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Digging Into India’s Dash for Critical Minerals

In the first instalment of a three-part series that explores India’s efforts to bolster its position in the critical minerals supply chains, we find that its success depends on more than just the country’s navigation of global geopolitics.
Photo: Paul-Alain Hunt/Unsplash

Developments in the past few weeks have reinforced the buzz around critical minerals in India’s policy and trade circles. First, India was inducted into the US-led Mineral Security Partnership (MSP). Next, India issued its critical mineral policy listing 30 minerals vital for India’s economic growth. Finally, as this report was being prepped for publication, news emerged that India’s Union Cabinet had approved commercial mining for five of these minerals—lithium, beryllium, titanium, niobium, tantalum and zirconium.

The significance of these minerals for emergent technologies and industries has been known for decades, so why is it only now that the Indian government appears to be waking up to this fact? And what are the odds that its enthusiasm to integrate with global supply chains will translate to reality?

China’s mineral monopoly

Answers to these begin with an understanding of how supply chains for many of these minerals and their derivatives are currently controlled – and the power structures these supply chains represent.

In the early pages of the bestselling book Cobalt Red, author Siddharth Kara describes a modern geopolitical quandary. Half of the world’s reserves of cobalt lie in a 400 sqkm crescent running from the Democratic Republic of the Congo (DRC) to northern Zambia, writes Kara in his book about the unfettered mining of the mineral in the country.

Much of the mining here – from the depots that collect cobalt ore from miners to the units that process it – is dominated by the Chinese. “As of my last ground count in November 2021, there were nineteen major industrial copper-cobalt mining complexes operating in (Congo’s) Haut-Katanga and Lualala provinces, fifteen of which were owned or financed by Chinese mining companies,” writes Kara.

That is just the start. Semi-processed cobalt from these mines is exported to commercial-grade refiners, most of whom are in China. “In 2021, China produced 75 percent of the world’s refined cobalt,” he writes. “The single largest refiner was Huayou Cobalt with a market share of 22 percent. Huayou owns Congo Dongfang Mining, one of the largest copper-cobalt companies operating in the DRC.”

Cobalt is far from an exception. Over the past 20 years, China has methodically amassed mining concessions for the critical minerals necessary for the energy transition as well as built expertise in processing raw ores into refined metals.

IEA estimates that China’s share of refining is around 50-70% for lithium and cobalt, 35% for nickel, and 95% for manganese. The nation is also responsible for nearly 90% of rare earth elements, which are essential raw materials for permanent magnets used in wind turbines and EV motors, as well as 100% of graphite, the anode material in EV batteries.

As we know, the country’s choke-hold over the global energy transition doesn’t end there. Once refined, cobalt and lithium are merged with other metals to make batteries. At this time, with a 35% share, the largest lithium-ion (Li-Ion) battery manufacturer in the world is China’s CATL. Earlier this year, BYD overtook LG to claim, with a 16% market share, the second slot.

Nor is that all. Five of the top 10 battery makers today are Chinese. Between them, the country’s market share in rechargeable batteries stands at 75%. That is three out of every four batteries powering the global energy transition.

A problem for India

It barely needs to be said that China’s hegemony over critical minerals is not optimal for India. The country has ambitious renewable energy targets. It wants renewables’ share in the grid to rise to 500 GW by 2030. It also wants 30% of private cars, 70% of commercial vehicles and 80% of two- and three-wheelers to go electric by 2030.

Between mobility, consumer electronics and grid storage, Niti Aayog pegs India’s potential need for battery storage at 600 GWh. Other estimates are even higher. According to New Delhi-based Council on Environment, Ecology and Water (CEEW), India will need as much as 903 GWh to decarbonise just its mobility and power sectors.

Failure to manufacture these batteries locally will result in huge import dependence – if not on China then on global commodity traders like Glencore and Trafigura that dominate trade in critical minerals.

This is a problem. As Covid-19 showed, over-reliance on any country/company for critical supplies can result in supply disruptions.

Compounding matters, relations between China and India are souring and, as history keeps telling us, control over energy is a powerful geopolitical weapon. Indeed, as this article was being written, in retaliation over semiconductor curbs by the USA, China restricted exports of gallium and germanium—both key for semiconductor manufacturing. Incidentally, days after this announcement, one possible fallout emerged from India. Foxconn announced that it was officially withdrawing from its $19.5 billion joint venture with Vedanta to produce semiconductors and microchips in India. This is undoubtedly a big blow to India’s ambitions.

The project itself, while hailed as a beacon of India’s semi-conductor mission and domestic manufacturing push, is no stranger to controversy. The proposed location of the manufacturing facility was shifted to Gujarat in 2021 from its original location in Maharashtra soon after the dismissal of the erstwhile Maharashtra state government. While Foxconn’s statement remains silent on the reasons of withdrawal from the project, the timing draws questions around the impact of China’s recently imposed restrictions on gallium and germanium exports—and by extension on India’s self-reliance ambitions. Despite the volte-face maintained by both India’s government and Vedanta, the loss of face in the immediate aftermath is palpable. 

Racing to catch up 

To create an indigenous renewables value chain, India needs to secure supplies of critical minerals, no less than 30 elements, according to the newly released critical mineral policy. The catch is: India is self-sufficient in few of these.

The critical mineral policy—which maps mineral requirements for a clutch of sectors including renewables, defence, electronics, telecommunications and transportation—lists 10 minerals where India entirely relies on imports. These are lithium, cobalt, nickel, vanadium, niobium, germanium, rhenium, beryllium, tantalum, and strontium. Others—like antimony, titanium and copper—are found in India but known reserves are less than the volumes needed.

As a working paper by New Delhi-based Centre for Social and Economic Progress (CSEP) notes, “India doesn’t have reserves of nickel, cobalt, molybdenum, rare earths, neodymium and indium, and the needs for copper and silver are higher than the country’s current reserves.”

Given this backdrop, there is rising clamour that India must secure its critical mineral supplies. Mere days after notifying the critical mineral policy, India’s Union Cabinet of ministers reportedly approved amendments to the Mines and Minerals (Development and Regulation) Act to allow the commercial mining of six minerals. Five of these—lithium, beryllium, titanium, niobium, and tantalum—are among those whose domestic production capacity is currently non-existent or significantly below requirement. The amendment reportedly goes even further, allowing for companies to suggest areas for exploration and extraction—a stark departure from established norms where the government identifies and auctions mineral blocks (as is the case with commercial coal mining). The amendment is expected to be tabled in the Parliament during the Monsoon Session, which is slated to commence on July 20.

What are the odds?

India’s keenness to enter the critical minerals fray has been evident for a few years now, and the recent flurry of developments have hardly materialised from thin air.

In 2019, the country set up KABIL (Khanij Bidesh India Ltd). Like ONGC Videsh (OVL), which offsets India’s small domestic oil reserves by investing in oilfields elsewhere in the world, KABIL has to secure India’s supplies of strategic minerals through global investments.

Its success, however, hinges on two factors.

The first is global geopolitics around critical minerals. Not only has India staged a belated entry into the critical minerals space—China began amassing critical mineral reserves from the early 2000s; and had begun developing its renewables industry by the end of that decade—India is also entering this arena at a time global critical mineral supply chains are seeing extraordinary competition.

Global lithium ion capacity, to take one instance, is projected to spike from 1,000 GWh in 2021 to 5,500 GWh in 2030. That works out to a demand of 5,500,000 tonnes of lithium. To put that in perspective, global production of lithium stood at 84,000 tonnes in 2021. That is the geopolitical context in which KABIL has to operate.

The second factor is equally consequential. Securing critical mineral supplies is not enough to insulate the country from supply risks. If Chinese EV firms reprise their country’s success in solar panels—or if Indian firms continue sourcing components from China as opposed to buying them from Indian manufacturers—the country’s dependence on Chinese supply chains will continue.

In other words, to meaningfully insulate itself, India has to develop its own EV value chain.

How are these pieces coming together? 

The next installations in this series will attempt to answer this and paint a clear picture of India’s scramble for a place in the supply chains of tomorrow.

This article was originally published on Carbon Copy.

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