your fan did not spin, and even your
00:12:00
Wi-Fi router was dead. You go and try to
00:12:02
make breakfast, but your induction stove
00:12:04
does not turn on. You go and find the TV
00:12:06
remote, but nothing happens and the TV
00:12:08
does not turn on. the screen stays
00:12:10
blank. It basically feels like the world
00:12:12
has sort of come to a standstill. And it
00:12:13
sounds extreme and almost dystopian to
00:12:16
many levels. And maybe some of you may
00:12:17
think that I've gone crazy to even say
00:12:19
this. But honestly speaking, this is
00:12:21
what life could look like without rare
00:12:23
earth elements. And while these rare
00:12:25
earth elements are not going anywhere
00:12:26
overnight, the problem is that they are
00:12:28
becoming harder to access. There is a
00:12:30
very big brewing geopolitical battle
00:12:32
that is very quietly turning these
00:12:34
obscure metals into one of the most
00:12:36
important and dangerous supply chain
00:12:38
bottlenecks of our time. So today in
00:12:40
this story, let me break down what these
00:12:42
rare earth elements are, why they matter
00:12:44
so much, and how the world has let China
00:12:46
gain a near monopoly over them. To begin
00:12:49
with, the term rare earth refers to a
00:12:51
set of 17 metallic elements. 15 of these
00:12:53
sit together on the periodic table under
00:12:55
a category called lanthnides. and the
00:12:57
other two are not technically lanthnides
00:12:59
but they behave similarly in chemical
00:13:01
reactions so they are also grouped under
00:13:03
the same label. Now the thing is despite
00:13:05
what the name actually suggests rare
00:13:07
earths are not actually rare in many
00:13:09
ways. Serium for instance is roughly as
00:13:11
abundant as copper in the earth's crust
00:13:13
and even the scarcest of these elements
00:13:14
are actually hundreds of times more
00:13:16
common than precious metals like gold.
00:13:18
The name rare earth is actually a
00:13:19
historical accident. The thing is in the
00:13:21
1700s some scientists discovered strange
00:13:24
minerals in unusual looking rocks near
00:13:26
the Swedish village called Yerby. Now
00:13:28
these were oxide based materials which
00:13:30
is what people at the time generally
00:13:32
referred to as earths and because these
00:13:34
minerals came from rare rocks and they
00:13:36
looked a little bit different from the
00:13:37
usual stuff. They were called rare
00:13:39
earths and the name sort of stuck along
00:13:41
and it's a bit misleading to be honest
00:13:43
but anyway that aside the real challenge
00:13:45
with rare earths is not that they are
00:13:47
hard to find. it is that they are way
00:13:49
too spread out. Unlike metals like iron
00:13:51
or copper which form rich concentrated
00:13:53
deposits, rare earths are actually
00:13:55
scattered across various kind of rocks
00:13:57
in very very tiny amounts. And when you
00:13:59
do find usable deposits, you are likely
00:14:01
to find many of these rare earths
00:14:02
tangled together. And that is because
00:14:04
they are chemically so similar that it
00:14:06
is extremely difficult to separate one
00:14:08
from another. And the separation process
00:14:10
is very messy. It is expensive and also
00:14:13
very slow. It basically takes hundreds
00:14:15
of chemical steps, uses a lot of acid
00:14:17
and industrial solvents, and also
00:14:19
produces massive amounts of waste, some
00:14:21
of which can also be radioactive in
00:14:23
nature. And that, mind you, is what
00:14:25
makes rare earth such a pain to extract
00:14:27
and to refine. It's not really a
00:14:28
geological problem in many ways. It's
00:14:30
actually economic and a technological
00:14:32
one. So the question then is what makes
00:14:34
it all worth the trouble for everyone.
00:14:36
See, rare earths have some very unusual
00:14:38
and also very useful physical properties
00:14:40
that make them essential for modern
00:14:41
technology. The most important of this
00:14:43
is magnetism. See, magnets made from
00:14:45
neodymium, iron, and boron are the
00:14:47
strongest permanent magnets that we have
00:14:49
ever made as humans. They are about 10
00:14:51
times stronger than regular magnets
00:14:53
while also being much smaller and much
00:14:56
lighter. And today, magnets are
00:14:57
everywhere in speakers, in hard drives,
00:15:00
electric vehicle motors, industrial
00:15:01
generators, and also wind turbines. Rare
00:15:04
earth magnets are the reason why these
00:15:05
devices can be so small yet so powerful.
00:15:08
Now, some rare earths also have a very
00:15:10
unique optical property. Europium and
00:15:12
turbium for instance help produce the
00:15:14
red and green colors that you see on
00:15:16
your phone and TV screen. These elements
00:15:18
are usually hosted in a crystal
00:15:19
structure which is built from yrim and
00:15:21
without them our screens would look much
00:15:23
bulkier, much less colorful and also far
00:15:26
less sharp than they currently do. Other
00:15:28
errors also have some catalytic powers.
00:15:30
They help accelerate chemical reactions
00:15:32
and that makes them critical in oil
00:15:34
refining and also in the catalytic
00:15:36
converters inside vehicles which
00:15:38
basically help reduce the harmful
00:15:39
emissions from exhaust systems. And that
00:15:41
entire comprehensive list that I just
00:15:43
gave you is only a very quick sample. In
00:15:45
reality, rare earths are actually hidden
00:15:48
inside everything right from lasers and
00:15:50
MRI machines to even defense radars and
00:15:52
satellite systems. But there are two
00:15:54
specific use cases that make rare earths
00:15:57
very very irreplaceable which is clean
00:15:58
energy and also military applications.
00:16:01
Let me start with defense. See modern
00:16:03
defense equipment is deeply reliant on
00:16:05
rare earths. Fighter jets use rare earth
00:16:07
magnets for their electronic systems,
00:16:09
rare earth oxides in their screens and
00:16:11
displays, rare earth alloys in their
00:16:13
engines, and also rare earth coatings
00:16:15
for stealth. An F-35 fighter jet for
00:16:17
example contains nearly half a ton of
00:16:20
rare earth materials which is roughly 3%
00:16:22
of its total weight. Now let's shift to
00:16:24
the world of clean energy. See whenever
00:16:26
you want to convert motion into
00:16:27
electricity or vice versa you need
00:16:29
magnets. Wind turbines use them to
00:16:31
generate electricity from winds and
00:16:33
electric vehicles use them to turn
00:16:34
electricity into motion. Now one wind
00:16:36
turbine alone can contain up to a ton of
00:16:39
rare earths. Electric vehicles use a few
00:16:41
kilos each and that is why rare earths
00:16:43
are very crucial to the green transition
00:16:45
for the entire world. Basically without
00:16:47
them the clean energy movement slows
00:16:49
down drastically maybe to some extent
00:16:51
even become close to impossible for us
00:16:53
and that is why as you would expect the
00:16:55
demand for them is absolutely surging.
00:16:57
The international energy agency projects
00:16:58
that rare earth demand will rise
00:17:00
anywhere from 3 to seven times by 2040.
00:17:03
One analysis estimates that for every 1%
00:17:05
increase in green energy deployment,
00:17:07
global rare earth reserves shrink by
00:17:10
0.18%. Now that is an incredibly steep
00:17:13
cost to pay for the transition, but is
00:17:15
also unavoidable with the current
00:17:17
technology that we have. And that brings
00:17:18
me to the real reason why rarers are
00:17:20
suddenly in global spotlight, which is
00:17:23
control. See, even though these elements
00:17:24
are found across the world, like I
00:17:26
mentioned, the mining, processing, and
00:17:28
manufacturing are almost entirely
00:17:30
controlled by one single country, which
00:17:32
is China. Right now, China mines about
00:17:34
70% of all the rare earths available
00:17:37
globally. It processes between 85 to 90%
00:17:40
of them and it also dominates
00:17:41
manufacturing. For example, it produces
00:17:44
over 90% of the world's rare earth
00:17:46
magnets. Now, this mind you did not
00:17:48
happen by chance. Back in the 1970s and
00:17:50
the 1980s, while the world was focusing
00:17:52
on oil and semiconductors, China was
00:17:55
quietly starting to build out its rare
00:17:57
earth supply chain. Deng Xiaoping who's
00:17:59
the Chinese leader at that time
00:18:00
understood their strategic value long
00:18:02
long before anyone else did. He very
00:18:04
famously said and I quote the Middle
00:18:06
East has oil, China has rare earths. At
00:18:09
that time the US was the world leader in
00:18:10
rare earths and produced most of the
00:18:12
supply from the mountain pass mine in
00:18:14
California. Now these materials were
00:18:16
very critical to the cold war era
00:18:17
defense race and the US even invented
00:18:19
samarium cobalt magnets in the 1960s for
00:18:22
radar and missile systems. But China
00:18:24
played the long game over here. Between
00:18:26
1978 and 1995, they ramped up rare
00:18:29
earth's production by nearly 40% every
00:18:31
single year. They flooded the global
00:18:33
market with cheap supply and they
00:18:35
undercut US producers. Now, this is not
00:18:37
just because of cheap labor. China also
00:18:39
invested in separation technologies.
00:18:41
They built an end-to-end domestic supply
00:18:43
chain and also accepted far higher
00:18:45
levels of environmental damage than most
00:18:47
other countries were willing to
00:18:48
tolerate. And over time, Western
00:18:50
production lost out to it. By the early
00:18:52
2000s, China controlled nearly 98% of
00:18:55
global rare earth production. And even
00:18:57
today, most countries have found it
00:18:59
almost impossible to catch up to them.
00:19:01
The barriers to entry are very, very
00:19:03
steep here because once a rare earth
00:19:04
deposit is even discovered, it can take
00:19:06
as much as 7 to 15 years in order to
00:19:09
develop it. A separation facility can
00:19:11
cost upwards a billion dollars and the
00:19:13
technical expertise that is needed to
00:19:15
refine these elements at scale is still
00:19:17
very very concentrated only and only in
00:19:19
China. Now, there is also an
00:19:20
environmental cost to all of this. For
00:19:22
every ton of rare earths that you
00:19:24
refine, the process generates roughly
00:19:26
2,000 tons of mining waste, which
00:19:28
includes radioactive slurry and acidrich
00:19:30
byproducts. China has already destroyed
00:19:33
entire water bodies and farmlands near
00:19:35
its mines for this. And most countries
00:19:37
today are unwilling to pay that price.
00:19:39
But this is also what makes China's grip
00:19:41
over rare earth so very dangerous
00:19:43
because it gives China the power to
00:19:45
choke off the supply at any point in
00:19:47
time it wants. and it has already done
00:19:49
that before. In 2010, after a diplomatic
00:19:52
clash against Japan over the Senkaku
00:19:54
Islands, China very quietly restricted
00:19:56
rare earth exports to Japan. They didn't
00:19:58
issue a formal ban as such. They just
00:20:00
slowed down shipments drastically.
00:20:01
Prices of course skyrocketed as a
00:20:03
result. Neodymium shot up by
00:20:06
$575%. Disproium, which is another rare
00:20:08
earth, went from $250 per kg to $1,500
00:20:12
per kg. Japanese manufacturers,
00:20:14
especially in auto and electronics
00:20:16
fields, were completely caught off guard
00:20:17
for this. But Japan eventually had to
00:20:19
fight back. They built a five-point
00:20:21
strategy to cut usage and diversify
00:20:23
supply. Over the next decade or so, they
00:20:25
bought down their dependence on Chinese
00:20:27
rare earth from 90% to 60%. But the
00:20:30
message was very clear that rare earth
00:20:32
could be used as a weapon. And China,
00:20:34
mind you, has not stopped since then. In
00:20:36
April 2025, which is very recently, in
00:20:38
retaliation to American tariffs, they
00:20:40
impose fresh export restrictions on
00:20:42
seven rare earth elements. Now, these
00:20:44
are particularly important for defense
00:20:46
and high performance magnets. And the
00:20:48
signal here was unmistakable. China is
00:20:51
ready to use rare earths for
00:20:52
geopolitical pressure across the world.
00:20:54
Now, this is a part of a broader trend
00:20:56
that analysts are calling as weaponized
00:20:58
interdependence. See, as global trade
00:21:00
now becomes more adversarial, countries
00:21:02
are now using their control over key
00:21:04
supply chain nodes like semiconductors,
00:21:06
batteries or rare earths as tools of
00:21:08
strategic power. Basically, whoever
00:21:10
controls the choke point here controls
00:21:12
the leverage as well. And that is what's
00:21:13
worrying governments worldwide. The US,
00:21:15
for example, has started pumping
00:21:17
millions of dollars into building rare
00:21:19
earth capacity. India has also launched
00:21:21
a national criticals mineral mission and
00:21:23
has opened up rare earth mining to
00:21:24
private players for the first time ever.
00:21:26
We are also partnering with countries
00:21:28
like Australia and even manufacturing
00:21:30
small batches of magnets at BRC. But
00:21:33
this like I said is a decadesl long
00:21:35
project. What's interesting though is
00:21:36
that India has around 6.9 million metric
00:21:39
tons of rare earth reserves which is
00:21:40
roughly 5 to 6% of the global total. But
00:21:44
the problem is that we produce less than
00:21:45
1% of the supply right now and that is
00:21:47
partly because our deposits often sit
00:21:49
alongside thorium which is treated as a
00:21:51
nuclear fuel and falls under tight
00:21:54
regulations. For decades, a single
00:21:56
government entity which is was allowed
00:21:58
to mine these resources and that sort of
00:22:00
limited our ability to build a
00:22:01
full-fledged ecosystem. But like I said,
00:22:03
the policy is slowly starting to shift
00:22:05
now. But the only problem is that it'll
00:22:07
take some time and in the meantime, the
00:22:09
risks remain very real. If China were to
00:22:11
hypothetically halt exports today, the
00:22:13
impact would be immediate and very very
00:22:15
severe. EV production could drop by as
00:22:18
much as 25%, wind turbine manufacturing
00:22:20
could drop by 90% and production of
00:22:23
fighter jets could grind to a halt
00:22:25
completely. Even MRI machines could sort
00:22:27
of disappear from hospitals for many
00:22:29
months at a stretch. Eventually, of
00:22:30
course, the world will manage to adapt
00:22:32
as Japan's example shows. It is possible
00:22:34
to derisk from China, but that of course
00:22:36
requires a long-term plan, deep
00:22:38
investments, and hard tradeoffs.
00:22:40
Currently speaking, many countries are
00:22:42
simply not prepared for it. And that
00:22:44
brings me to the end of the two stories
00:22:46
of the day. With that, let's move on to
00:22:47
the final section and talk about the
00:22:49
quick news headlines. First, Coal India
00:22:51
has announced plans to set up 4.5 gawatt
00:22:54
of renewable energy capacity at a cost
00:22:56
of 25,000 cr rupees to supply carbon-f
00:22:59
free power to AM Green's green ammonia
00:23:01
facilities in Gujarat, Kandla or other
00:23:04
locations. The project will combine
00:23:06
2,500 to 3,000 megawatt of solar and
00:23:09
1,500 to 2,000 megawatt of wind capacity
00:23:12
with wind projects likely in southern
00:23:14
states and solar plants in Gujarat and
00:23:16
Rajasthan. Second, Larsson and Tubro or
00:23:18
LNT reported a 25% year-over-year rise
00:23:22
in consolidated net profit to 5,497 cr
00:23:25
rupes for quarter 4 of FI 2025 supported
00:23:28
by a 10.9% growth in revenue to 74,392
00:23:32
cr rupes. Third and the final one for
00:23:34
the day. Billionaire Sunil Bharti Mittal
00:23:36
who is the founder of Bharti Etel is in
00:23:38
advanced discussions to acquire a 49%
00:23:41
stake valued at 2 billion in the Indian
00:23:44
arm of Chinese appliance giant hire
00:23:46
according to Bloomberg. My metal has
00:23:48
partnered with private equity firm
00:23:50
Warberg Pinkis for the deal which could
00:23:52
be finalized in the coming few weeks. By
00:23:54
the way, Hire's Indian unit currently
00:23:55
operates three manufacturing plants
00:23:57
producing air conditioners,
00:23:59
refrigerators, washing machines and
00:24:00
other appliances. That's all the news
00:24:02
and stories I have for you today. I hope
00:24:04
you enjoyed the show. This is your host
00:24:06
Anor Bansal signing off. Take care and
00:24:08
goodbye. Disclaimer, this content is
00:24:11
forformational purposes only. None of
00:24:13
the stocks, brands or products mentioned
00:24:15
are recommendations or endorsements.
![How to Cara Install Black Myth Wukong PC Gratis Free Offline Activation 2025 [Permanent] Discord](https://ruhnrawpgxrzdrgaohnf.supabase.co/storage/v1/object/public/images/video/J8fyCgUYGMI/thumbnail.jpg)
