Critical Minerals

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

What are critical minerals?

• Critical minerals are elements that are the building blocks of essential modern-day technologies, and are at risk of supply chain disruptions.
• These minerals are now used everywhere from making mobile phones, computers to batteries, electric vehicles and green technologies like solar panels and wind turbines. Based on their individual needs and strategic considerations, different countries create their own lists.
• However, such lists mostly include 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?

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

• According to the 2019 USGS Mineral Commodity Summaries report, China is the world’s largest producer of 16 critical minerals.
• China, according to a report on the role of critical minerals by the International Energy Agency, is “responsible for some 70% and 60% of global production of cobalt and rare earth elements, respectively, in 2019. 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.”
• It also controls cobalt mines in the Democratic Republic of Congo, from where 70% of this mineral is sourced.
• 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.