Strategy for Securing Reliable Critical Minerals Supply

Context: In the 20th century, oil was the primary driver of global conflicts, shaping America’s involvement in wars like the Gulf War. Today, critical minerals (lithium, cobalt, nickel, rare earths, etc.) are the backbone of future technologies.

What are Critical Minerals?

• Critical minerals are mineral resources, both primary and processed, that are essential inputs in modern technologies, economies, and national security.
• They are characterized by the risk of supply chain disruption due to non-availability and price volatility.
• These minerals play a crucial role in various industries and sectors and have limited substitutes, making them of strategic importance.

China’s Dominance in Critical Minerals

Resource Base and Investments

• China is the world’s largest mining nation with 173 types of minerals, including:
  • 13 energy minerals, 59 metallic minerals, and 95 non-metallic minerals.
• In 2023, China invested $19.4 billion in exploration, discovering 132 new mineral deposits, including 34 large ones.
• Key mineral reserves: copper, lead, zinc, nickel, cobalt, lithium, gallium, germanium, crystalline graphite, and others.

Processing and Refining Capabilities

• Controls 87% of rare earth processing, 58% of lithium refining, and 68% of silicon processing.
• Strategic overseas investments in mining and refining enhance supply chain control.

China’s Strategic Export Controls

Weaponisation of Exports: Targets critical minerals vital for semiconductors, batteries, and high-tech manufacturing.

• Example:
  • 2010 rare earth embargo against Japan.
  • 2023 restrictions on gallium, germanium, and antimony exports.
  • Ban on rare earth extraction and processing technologies in December 2023.
• Strategic Balance: Avoids controlling minerals heavily reliant on Western raw materials.
  • Avoids actions disruptive to its domestic industrial and export-dependent sectors.

India’s Dependency on China

Critical Minerals Import Dependency (2019-2024)

• Bismuth (85.6%): Used in pharmaceuticals and chemicals; China controls 80% of global refinery production.
• Lithium (82%): Crucial for EV batteries; China refines 58% of the global supply.
• Silicon (76%): Key for semiconductors and solar panels; advanced processing technology required.
• Titanium (50.6%): Vital for aerospace and defence; diversification exists, but switching costs are high.
• Tellurium (48.8%): Used in solar power and thermoelectric devices; China produces 60% globally.
• Graphite (42.4%): Essential for EV batteries and steel production; China dominates 2% of global output, including battery-grade graphite.

Reasons for India’s Import Dependency

Structural Challenges in Mining

• Critical minerals are often deep-seated, requiring high-risk investments in exploration and mining technologies.
• Lack of incentives and policy support has deterred private sector participation.

Limited Processing Capabilities

• India lacks the advanced technological capacity for extraction and processing.
• Example: Jammu and Kashmir’s lithium deposits (5.9 million tonnes) are in clay form, but India lacks the technology to extract them efficiently.

India’s Efforts to Reduce Dependency

Strategic Initiatives

• KABIL (Khanij Bidesh India Ltd.): A joint venture of three State-owned companies to secure overseas mineral assets.
• Membership in:
  • Minerals Security Partnership (MSP).
  • Critical Raw Materials Club for diversification and partnerships.

Investments in Research

Collaboration with the Geological Survey of India (GSI) and the Council for Scientific and Industrial Research (CSIR) to develop indigenous technologies.

Circular Economy and Recycling

• Promoting recycling to reduce dependency on virgin minerals.
• Production-linked incentives for critical minerals extraction through recycling.

India’s Position in Critical Minerals

India is highly import-dependent, lacking large domestic reserves.

Key reserves in India

• Lithium: It is found in Jammu & Kashmir, but exploration is at an early stage.
• Rare Earths: India has 5% of global reserves, mainly in Andhra Pradesh and Odisha.
• Graphite: Large reserves in Jharkhand, Odisha, and Arunachal Pradesh.

Current Challenges

• Limited exploration and mining infrastructure.
• Dependence on imports of critical minerals is even greater than oil dependency.
• There is a need for investment in domestic refining and processing facilities.

Lessons for India

• Need for Domestic Exploration: Despite rich geology, India has insufficient mineral exploration.
  • Liberalizing the sector and incentivizing private players is crucial.
• Strategic Foreign Partnerships: India has been signing supply agreements with friendly countries but must secure long-term partnerships to ensure resource security.
• Developing a Self-Sufficient Manufacturing Base: India’s ambition to become a global manufacturing hub (EVs, renewables, electronics) requires a steady supply of critical minerals.
  • Encouraging domestic refining and processing will reduce reliance on China.
• Policy Reforms for Mineral Security: Allow private companies to monetize their mineral discoveries as per global best practices.
  • Strengthening public-private partnerships in mining and refining is essential for long-term self-sufficiency.

Why Critical Minerals Play a Crucial Role in Geopolitics?

• Foundation of Future Technologies: Critical minerals like lithium, cobalt, nickel, and rare earth elements are essential for electric vehicles (EVs), semiconductors, renewable energy, and advanced defense systems.
  • Nations that control these resources have leverage over global supply chains and technological advancements.
• US-China Strategic Rivalry: China dominates 75% of the global rare earth supply and controls key refining facilities.
  • The US is highly dependent on imports, making it vulnerable to supply disruptions, similar to oil dependence in the past.
• Weaponization of Supply Chains: Countries can restrict mineral exports as a geopolitical tool.
  • Example: China banned the export of key rare earth processing technologies in 2023, limiting competitors’ access.
• Energy Transition & National Security: The global shift to clean energy (solar, wind, EVs) increases demand for critical minerals.
  • Nations without secure supply chains risk falling behind in industrial and defense capabilities.
• Economic Leverage & Resource Wars: Countries rich in minerals (e.g., Ukraine, Greenland, Democratic Republic of Congo) become strategic battlegrounds for resource control.
  • Example: The US seeks greater access to Ukraine’s lithium and graphite reserves to reduce dependence on China.
• Strategic Alliances & Supply Chain Diversification: The US, EU, India, and Japan are forming alliances to secure mineral supplies.
  • India is signing agreements with Australia, Argentina, and African nations to reduce import dependence.

The Way Forward

• Sustained Investments: Addressing mining and processing challenges requires long-term commitment.
• Diversification: Expand partnerships to reduce reliance on Chinese supplies.
• Enhancing Indigenous Capabilities: Develop technological capacity for extraction and refining critical minerals.

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