The category of ‘critical minerals’ is not formally defined, but is widely understood to mean lithium, cobalt, nickel and rare earths – which are crucial for new and emerging technologies such as electric vehicles, electronics and the production of renewable energy. India depends on imports for all of these.
The push for renewable energy and policies that encourage the manufacture of electric vehicles in India have increased demand for these minerals. Bajaj, Hero, Ola and Ather are manufacturing electric two-wheelers that require lithium, cobalt, nickel and rare earth elements (REE). India’s goal of achieving 450 GW of renewable energy[1] hinges partly on wind power, for which REEs are essential.[2]
The Ukraine disruption:
A significant disruption has just taken place in the nickel supply chain due to the war in Ukraine, pushing up prices and causing disruptions to the steel industry. India’s nickel imports, used in steel production, have increased many times in value (refer table).
Table 1: India’s Imports of Nickel & Alloys
| Countries | Apr-Feb 2022 | Year-on-Year Change |
| Indonesia (Ferro-Nickel) | 572 | 292% |
| Nickel & Articles Thereof | ||
| Netherlands | 115 | 414% |
| Norway | 107 | 32% |
| UAE | 87 | 454% |
| Japan | 76 | -8.8% |
| South Africa | 74 | 95% |
| Russia | 70 | 288% |
| UK | 53 | 62% |
| PRC | 52 | 9% |
| USA | 51 | 9% |
| Figures in $ million | ||
Source: Commerce Ministry
Stainless steel prices in India have also risen due to the increased price of nickel and coal, the shortfall in steel supply from Russia and Ukraine, and uncertainty regarding the Chinese steel supply. However, Indian steelmakers are working to soften the impact of external factors using stainless-steel scrap, which contains nickel, as raw material in the production of stainless steel.[3] The electric vehicle sector in India has been impacted by the rising prices of critical minerals like nickel, cobalt and lithium. Supply chains for these critical minerals are highly concentrated and the Ukraine crisis has aggravated shortages and prices. According to India’s biggest electric cars producer Tata Motors, the cost of battery cells has increase by 20%.[4] This, in turn, has led to 2% to 3% higher prices for electrics cars and two-wheelers. The disruption in the nickel supply chain is an example of how things can go wrong. Many other critical mineral supply chains are even more concentrated.
For instance, over 60% of the world’s cobalt is mined in the Democratic Republic of Congo,[5] while over half of it is processed in China.[6] Almost two-thirds of global rare earth production is in China. This concentration means that a disruption is a matter of when, rather than if. This paper will examine the rare earth scenario for India. Its broad conclusions, especially on sourcing these minerals overseas, will be applicable to other critical minerals.
India’s electricity challenge:
Minerals used in batteries may also have a role to play in cleaning up India’s power sector, which largely runs on coal.
India’s power sector already has a large base of renewable electricity installations, but these are intermittent. Natural-gas-fired power plants can serve as a bridge fuel to tide over the intermittency of renewable generation, but this has not worked in India due to the high cost of gas-fired power even before the ongoing crisis. Grid-scale storage of electricity may be a possible solution to help renewable energy scale up. India already has some pilot projects going on.[7] For grid-scale storage to go mainstream, India will need large supplies of lithium, cobalt and other battery minerals. India is facing an electricity shortage in early 2022 as generation is unable to keep pace with demand[8] – these challenges will increase as the share of renewable energy increases. This makes battery storage and access to relevant minerals even more important.
Rare earths in India:
Rare earth minerals occur in India, but not the metals needed for high powered magnets used for production of electric cars. As India’s rare earth resources are managed by the Department of Atomic Energy, securing private sector involvement will be difficult. Government-owned IREL Ltd mines much of the REE, producing 4,215 tons in 2018-19.[9] This is, however, a small amount.
Furthermore, most of India’s production of REE is in the form of chlorides and oxides, which are of low value. India is hindered by lack of capital, technology, infrastructure and policies to produce the rare earths in metal and alloy form for use in manufacture of high value products. This keeps India reliant on imports of REE.
Some progress has been made on domestic Indian mining thanks to the Toyota Tsusho Corporation. It has set up a wholly owned subsidiary in India, Toyotsu Rare Earths India Pvt Ltd, to process and refine rare earth oxides.[10] The company purifies then exports rare earth chemicals to Japan, which is trying to reduce its dependence on China. Its annual target is 4,000 tons.
Another company, Ashvini Magnets, is trying to move up the value chain by producing rare earth magnets used in electric vehicles and wind energy installations. Ashvini signed an agreement with IREL and BARC under which IREL will supply the raw materials and BARC will transfer technology and incubate the new venture. This initiative increases the possibility that India could serve as a base for the processing of minerals produced elsewhere.
However, India will still need to rely on imports for much of its requirement and needs to look for these minerals overseas. India’s securing supplies of these minerals on the global market revolves around KABIL, a company set up in 2019 for this purpose, that as of February 2022 had not been able to acquire a single asset. KABIL is a variation of the ONGC Videsh model that has acquired oil producing assets across the world. However, ONGC Videsh was an arm of Oil and Natural Gas Corporation Ltd and had a history of operating in the oil and gas sector, which KABIL lacks. Bidding for natural resources without experience is difficult.
Operational challenges exist as well. Cobalt, for example, is a by-product of copper and is expensive to extract since copper accounts for the bulk of value from mining and is and of primary interest to the project operators.
Production of REE can be highly polluting and open an operator to lawsuits, especially in countries such as the U.S. and Canada. As a result, rare earth production shut down in most of the world during the 1990s and 2000s and shifted almost entirely to China. At this point, India’s focus should be on financial investments, as they don’t leave Indian firms open to lawsuits, and on more effective use of financial markets.
Recommendations:
- Specialised investment firms for low-volume minerals: Specialised companies like Cobalt 27 Capital Corp. and Nickel 28 take shares in mining projects and royalties to build supplies and reserves of minerals. In India, this investment model can be instrumental in financing companies that are mining low-volume minerals like REE and cobalt, and in encouraging private sector participation.
- Acquiring, developing and collaborating on extraction technologies: India’s capacity to extract critical minerals like REE is limited by inefficient policies and propriety technology. The Indian Government has initiated a ‘Deep Ocean Mission’ to explore minerals in the Indian Ocean and could benefit from a collaboration with Japan, given their expertise in deep sea mining. In 2020, JOGMEC of Japan developed a crust excavation technique to extract nickel and cobalt from the seabed[11][12][13].
- Investment in recycling and innovation: Except for cobalt that is recycled at nearly 16%, less than 1% of critical minerals like REE are recycled.[14] With forecasts of a global supply deficit[15], recycling is increasingly important. This is an area where Japan and India can collaborate given Japanese investment in R&D for recycling and finding substitutes for REE.
- Information sharing: Many commodities have dedicated publications that track developments in their respective markets, like the Oil Market Report, published monthly by the IEA. A similar mechanism can serve as a reliable method of sharing much needed information on minerals necessary for electric vehicles and wind energy.
Amit Bhandari is the Senior Fellow for Energy, Investment and Connectivity, Gateway House
Saeeduddin Faridi is a Researcher at Gateway House
This essay is part of a paper ‘Analysing India’s Economic Security Challenges’. Read the full paper here.
The views and opinions expressed in this paper are solely those of the authors. The view expressed in the paper do not necessarily reflect those of NEDO
For permission to republish, please contact outreach@gatewayhouse.in
©Copyright 2022 Gateway House: Indian Council on Global Relations. All rights reserved. Any unauthorised copying or reproduction is strictly prohibited.
References:
[1]https://m.economictimes.com/small-biz/productline/power-generation/india-to-have-450-gw-renewable-energy-by-2030-president/articleshow/73804463.cms
[2]https://iea.blob.core.windows.net/assets/ffd2a83b-8c30-4e9d-980a-52b6d9a86fdc/TheRoleofCriticalMineralsinCleanEnergyTransitions.pdf
[3] https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/jindal-stainless-turns-to-domestic-suppliers-to-cut-down-on-imported-raw-materials/articleshow/77932844.cms?from=mdr
[4] https://www.reuters.com/business/autos-transportation/tata-motors-says-20-rise-battery-cell-costs-increasing-short-term-pressure-2022-03-29/
[5]https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2020-full-report.pdf
[6]https://publications.jrc.ec.europa.eu/repository/handle/JRC112285
[7] https://www.tatapower.com/media/PressReleaseDetails/1617/tata-power-collaborates-with-aes-and-mitsubishi-corporation-to-power-up-south-asias-largest-grid-scale-energy-storage-system-in-india
[8] https://www.livemint.com/industry/energy/power-cut-delhi-punjab-uttar-pradesh-kerala-haryana-maharashtra-are-on-brink-of-power-outage-amid-heatwave-increased-demand-coal-shortages-11651192917644.html
[9]https://ibm.gov.in/writereaddata/files/10012020172151RareEarth_2019_AR.pdf
[10] https://www.toyota-tsusho.com/english/press/detail/151210_002928.html
[11]https://www.jogmec.go.jp/english/news/release/news_01_000033.html
[12]https://www.thehindu.com/sci-tech/science/why-is-india-pulled-to-deep-sea- mining/article28809029.ece
[13]https://www.jogmec.go.jp/english/news/release/news_01_000033.html
[14]Jowitt, Simon M., Timothy T. Werner, Zhehan Weng, and Gavin M. Mudd. “Recycling of the rare earth elements.” Current Opinion in Green and Sustainable Chemistry 13 (2018): 1-7.
[15]https://publications.jrc.ec.europa.eu/repository/bitstream/JRC112285/jrc112285_cobalt.pdf