India Can Turn To Global South For Its Critical Minerals Needs: IEEFA

India’s minerals are at risk due to high import dependency and reliance on a few countries. Currently, India depends on resources such as synthetic and natural graphite, lithium oxide, nickel oxide, nickel sulphate, and copper cathodes. The study highlights the need for a diversified procurement strategy for these minerals to reduce trade risks.

These minerals are essential in manufacturing clean technology equipment, such as solar panels, wind turbines, electric vehicles, and batteries. Additionally, they are critical for the production of defense and electronic equipment.

The responsibility falls on India to carefully develop its import strategy, balancing international partnerships to secure minerals vital for accelerating its energy transition, states a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).

IEEFA’s report examines five critical minerals and their compounds—cobalt, copper, graphite, lithium, and nickel—considering factors like import dependency, trade dynamics, domestic availability, and global price fluctuations. The report finds that India remains largely import-dependent for these minerals, with a 100% import reliance on minerals such as lithium, cobalt, and nickel.

One of the key takeaway from the analysis is to remove import dependence on synthetic graphite and natural graphite on China and need for policy interventions are needed to drive procurement diversification of these minerals. It added that, Mozambique, Madagascar, Brazil, and Tanzania are some countries with the highest graphite production. As part of the Global South cooperation initiatives, these countries could be favourable partners for India for graphite trading. Further, they are also being considered by the Minerals Security Partnership (MSP) as investment destinations.  Other favourable countries to partner with are Mexico, Australia, Vietnam, and Namibia, given their potential for increased graphite production, as well as Germany, Norway, and Canada, which are members of the MSP.

Lithium 

As a key mineral that is used in batteries lithium is pivotal in ensuring efficient, stable and consistent power delivery and storage. Its characteristic use is in batteries, lubricants, glass and ceramics. India sources lithium from for the electric vehicle (EV), this means relying on China, Chile, Bolivia, Argentina and Australia. Total imports of lithium, lithium-ion, lithium carbonates, and lithium oxides and hydroxides from April 2017 to December 2023 were about US$11.9 billion.

In FY2023, India imported 400 tonnes of lithium carbonate from the Netherlands, 227 tonnes from Belgium, 200 tonnes from Ireland, 75 tonnes from the US and 43 tonnes from Argentina. Between April and December 2023, India imported lithium carbonate mainly from Ireland, Belgium, the Netherlands, Argentina and China.

Like other critical minerals, lithium prices are volatile because the production and refining of the mineral are highly concentrated in certain countries, which makes it vulnerable to geopolitical risks. Aside from the key countries that control most of the global lithium production, 60% of the lithium processing takes place in China.

Lithium carbonate and hydroxide prices dropped in 2020. This decline was due to a supply glut in the market, particularly as the pandemic disrupted demand across various industries, including EVs and consumer electronics. However, this drop was short-lived. By 2021 and 2022, as the global economy began to recover and the demand for EVs surged, lithium prices started to rise, driven by tighter supply and increasing demand for lithium-ion batteries.

Recommendations from IEEFA Report

“India should strive to de-risk its critical minerals sourcing by identifying new international resources and expediting domestic production. Strengthening partnerships with mineral-rich countries should be a priority for India,” says Charith Konda, co-author and Energy Specialist at IEEFA.

“The country can also explore investment opportunities in resource-rich, friendly nations such as Australia, Chile, and African countries like Ghana and South Africa,” he adds.

“For both types of graphite, India depends heavily on China. Mozambique, Madagascar, Brazil, and Tanzania are major graphite producers. As part of Global South cooperation initiatives, these countries could be favorable partners for India’s graphite sourcing,” says Kaira Rakheja, co-author and Energy Analyst at IEEFA.

“The critical minerals mining block auctions provide an opportunity for India to focus on building refining and processing capabilities to become a global value-adding hub,” adds Rakheja.