Rare Earth Metals (Episode 2) – “The Race Is Very Much On!”
In my previous and first article on this topic (Rare Earth Metals – “The War for World Domination”, dated July 24, 2022), I had focused on how China was galloping away towards the winner’s podium of the Rare Earth Metals Race. For those who missed it or wants a refresher, here is the link - https://industry4o.com/2022/07/28/rare-earth-metals-the-war-for-world-domination/
In that article I had however also concluded that “It will be interesting to see how countries like the US, Russia, Japan, the EU, India, etc. (in isolation or in alliances) will play out their parts in this resource war. More on that, in another blog”.
Well, I felt it is time for a follow-on article to take stock on how the race has been shaping up over the past year. In this second episode of the series on Rare Earth Metals Race, I will be focusing on India - the proverbial elephant who seems to be waking up from a deep slumber, and maybe a bit groggy still?
An Alliance Was Indeed Born!
As part of the global ‘China-plus-one’
strategy adopted due to the massive supply-chain disruptions post the Covid-19
pandemic, a group of western nations initiated a cooperation to develop
alternatives to China to ensure key industrial supplies. Last year around June 2022, a US-led
partnership of 11 nations (the Minerals Security Partnership or MSP)
- Australia, Canada, Finland, France, Germany, Japan, South Korea, Sweden,
the UK, and the European Union - was created to form an alternate supply
chain to counter China (having 70% share of global production) in Rare Earth
Elements (REEs). A briefing note on the same was also released to the media by
the US Department of State (https://www.state.gov/minerals-security-partnership/).
As per the MSP website (https://www.iea.org/policies/16066-minerals-security-partnership), there are currently 31 member countries, 4
accession countries (including Chile) and 11 associate countries
(including India and China). India is not yet a full member of this
arrangement, but India is keen to be so.
The MSP grouping aims to
bolster the supply chains of critical minerals such as cobalt, lithium, nickel,
gallium, and 17 Rare Earth minerals.
Countering the Chinese Hegemony in Critical Minerals
According
to the US Geological Survey, 38 per cent of world production of rare
earth minerals in 1993 was in China, 33 per cent in the US, 12 per cent in
Australia, and five per cent each in Malaysia and India. However, China
accounted for more than 90 per cent of the world production of rare earth
minerals in 2008. By 2011, China accounted for 97 per cent of world production
of rare earth minerals! So much dependence on one country became
alarming and sent shockwaves across the world capitals.
Chinese
companies over the years have been making discreet investments in overseas
assets in Chile, Indonesia, and Australia. Since 1990, supplies of rare earth
minerals became an issue because the Chinese government began to change the
amount of rare earth minerals it allows to be produced and exported, and also
started limiting the number of Chinese and Sino-foreign joint venture companies
that could export rare earth minerals from China. According to the International
Energy Agency, complex supply chains could increase the risks that might
arise from trade restrictions or other developments in major producing countries.
Hence
the “China Plus One” strategy and the MSP. The MSP is aimed at reducing
dependency on China for rare earth minerals, end its hegemony and pre-empt any
chances of “critical minerals blackmail” (ala, nuclear
blackmail!). To jog our memories, in 2019 China did make implicit threats to
curb exports of rare earth metals to the US (and Japan), as were suggested by
the Chinese state-owned media itself then!
Though India
has 6% (fifth-largest) of the world's rare earth reserves, it only
produces 1% of global output, and meets most of its requirements of such
minerals from China!
India (like other
countries) needs to mitigate the perilous over-dependence on China on a war
footing. The applications of critical minerals (including the rare minerals
set) are diverse and endless - mobile phones, computers, tablets, flat
screen monitors, televisions, semiconductors, fibre-optic cables, electric
vehicles, wind turbines, solar panels, stainless steel, rechargeable batteries,
magnets, power grids, defence, aerospace, medical applications, and the list
goes on.
Recently some good news
has been making the headlines with regards to new discoveries. On Feb. 9, the GOI announced a discovery of an untapped 5.9-million-ton
stash of lithium reserves located in the Reasi district of Jammu and Kashmir.
This has led to renewed efforts to go after establishing commercial feasibility
of the lithium reserves found between 2020 and February 2021 in Mandya district
of Karnataka. Further, in April 2023, scientists at the CSIR-National Geophysical
Research Institute (NGRI) discovered large deposits of Light Rare Earth
Elements in Anantapur district of Andhra Pradesh. The elements include
those in the lanthanide series including allanite, ceriate, thorite, columbite,
tantalite, apatite, zircon, monazite, pyrochlore euxenite and fluorite.
However, the not so
good news is that the resources found in India are of "significantly
lean grade" as they have been found alongside radioactive
elements, thus making their extraction long, complex and expensive. Heavy Rare
Earth Elements have not yet been found in extractable quantities in India. Moreover,
India unfortunately does not yet have the requisite technology, skills and
resources for effective commercial extraction and processing/refining of such
minerals!
How should India Play its Cards?
With the GOI’s renewed
focus on Manufacturing (Make in India and Self-Reliant India/ Atmanirbhar
Bharat), based on the relative importance of particular minerals to our
industrial needs and the strategic assessment of supply risks, India needs to
develop its own list of critical minerals and strategy for the same.
My sense is India
wants to adopt a multi-modal / hybrid strategy to become a serious player in
this global race, but at this point in time is yet to firm up a coherent
strategy and an action plan with adequate budgetary outlays for the same (like
it has already done with other initiatives/missions/sectors).
The Confederation of
Indian Industry (CII) had suggested that such minerals should not be held
captive to India’s civil nuclear programme alone. The industry body had further
recommended that the public sector firm Indian Rare Earths Limited (IREL),
administered by the Department of Atomic Energy (DAE), should be split
into two entities. While IREL primarily focuses on Thorium and Uranium, CII had
suggested that the second entity could pursue other critical minerals.
In
layman terms, there are broadly 2 stages involved in successful mining and
exploitation of critical and rare earth minerals:
Stage 1:
Exploration-Discovery-Commercial Feasibility
For this India seems to be
going the self-driven way at this time, with the Council of Scientific
and Industrial Research (CSIR-India) project called SHORE
(Shallow Subsurface Imaging of India for Resource Exploration) and the Deep
Ocean Mission.
India
can also leverage the expertise of friendly countries like Australia, Chile,
Finland, Norway, US, amongst others. This apart from getting the required
expertise (along with technology and knowledge transfers), will also help India
explore & establish commercial feasibility faster and at scale.
Further (like China so
successfully did), India can look at other countries for such critical mineral
resources sourcing (buying, ownership though investments, etc.). Towards the
same, the Ministry of Mines
has created a Joint Venture company Khanij Bidesh India Ltd (KABIL) with participating
interest of NALCO, HCL and MECL. KABIL
has already shortlisted a
select set of source countries with whom engagements are underway such
as Australia, Argentina, Bolivia, Chile etc. for exploring possibilities of
mineral asset acquisition abroad.
Stage 2:
Extraction-Refining-Commercialisation
Here
India definitely needs external help! Alliances and collaboration will
be the fastest and most effective way to access the required expertise (through
technology and knowledge transfers), till India builds its self-reliance
capabilities.
For
this, India is already working towards joining the multi-lateral MSP
alliance as a priority. In parallel, exploring bilateral and
multi-lateral collaborations can be another route.
A
good example of the same is the Australia-India Critical Minerals Investment
Partnership which is an investment partnership that is set to unlock mutual
benefits for India and Australia from Australia’s world-leading critical
minerals sector. In March 2022, the Australian Government allocated $5.8
million to the three-year Australia-India Critical Minerals Investment
Partnership.
As
part of this partnership, Australia will partner with India to supply critical
minerals, export services and technology to process, refine, recover, and
recycle critical minerals, help with mineral exploration in India, carry out
joint research projects, and support India’s mining-related environmental
management.
In
Feb 2023, Norway’s Minister of Trade and Industry indicated that Norway
will explore export of rare earth metals to India. Similarly, on April 3, 2023,
Chile (home to the world’s largest Lithium reserves), said it is keen to
partner with India in exploring the possibilities offered by the discovery of
the estimated 5.9-million-tonne reserve of lithium in Jammu and Kashmir. Chile further
said it is “willing” to engage in technology transfers and help India
build up its industrial capacity in Lithium exploration so that the country can
become a major player in the metal's supply chain.
It is however intriguing
that the US had kept India out from the MSP alliance! Why? is a loaded question that possibly has many answers, which
I plan to elucidate in the next episode of this series! However, for
its own interests, India (despite its Atmanirbhar Bharat / Self Reliant
India push), should also work closely with the US, both on a bi-lateral
basis through the Initiative on Critical and Emerging Technologies (iCET)
and through multi-lateral forums like Indo-Pacific Economic Forum (IPEF)
and the QUAD grouping, and also MSP (in future when India becomes
a full member). End of the day, both countries cannot keep depending on China
forever!
The Seven Imperatives for India
1) It makes sense for the GOI to set up an integrated ‘India Rare Earths Mission’ helmed and manned by professionals/technocrats (and not public sector bureaucrats) - like the India Semiconductor Mission, the India Stack, etc.
2) The Rare Earths Mission can be included as a key component of the over-arching Make in India & Self-Reliance India planning. As part of that process, extending the Production Linked Incentive (PLI) concept to this sector will also encourage private players (both domestic and foreign collaborators) to mine such minerals.
3) Critical minerals exploration needs to be designated CSFs of the Deep Ocean Mission plan of the GOI. Similarly, ISRO needs to be mandated along with funding, to explore rare earth metals in space, like is being done by NASA and China.
4) Opening up the sector for private sector (including foreign) participation is the need of the hour. This may mean bringing in some much-needed and much-delayed reforms in the mining sector.
5) The country’s skill development programme needs a long-term plan executed in a mission mode to build internal expertise (both technology and process skills) in this emerging field. This should include revamping relevant professional education streams (like geology, applied sciences, mining & metallurgy, etc.) and institutes (Engineering Colleges, ITIs and Polytechnic Institutes). This is a classic case of irony wherein while there is huge demand for skilled professionals (employment opportunities) in this sector, but India does not have adequate skilled manpower supply for the same and unemployment is always a big issue for the country! This just cannot a Ministry of HRD mandate alone to tackle, the revamp should be done as part of the India Rare Earths Mission initiative, with more effective minds deployed on the job!
6) Leveraging collaborations and alliances (both bilateral and multi-lateral) to address current deficits, access tech and skills transfer, and scale faster. Mapping the MSP member countries and working on them consistently and in a target-oriented manner is the way to go!
7) Finally, India should not decouple from China (not in the near term for sure) in this key sector! Like its dependence on China for APIs for its Pharmaceutical sector, till the time there is a credible alternative formed based on its hybrid strategy of “self-reliance + alliances”, India has to do business (read import) and be dependent on China, till the India Rare Earths Mission starts delivering.
In my next article of this series (Episode 3), I plan to cover further developments in this sector which I will be tracking, with a focus on what the US has been planning and doing. Watch this space!
A Blog Series on Geo-Economics & Geo-Politics
Dated: May 1, 2023
Author: Subham Sarkar (https://www.linkedin.com/in/subham-sarkar-519b7114/)
Disclaimer: The contents of this article are purely
written in an individual capacity with data available in the public domain and
based on the personal opinions of the author. Data sources and image credits have
been cited duly as and where applicable.
Comments
Post a Comment