Demand for Critical Minerals
China holds a dominant position in the supply of certain crucial materials for the green transition, which is seen as a potential supply risk. An example of this is the recent restrictions imposed by China on the export of important metals like Gallium and Germanium. This highlights the concern about relying heavily on a single country for the supply of these essential materials.
What are Critical Minerals?
Minerals
Minerals are natural substances that are formed by geological processes. They have a definite chemical composition and physical properties.
They are classified into metallic and non-metallic minerals based on their characteristics and uses
Metallic minerals are those that contain metals or metal compounds, such as iron, copper, gold, silver, etc.
Non-metallic minerals are those that do not contain metals, such as limestone, coal, mica, gypsum, etc.
Critical Minerals
Critical minerals are those minerals that are essential for economic development and national security. The lack of availability of these minerals or concentration of extraction or processing in a few geographical locations may lead to supply chain vulnerabilities and even disruption of supplies.
Critical Minerals for India
Expert Committee under Ministry of Mines has identified a set of 30 critical minerals for India.
These are Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, PGE, Phosphorous, Potash, REE, Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium and Cadmium.
India has set up KABIL or the Khanij Bidesh India Limited, a joint venture of three public sector companies, to ensure a consistent supply of critical and strategic minerals to the Indian domestic market.
It ensures the mineral security of the nation; it also helps in realising the overall objective of import substitution.
Current Scenario for Critical Minerals Around the Globe
Rapid Surge in Demand and Market Growth for Energy Transition Minerals (Critical Minerals):
From 2017 to 2022, the demand for lithium tripled, cobalt increased by 70%, and nickel rose by 40%, primarily driven by the energy sector.
According to the International Energy Agency (IEA), the market for energy transition minerals reached $320 billion in 2022 and is expected to continue growing rapidly.
Global Efforts through Policy Measures
The availability of critical mineral supplies will greatly impact the affordability and speed of energy transitions. To mitigate uncertain global supply chains, countries are implementing new policies to diversify their mineral supplies.
The United States (US), Canada, the European Union (EU), and Australia have enacted regulatory legislation, while resource-rich nations like Indonesia, Namibia, and Zimbabwe have imposed restrictions on the export of unprocessed mineral ores.
Industry's Role through Vertical Integration
To secure mineral supplies, industries such as automakers, battery cell makers, and equipment manufacturers are becoming more actively involved in the critical minerals value chain.
This includes engaging in activities like mining and refining, along with establishing long-term agreements for purchasing minerals.
Geopolitical Tensions and Resource Nationalism
It is important to address these challenges because global relations between nations have become more polarised, especially due to events like the US-China trade war and the Russia-Ukraine war. These conflicts have led to sanctions and disruptions in established trade patterns.
Additionally, there is an increasing trend of resource nationalism, where countries prioritise their own resources and impose restrictions on exports. These factors contribute to uncertainties in global trade flows.
Supply-Demand Dynamics
As the prices of critical industrial metals, such as copper, are expected to increase in the coming years due to growing demand surpassing supply. This rise in material prices will likely disrupt the production costs of devices like solar panels and electric vehicles.
Challenges Related to Critical Minerals in India
India is currently confronted with both global and domestic challenges in ensuring reliable supply chains for critical minerals. Internationally, there are few major risks to consider:
Covid-19 Impact: China, which holds a dominant position in critical mineral supply chains, continues to struggle with Covid-19. Consequently, there is a significant risk of a slowdown in the extraction, processing, and exports of critical minerals.
Russia-Ukraine War: The conflict has implications for critical mineral supply chains. Russia is a major producer of nickel, palladium, titanium sponge metal, and the rare earth element scandium.
Ukraine is a significant producer of titanium and has reserves of lithium, cobalt, graphite, and rare earth elements.
The ongoing war between the two countries raises concerns about the stability and availability of these critical minerals in the global supply chains.
Strategies to Mitigate Challenges Regarding Critical Minerals
Keeping up with Rapid Demand Growth: To ensure that future supplies of critical minerals can meet the rapidly growing demand driven by climate-driven scenarios. It is crucial to assess whether the global supply of these minerals can keep pace with this surge in demand.
Diversifying Sources of Supply: Currently, the reliance on a limited number of countries for these minerals poses risks to the supply chain. By diversifying the sources, countries and industries can reduce vulnerability to disruptions in supply caused by geopolitical factors, trade restrictions, or other uncertainties.
Way Forward
Ensuring Resource Availability: Addressing the resource aspect is crucial. It is necessary to assess the availability and accessibility of critical materials required for clean energy technologies. This includes evaluating the domestic reserves of critical minerals and exploring opportunities for their sustainable extraction or sourcing from diverse international markets.
Additionally, there should be strategies to ensure a steady supply of these materials, mitigating risks associated with potential disruptions in global supply chains.
Financial Considerations: The transition to clean energy often necessitates significant investments in infrastructure development, research and development, and policy support. There is a need for financing mechanisms, incentives, and funding models that can attract both public and private investments.
Identifying avenues for international collaborations and exploring innovative financing options will also be vital in mobilising the required capital for a successful energy transition.
Technology as the Key Driver: Technology plays a critical role in achieving our energy goals. It is required for the world to focus on fostering domestic technological capabilities, promoting research and development, and fostering innovation in clean energy technologies.
There is a need for technology transfer, collaborations with academia and industry, and the creation of an ecosystem that supports the development, adoption, and scaling up of innovative clean energy solutions.
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