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Chinese Weaponisation of Critical Mineral
Context:
On August 15, 2024, China imposed export restrictions on antimony, a critical mineral for defence and strategic sectors, continuing a trend of similar restrictions that began in mid-2023.
Critical Mineral Market Overview
- Global market: $320 billion (doubled in last 5 years), driven by clean energy tech demand.
- China’s dominance: Controls 60% of rare earth production, 60% of critical minerals, and 80% of processing worldwide.
Examples of China’s Weaponisation of Rare Earths
- 2010 Japan Incident: China halted rare earth exports after a collision between a Chinese trawler and Japanese boats.
- Mid-2023 Restrictions: China imposed export restrictions on gallium and germanium in response to U.S. export controls.
- Netherlands Response: China limited the supply of critical minerals like graphite after the Netherlands restricted semiconductor equipment exports.
- Retaliation to U.S. Export Controls on Advanced Technology: When the U.S. imposed tighter controls on advanced computing, semiconductors, and related equipment, China responded by curbing exports of synthetic and natural graphite.
- Other Examples:
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- Zimbabwe: Banned unprocessed lithium exports.
- Indonesia: Restricted nickel exports.
- Chile: Moves to nationalise lithium industry.
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Reasons for Weaponisation
- Strategic Dependency Reminder: China highlights the West’s reliance on Chinese-controlled mineral supply chains.
- Supply Chain Sabotage: Disrupting Western access to critical minerals hampers technology development.
- Targeting Military Hardware: Minerals like rare earth elements are essential for military applications such as submarines and fighter jets.
- Shift to Coercion: China’s foreign policy is becoming more retaliatory as relations with the West deteriorate.
Impact on India
- India is heavily dependent on imports of critical minerals, with an import cost of ₹34,000 crore in FY23.
- Domestic mining may increase, raising environmental and social concerns.
Steps Taken by India
- Critical Mineral Mission: Focuses on domestic production, recycling, and overseas acquisitions.
- Legislative Changes: Mines and Minerals (Development and Regulation) Amendment Bill, 2023 enables private sector exploration.
- Overseas Acquisitions: KABIL, a joint venture of public sector firms, signed its first lithium mining deal in Argentina in January 2024.
- Customs Duty Exemptions: In the Union Budget 2024-25, customs duties on 25 critical minerals were removed to promote domestic manufacturing and reduce import dependency
Challenges in Reducing Dependency
- Complex Supply Chains: Diversifying supply chains requires significant investment and expertise.
- Processing Bottleneck: China remains a dominant processor of critical minerals, even if mined elsewhere.
Global Response
- Diversification of Reserves: New critical mineral deposits are being discovered in Indonesia, Argentina, Australia, and Sweden.
- Substitutes and New Technologies: Alternatives like sodium-ion batteries and cobalt-free EVs are emerging.
- Recycling: By 2040, over 50% of Europe’s lithium demand could be met through recycling.
China’s Strategic Use of Antimony
- China controls half of the world’s antimony production, critical for military, electronics, and energy sectors.
- Export restrictions on antimony will disrupt global supply chains, reinforcing China’s dominance.
Global Cooperation
- Countries like the U.S. and India are forming alliances and developing domestic capabilities to counter China’s mineral control.
- Partnerships with resource-rich nations like Australia and Canada aim to diversify supply chains.
Way Forward
- Decentralisation of Reserves: Efforts to develop alternative sources of critical minerals are underway globally.
- New Extraction Methods: Technologies like Direct Lithium Extraction (DLE) aim to increase production and sustainability.
- Strategic Stockpiling: Countries are increasing reserves of critical minerals to buffer against future supply disruptions.