The new global geopolitical crisis might arise from China's domination of the critical minerals supply chain. This hegemony can, and must, be challenged.
The collective goal of sustainable green energy transition has to be substantiated with innovative alternatives that could facilitate this process. This is primarily the reason as to why critical minerals have occupied such a significant place in not just the scientific communities but also international geopolitics. As countries embark on their journey of becoming carbon neutral and reaching net zero carbon emission, it is all the more important for them to get a considerable control over the supply of these critical minerals and this is all the more accurate for the ones that do not have a strong base of domestic deposits. The skewed geological concentration of these minerals is part of the reason that makes them ‘critical’. One might assume that the vast concentrations of these deposits would give some countries a monopoly over the others when it comes to the critical minerals market, but that may not be entirely true.
Consider China, for example. When it comes to the geologically present deposits of the critical minerals, China has a significantly lesser concentration of these minerals than any of the countries in South America, Australia or even the United States. Still, China dominates the critical mineral supply chains. Much of the geopolitical considerations around critical minerals are also centred around disrupting China’s dominance in the supply chain network.
How did this come about?
To put it simply, China has mastered the processing of these critical minerals.
As per the International Energy Agency data for 2021, more than 80 per cent of the world’s rare earth minerals and about 60 per cent of the world’s lithium are processed in China. This is particularly significant because some of the rare earth minerals are also very important components of contemporary defence equipment technologies.
Source: United States Geological Survey
Consider the figures above in this regard. China has less amount of identified lithium resources as compared to the United States and an even lesser lithium that can be economically exploited. This means that for a country that has a very high demand of lithium, there are not enough domestic resources. This answers the question as to how China came to dominate the supply chain- through midstream and downstream processing.
The later stages of the critical mineral processing are often categorised into midstream and downstream processing. When it comes to different minerals processing, China processes more than 60 per cent of cobalt, around 45 per cent of nickel and 60 per cent of lithium. These figures can be translated into understanding the importance of processing. In a critical mineral supply change, processing is as important as the extraction and production of the minerals.
When a mineral such as lithium or cobalt are mined and produced in one country, they go through a series of processing (midstream and downstream) in order to be used in the manufacturing of the final output in the form of EV batteries. Countries like Chile and Australia, while having abundant reserves of lithium, can scale in upstream production of these critical minerals but their later stage processing capabilities remain limited. Other countries such as the Democratic Republic of Congo have vast resources of cobalt and Indonesia possesses high levels of nickel reserves, they still lack the downstream processing capabilities. This makes these countries all the more dependent on outsourced processing and much of this stock is then exported to China.
China however, has not only used downstream processing to claim its place in the supply chain, but has also started investing in the foreign mining companies that engage in first hand mining and production of the critical minerals. This is done to also secure the availability of the raw material for the later stages of processing. It was only last year, in January 2022 that BYD, the largest automaker company in China got the contract to extract about 80,000 metric tonnes of lithium from Chile, over the period of twenty years. The contract was later suspended however this gives a clear picture of how China is attempting to diversify the sources of the raw minerals in order to ramp up the processing in the home front.
While most of the processing capabilities in China are a product of a combination of factors such as the largest consumption needs out of any other country and also the ambition to gain control of the supply chains before critical minerals become the cause of global conflicts. China however, is not the only country known for its high demand of critical minerals, there is another player in this sector, India.
India coming into the spotlight
Over the years India has worked consistently towards aiming to achieve its net zero carbon emission targets and when it comes to lithium resources, India is considered to be having a very high demand that is increasingly growing. The reason is the subsequent growth of India’s electric vehicle (EV) industry. High consumption of lithium-ion battery powered electric vehicles consequently raises the demand for lithium to manufacture these vehicles. India is considered to be one of the larger importers of lithium-ion batteries for the manufacturing of EV vehicles. While the manufacturing of the EV happens within the country, the lithium ion batteries are majorly imported.
This makes it all the more important for India to develop robust agreements for lithium trade with major producer countries. One such agreement is already in place with Australia but India needs to diversify its sources in order to create control of its position as an important EV manufacturer. The need is also to develop domestic supplies of the critical minerals. The Geological Survey of India has identified that there are resources of 49 critical minerals in India and the country still needs to build facilities for sustainable extraction of these minerals. While the discovery of lithium in Jammu and Kashmir was a breakthrough for the country in its bid to develop a critical minerals infrastructure, it is also important to understand that this discovery would remain redundant unless India develops an upstream production capacity. The sustainable aspects of production can be developed through either utilisation of the mine waste or reprocessing of electric and electronic equipment (EEE) waste materials such as spent batteries that still consist of a considerable amount of lithium. As far as the downstream production capacity is concerned, the country still needs to build mechanisms to refine and process these minerals. There is a vast potential for India to excel in downstream processing owing to the labour intensive workforce and the technological developments that characterise India’s assets.
The major economies of the world right now are becoming largely aware of the looming threat of the Chinese dragon and much of the alliance made in the contemporary times is to primarily contain this threat or to take advantage of its presence. The same has been translated to the question of critical minerals that have now occupied a geopolitical characteristic. India can become a major player in thai regard by building a multilateral alliance network that could challenge China’s supremacy in the critical mineral supply chain. South American countries and also Indonesia can become important partners for India in this regard.