Why China and India disagree on green mineral supply chains

Employees work on a production line manufacturing lithium battery products at a factory in Yichang, Hubei province, China May 28, 2019

Employees work on a production line manufacturing lithium battery products at a factory in Yichang, Hubei province, China May 28, 2019. REUTERS/Stringer

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India's hopes for greater collaboration on critical mineral supply chains obstructed by China at G20 meeting, energy sources say

  • Critical minerals seen as key for clean energy transition
  • G20 fails to agree India-led plan to secure supply chains
  • China dominates the sector, opposes collaboration

NEW DELHI - While friction over phasing down fossil fuels dominated a recent G20 meeting in India, another key climate issue also failed to garner consensus despite the host country's best efforts: securing critical minerals for the global energy transition.

Ahead of last week's gathering of energy ministers of the world's 20 richest nations, India was hoping for collaboration on improving the global supply chain of metals, from lithium to cobalt, used in green tech like electric vehicle (EV) batteries.

India, which has the presidency of the G20 this year, wanted the group to develop a shared vision on critical minerals covering aspects from monitoring to strategic stockpiling - at a time when nations are racing to secure supplies to meet net-zero goals.

Yet China - the global leader in mineral processing by some distance - opposed India's push, said two energy experts who were briefed by Indian officials during the G20 meeting. The sources spoke on condition of anonymity to reveal details about the closed-door negotiations in Bambolim, in the state of Goa.

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"There has been a building of coalitions and movements around the world on critical minerals to try and reduce China's hegemony," said one of the sources. "Through this G20 meeting India attempted to draw attention to this - and try and figure out ways through which supply chain disruptions can be reduced."

The final outcome document from the meeting makes brief references to minerals critical for the energy transition, but they have been lumped together with "materials and technologies" - reflecting a lack of consensus on the issue, the sources said.

Although India did not achieve the desired progress due to China's opposition, getting the matter on the table for discussion was a "small victory", according to the sources.

Here is why the global critical mineral supply chain is such a hot topic:

Where are critical minerals found?

Critical minerals - including copper, cobalt, lithium, manganese and nickel - are vital for clean technologies from wind turbines to battery storage, as the world shifts towards a green energy-led economy and strives to rein in global warming.

Minerals like cobalt, lithium and manganese are vital for battery performance, and copper is integral for all electricity-related tech, while rare earth elements such as neodymium are used in permanent magnets that power EV motors and turbines.

Yet most of these minerals are geographically concentrated in their resources, reserves and production, research has found.

Just 15 nations hold between 55% to 90% of global reserves of critical minerals required for low-carbon technologies, found a recent report commissioned by India's Ministry of Mines.

Bolivia has the largest deposits of unmined lithium, while 46% of cobalt reserves are in the Democratic Republic of Congo. China accounts for nearly 79% of natural graphite production - and about half of the world's lithium is mined in Australia.

The same 15 countries also produced 70% to 95% of these minerals in 2022, according to the report.

The energy sector was the driving force behind a tripling of demand for lithium between 2017 and 2022, while demand for cobalt grew by 70% and nickel rose by 40%, found a report released in July by the International Energy Agency (IEA).

Who has most influence over the supply chain?

G20 collaboration on critical minerals is seen as important because the member nations are responsible for at least 75% of global emissions - and the bloc's demand for the metals is rising rapidly as they seek to decarbonise their economies.

For example, India has an ambitious target of adding 500 gigawatts (GW) of renewable energy to its electricity grid by 2030, and also has a goal of massively electrifying transport in the country - from private cars to commercial vehicles.

This will require a lot of battery storage, which India wants to build at home to avoid import dependency. A continuous supply of critical minerals is therefore vital for the country.

The race by nations to secure these minerals is changing the "traditional paradigm of energy security, which so far has been limited to fossil-fuel supply disruptions and price spikes", said the report commissioned by India's Ministry of Mines.

China is far ahead in this race and largely dominates the world's critical mineral supply chains. The country refines 68% of nickel globally, 40% of copper, 59% of lithium, and 73% of cobalt.

Between 50% and 80% of the global production of mineral-rich components for battery cells is done by China, found a 2021 report by the Brookings Institution, a U.S.-based think tank.

What's more, China has 78% of the world's cell manufacturing capacity for EV batteries. The country also hosts three-quarters of all lithium-ion battery mega-factories globally. This means China is also the largest consumer of the minerals it refines.

How are countries seeking to secure critical minerals?

Disruptions to renewables supply chains during the COVID-19 pandemic have spurred several nations to reduce their dependence on imports of resources including critical minerals - and adopt policies to ensure adequate and sustainable supplies.

The IEA's Critical Minerals Policy Tracker identified nearly 200 such policies and regulations across the globe, with more than half of them enacted in the past few years.

These include initiatives like the European Union's Critical Raw Materials (CRM) Act, the Inflation Reduction Act in the U.S. and similar policies from Australia and Canada, among others.

India does not want to risk being left behind.

It last month joined a U.S.-led multinational pact - the Minerals Security Partnership (MSP) - aimed at securing the supply of critical minerals. India and Australia's leaders have met this year to strengthen ties, and have discussed increasing cooperation and trade on mining and critical minerals.

At home, India's Ministry of Mines recently released an assessment mapping 30 minerals vital for its green journey.

Within a month of the assessment the government approved commercial mining for several of these minerals - lithium, beryllium, titanium, niobium, tantalum and zirconium.

One of the energy experts briefed on the recent G20 meeting said India had been stressing the point that "access to critical minerals needs to be similar to public goods", especially to partners like Australia and the United States.

"Without access to the critical minerals, the green energy transition will be difficult or more expensive," the source said.

(Reporting by Bhasker Tripathi; Editing by Kieran Guilbert)

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