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China’s Critical Minerals Export Control Moves
Context:
Recently, China’s Ministry of Commerce (MOFCOM) expanded its export control list to include 28 entities from the United States. This move effectively restricted access to critical minerals and refined materials crucial for high-technology industries, including aerospace, semiconductors, batteries, and advanced electronics.
Beijing’s Export Control List: Key Minerals
- Tungsten: Essential for specialty alloys and high-temperature applications.
- Gallium: Critical for semiconductors and optoelectronics.
- Magnesium: Vital for lightweight alloys.
- Beryllium: Used in aerospace and nuclear applications.
- Hafnium: Required in high-temperature superalloys and nuclear control rods.
- Lithium-6 (Isotope): Crucial for nuclear and energy storage technologies.
Strategic Reasons for the Restrictions
- Targeting High-Value Sectors: The focus is on minerals essential to western nations’ high-tech industries.
- Retaining Economic Leverage: The aim is to maintain a dominant position in global supply chains.
- Avoiding Domestic Disruption: Export controls are calibrated to prevent adverse impacts on China’s domestic industries and export-driven economy.
Competition for Critical Minerals: A Diplomatic Battleground
Critical minerals are now a focal point in international economic diplomacy. Nations are vying to secure supply chains, ensure resource security, and minimize vulnerabilities to geopolitical pressures.
- Reducing Dependency on Imports: China refrains from restricting minerals that rely heavily on western raw material imports.
Weaponization of Critical Minerals: Past Instances
- 2010 Rare Earth Embargo: Imposed against Japan, disrupting global supply chains.
- 2023 Restrictions: Targeted antimony, gallium, and germanium exports.
- Ban on Extraction Technologies (2023): Restricted rare earth processing know-how to safeguard its technological edge.
Impact of Chinese Export Controls on India
- Increased Import Dependency: India remains reliant on Chinese exports for critical minerals.
- Disruption to High-Tech Industries: Sectors such as electronics, semiconductors, and energy storage are particularly vulnerable.
- Pressure to Develop Domestic Capacities: The restrictions underscore the urgent need to enhance India’s mineral exploration and production capabilities.
Status of Critical Mineral Exploration in India
- Lithium Deposits in Jammu and Kashmir (2023): A promising find, yet no company has bid for the resources.
- Auction Challenges: Only 48% of available mineral blocks have been auctioned.
Government Initiatives to Boost Critical Mineral Exploration
- Identification of Critical Minerals: Thirty minerals have been classified as essential for national security.
- Khanij Bidesh India Ltd. (KABIL): Established to secure overseas investments in minerals like lithium and cobalt.
- 2023 Mines and Minerals Amendment Act:
- Introduced exploration licenses for specialized agencies.
- Removed restrictive classifications on some rare earth elements.
- Promised 50% reimbursement of exploration costs once mining begins.
Impact and Results of Reforms
- Limited Progress: Few exploration licenses have been issued, primarily to public sector firms.
- Sparse Foreign Participation: Global companies remain hesitant to invest.
- Stalled Mining Auctions: Many critical mineral blocks remain auctioned.
Reasons for India’s Lag in Mineral Exploration
- Outdated Resource Classification: Lack of detailed geological data on mineral blocks.
- Risky Investments: Insufficient exploration data deters potential bidders.
- Low Demand for Exploration Licenses: The current framework has failed to attract private and foreign players.
Way Forward: Boosting India’s Critical Mineral Exploration
- Enhance Geological Surveys: Invest in high-quality exploration data to reduce information asymmetry.
- Upfront Fiscal Incentives: Provide capital support during the exploration phase, akin to the semiconductor fabrication model.
- Streamline Regulations: Simplify procedures to attract private and foreign investment.
- Strengthen International Partnerships: Collaborate with resource-rich nations to secure critical mineral supplies.
- Encourage Technology Sharing: Facilitate access to advanced exploration and mining technologies.
