Playing Chinese Checkers With The Dragon For EV Minerals In The Indian Ocean

With China's firm grip on lithium and cobalt mines in Africa, India is looking to scour the depths of the Indian Ocean for cobalt, lithium, nickel, copper and manganese—key to green energy—to ensure its place in a brave new world of green mobility and energy.

At the heart of the race is the fight to corner minerals, which will be used in the next generation of electric vehicles, and solar and wind power plants. 

The UN-affiliated International Seabed Authority (ISA) is currently considering India's two applications for deep-sea exploration licences in Afanasy-Nikitin Seamount and the Carlsberg Ridge in the Central Indian Ocean where the minerals may be mined from. 

The race for licences is bedevilled by Chinese research ships already present in the region. Further, Sri Lanka has laid claim to Nikitin Seamount, named after a 15th-century Russian explorer who visited India, Arabia and Africa. 

Though the area lies beyond the 200 nautical miles limit for a country’s Exclusive Economic Zone (EEZ), a different set of rules does allow countries to lay claim on extension of land below the Ocean even if it is beyond their EEZ.   

Already, India has two exploration contracts with the ISA. The first contract covers a huge 75,000 square km sea bed, which is believed to have polymetallic nodules containing nickel, copper, cobalt and manganese. It was signed in 2002 and has been renewed thereafter. 

The second is a 15-year contract signed in 2016 to explore polymetallic sulphides in a 10,000 sq km area along the Central Indian Ridge (CIR) & Southwest Indian Ridge (SWIR) region of the Indian Ocean.

“Globally, no one has started mining as yet. But everybody is getting ready. We have developed a crawler which is a grabbing device to pick up nodules from the sea bed at a depth of five-and-a-half km,” said a senior officer at the Ministry of Earth Sciences. 

“We also know how to extract minerals out of the nodules. The challenge is to develop technology to pump the crushed nodules up through 5,500 metres of ocean to a mother ship,”said the officer, who didn’t wish to be named because he is not authorised to speak to media.

How India Stacks Up Against China On These Minerals

China’s lithium refining plants account for more than half the world’s capacity. Beijing imports more than two-thirds of its raw material from Africa, Australia and the South American lithium triangle of Chile, Argentina and Bolivia. 

Many of the mines are Chinese-controlled and are expected to raise their output four times from 194,000 tonnes in 2022 to 705,000 tonnes by 2025. This will also raise China’s share of the critical mineral to 32 per cent of global supplies. 

Similarly, China’s share of global cobalt supplies is expected to cross the 50 per cent mark by next year, up from 44 per cent in 2022, while its cobalt refining share in the world map has already crossed 77 per cent.  

In contrast, India has no working lithium mines though promising deposits have been found in Jammu and Kashmir and in Jharkhand in eastern India. Nor does it have lithium refining capacity, though it has a nascent lithium battery manufacturing sector which clocked revenues of just over US$ 5 million in 2023. Its electric vehicles industry has been growing at a faster clip for which it imports lithium, about 95 per cent of it coming from China and Hong Kong. 

Government-owned Khanij Bidesh India Ltd, which was set up in 2019 with Nalco, Hindustan Copper and Mineral Exploration and Consultancy Ltd (MECL) pooling together their money, has started buying mining and exploration rights abroad in lithium and cobalt in Australia and South America after Indian firms vying for lithium and cobalt leases in Africa were pipped to the finishing line by Chinese rivals in earlier decades. 

“It is a matter of concern that China has a huge dominance over raw materials in what is going to be a global sunrise industry. India is naturally looking at overcoming this by both trying to exploit resources that we have found locally as well as by trying to corner resources in Australia and South America,” said  Pinak R Chakravarty, former secretary (economic relations) in the Ministry of External Affairs.  

Analysts believe the demand for lithium, cobalt, nickel etc., would go up by geometric proportions as the EV market expands. Alarmed at China’s cornering of supplies, Western countries have also started taking proactive measures to remedy the situation. 

“We may need to team up with like-minded countries such as the US and Japan to counter the deep pocket that China is using to corner mineral resources and global scale factories,” said Chakravarty, who is also co-founder of strategic think-tank DeepStrat.  

Strategic analyst Udai Bhanu Singh, formerly with the Manohar Parrikar Institute of Defence Studies & Analysis, said, “Collaboration with Quad countries, which includes the US as well as with European nations, will be the way forward not only in mining but also gaining technical know-how which we will require in building these 'green' supply chains.”  

The Dragon's Advantage: An Early Start

Beijing was clearly an early mover. As the globe moves towards greener technologies, these critical clutch of minerals will be dearer and their control decisive in the next wave of green industrialisation.

According to data from the International Energy Agency, China's Lithium-ion battery manufacturing capacity stood at 1,200 gigawatt hour (Gwh), accounting for 76 per cent of the global capacity. The US had about 110 Gwh Lithium-ion battery-making capacity, or a little over 7 per cent of the global capacity, while European nations had about 130 Gwh, or 8.2 per cent of the global capacity. The rest of the world had another 130 Gwh capacity. In 2023, India had 18 Gwh of Lithium-ion manufacturing capacity or less than 1 per cent of the global number.

Three years ago, Chinese President Xi Jinping, said at a global environment conference: “Green mountains are gold mountains and silver mountains.” Xi was batting for sustainable economic development by adopting green technologies such as lithium-ion batteries used in electric cars, laptops, solar storage etc. 

More than half the electric cars on road worldwide are now in China. While some 14 per cent of new cars sold in 2022 were electric, they were 60 per cent in China. An IEA global outlook report -- the Stated Policies Scenario (STEPS), projected the share of electric cars would probably rise to 35 per cent of all cars sold globally.   

China has carefully crafted a trade policy of what it calls the “New Three” of lithium-ion batteries, electric vehicles and solar panels. It hopes the new policy will resuscitate exports while ditching the “Old Three” of household appliances, garments and furniture. 

A Citibank report states in “the first 10 months of 2023, China’s exports declined 5.7 per cent year over year amid global weakness for goods demand … But the "New Three" surged 30 per cent year over year to $128 billion during that period.”

It went on to note that Beijing has established a comparative advantage in "New Three" products and the European Union has become China’s largest buyer. Exports of EVs alone rose by 122 per cent in 2022 and by 92 per cent in the first 10 months of 2023. 

“It's just not EVs, our dependence on critical mineral resources and component imports to feed the renewable energy industry is growing by the day. That’s why we need to step up our game by expanding the basket of mining leases abroad with Indian companies and setting up component manufacturing facilities here,” said Krishan G Insan, an energy expert. 

Obviously, if China controls raw materials for this transition or the batteries which power the new EV fleet, then it not only creates a “mountain of gold” for itself but also creates a stranglehold over a vital market that could skewer its rivals' economic security outlook.