India, Australia Cooperation in Critical Minerals Sector

In News

• India and Australia decided to strengthen their partnership in the field of projects and supply chains for critical minerals.

What are critical minerals?

Building blocks:

• Critical minerals are elements that are the building blocks of essential modern-day technologies, and are at risk of supply chain disruptions. 

Usage:

• These minerals are now used everywhere from making mobile phones, computers to batteries, electric vehicles and green technologies like solar panels and wind turbines.  
• Graphite, lithium and cobalt, which are used for making EV batteries; 
• Rare earths that are used for making magnets and silicon which is a key mineral for making computer chips and solar panels. 
• Aerospace, communications and defence industries also rely on several such minerals as they are used in manufacturing fighter jets, drones, radio sets and other critical equipment.

Why is this resource critical?

Needed for transition towards clean energy:

• As countries around the world scale up their transition towards clean energy and digital economy, these critical resources are key to the ecosystem that fuels this change. 
• As the world transitions to a clean energy economy, global demand for these critical minerals is set to skyrocket by 400-600 per cent over the next several decades, and, for minerals such as lithium and graphite used in electric vehicle (EV) batteries, demand will increase by even more — as much as 4,000 per cent

Implications of supply shock:

• Any supply shock can severely imperil the economy and strategic autonomy of a country over-dependent on others to procure critical minerals.

Reasons for supply shocks:

• But these supply risks exist due to rare availability, growing demand and complex processing value chain. 
• Many times the complex supply chain can be disrupted by hostile regimes, or due to politically unstable regions.

What is the China ‘threat’?

World’s largest producer of 16 critical minerals 

• According to the 2019 USGS Mineral Commodity Summaries report, China is the world’s largest producer of 16 critical minerals. 
• It is responsible for some 70% and 60% of global production of cobalt and rare earth elements, respectively, in 2019

Presence in processing operations 

• The level of concentration is even higher for processing operations, where China has a strong presence across the board. 
• China’s share of refining is around 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements

Supply disruption 

• In 2010, China suspended rare earth exports to Japan for two months over a territorial dispute. 
• The decision, according to the Brookings Institution, made the market prices of RREs jump anywhere between 60% to 350%. 
• The prices returned to normal only after a year of China resuming shipments.

What are countries around the world doing about it?

Steps taken by USA

• In 2021, the US ordered a review of vulnerabilities in its critical minerals supply chains and found that an over-reliance on “foreign sources and adversarial nations for critical minerals and materials posed national and economic security threats”. 
• Post the supply chain assessment, it has shifted its focus on expanding domestic mining, production, processing, and recycling of critical minerals and materials.

Steps taken by India

• 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”.
• KABIL would ensure mineral security of the nation; it would also help in realizing the overall objective of import substitution.

Steps taken by Australia

• Australia’s Critical Minerals Facilitation Office (CMFO) and KABIL had recently signed an MoU aimed at ensuring reliable supply of critical minerals to India.

Steps taken by UK

• The UK unveiled its new Critical Minerals Intelligence Centre to study the future demand for and supply of these minerals.

Joint Initiatives

• The US, Canada and Australia had launched an interactive map of critical mineral deposits with an aim to help governments to identify options to diversify their critical minerals sources.

India –Australia Relation

Diplomatic Relation:

• India and Australia established diplomatic relations in the pre-Independence period, when the Consulate General of India was first opened as a Trade Office in Sydney in 1941. 

Bilateral economic relationship:

• Two-way goods and services trade with India was $24.4 billion in 2020.
•  India was Australia’s seventh-largest trading partner and sixth-largest export market in 2020, driven by coal and international education.

People-to-people links:

• Australia and India are building strong and lasting ties through our people-to-people links.
• The Indian diaspora (comprising both Australians of Indian origin and Indians resident in Australia) is now Australia’s fastest growing large diaspora. 
• India remains Australia’s largest source of skilled migrants and the second largest source of international students. 
• Hinduism is our fastest growing religion and Punjabi is our fastest growing language.
•  The Australia-India Council (AIC) is also advancing Australia’s foreign and trade policy interests with India.

Source: IE