Whalesbook
China's Dominance in Critical Minerals
India is proposing a six-month strategic reserve for critical minerals. This move marks a significant step towards greater self-reliance, driven by China's strong hold on vital supply chains and rising global demand for green technologies. The reserve aims to protect India's growing renewable energy, electric vehicle, and manufacturing sectors from supply risks and price swings.
China dominates the rare earth elements market, controlling about 60% of mining and nearly 90% of processing worldwide. This creates a major bottleneck for other countries. Beijing's temporary curbs on rare-earth magnet exports during trade disputes highlighted how fragile global supply chains can be. India relies heavily on imported lithium, cobalt, nickel, and copper for its green energy and manufacturing goals. Disruptions to these supplies threaten its industrial growth and energy transition plans, affecting sectors from defense to automotive. The market quickly reacts to such geopolitical moves, causing price spikes that raise manufacturing costs and delay projects.
Global Trend: Nations Build Mineral Reserves
India's initiative follows a global trend where nations are building up their reserves of critical minerals. The U.S., China, and South Korea already hold substantial government-managed stockpiles. Japan and the EU are also working to find new sources and boost domestic processing. This global effort recognizes that securing these minerals is key to technological leadership and economic stability. The International Energy Agency notes that critical minerals are often more volatile than oil, making strategic reserves a sound economic choice. India's National Critical Minerals Mission, with ₹16,300 crore allocated, aims to drive exploration, mining, processing, and recycling to attract investment for this sector.
Challenges for India's Strategic Reserve
Despite its clear policy goals and following global examples, India faces major challenges in building its strategic mineral reserves. A key issue is the heavy reliance on imports for minerals like lithium, cobalt, and nickel, as current domestic output is far too low for projected demand by FY30. Increasing domestic mining and refining capacity is difficult due to geological issues, strict environmental rules, and the huge capital needed for new mines and processing plants – a process that can take ten years. China's established infrastructure, integrated supply chains, and lower costs create a significant competitive hurdle. Moreover, the expense of maintaining a six-month reserve, including buying, storing, and managing volatile materials, is substantial. China's ability to impose supply curbs or strategic pricing remains a potent risk. While companies like Lohum Cleantech are working on recycling and local supply chains, these efforts are still small compared to the large import dependency.
Moving Forward: India's Self-Reliance Plan
Building strategic mineral reserves is crucial for India's long-term goal of self-reliance in key industries. Experts like Professor Sankalp Gurjar explain that this strategy aims to reduce vulnerability to supply shocks and geopolitical pressure. Harsh V Pant of the Observer Research Foundation adds that it directly counters China's long-term strategic planning in the sector. Industry figures, such as Pranati Kohli of Lohum Cleantech, compare potential mineral disruptions to past energy crises, highlighting the importance of securing supply chains for India's future industrial and tech growth. The strategy's success depends on consistent policy support, effective implementation of the National Critical Minerals Mission, attracting significant private and foreign investment, and forging international partnerships, possibly through entities like Khanij Bidesh India Ltd (KABIL), to secure foreign assets.