Critical minerals for critical times

National security requires that we review supply chains for critical-mineral industries to deal with obstacles to international trade

The Rs 2,000-crore funding from PM CARES should boost In­dia’s manufacture of ventila­tors — essential for hospitals treating patients of Covid-19. We must therefore note that Chinese manufacturers have identified permanent magnets, based on rare earths, as a key element in the supply chain for making ventilators — as well as MRI-and CT-scanning devices. China dominates the global supply of rare ea­rths, which are also essential for missile guidance systems, wind energy turbines, and da­ily use devices like smartphones. The lockdown in China led to a contraction in its rare earth industry, and exports, in the first quarter of the year, but Chi­nese analysts expect supplies, and the manufacture of permanent magnets, to be stable for the rest of the year. Ce­n­trally planned quotas for rare-earth producers have been increased and exports are expected to be in line with demand.

While these data may provide some relief, fears remain because China is not only dominant in the mining of rare ea­rths but its control over the refining and processing of the minerals is even more overwhelming. Dangers were highli­ghted in March, when Australian  mi­ning company Lynas Corporation’s Ad­vanced Ma­terials Plant in Malaysia, one of the few alternative refineries outside China, shut down operations be­cause of Covid-19-related restrictions. Since then concerns have been ex­pre­ssed about China’s central place in glo­bal supply chains not only for rare ea­r­ths, but also materials for military equipment, electric vehicles and renewable energy, such as lithium, cobalt, graphite, copper, nickel and manganese.

In India, mining is one of the sectors, which is opening up — with due safety protocols. Governments in states like Rajasthan have prioritised mining operations, which are linked to essential services like food, health care and FMCG. National security requires that we review supply chains for critical mineral industries, to deal with logistic or other obstacles to international trade. The mining sector can continue to be a stable employer in these times of stress.

The government has been attentive to the need for ensuring the supply of critical minerals for India’s requirements. The March 2020 amendment to the Mines and Minerals (Development and Re­gulation) Act took account of the need for continued mining of chromite and manganese. In August 2019, three mineral-sector PSUs set up a joint venture, named Kabil, to acquire critical mineral assets outside India. But India’s own geological potential can support greater mining and processing at home, to achieve strategic-, economic- and trade-related objectives. A look at what the US is doing is instructive.

The Donald Trump administration, which has consistently worked to re­bui­ld the US’ mining industry, included “mi­ning and production of critical minerals, materials, and associated supply chains” among its Essential Critical In­fra­structure. Mineral industries in these sectors maintained their work schedules even during lockdown. The companies are busy working on critical minerals, pa­rticularly rare earths, having discovered how vulnerable their de­pendence on Chi­na made them. Ca­li­fo­rnia’s MP rare earths mine, once the world’s biggest, which closed in 2015, reopened mining operations last year, but had to send its material to China for processing, due to lack of refining capacity in the US. At the height of the US-China trade standoff in May last year, China’s President Xi Jinping pointedly visited a rare earths processing plant to highlight China’s capabilities; and then in June, China raised tariffs on imported rare-earth minerals. The US got the message. The US Army had offered to help fund rare-earth refineries in the USA; and in December 2019, two companies developing a big new reserve of rare earths in Texas, opened a pilot processing plant in Colorado, which expects to start releasing refined products by mid 2020. Overall, the US companies are re­ported to have ramped up production of rare earth concentrates by 40 per cent in 2019. The US is also working on an alliance with Australia to ensure rare-earth resource availability.  

In 2010, Japan faced a cut off of rare-earth deliveries from China because of political tensions; it then sought to build a joint venture with India to process rare earths, which unfortunately did not take off. It may be time to revisit such plans. (Japan had helped financing of Lynas Corporation’s processing plant in Ma­laysia and just moved on from us.)

Looking ahead, we should also re­vi­ew regulatory bottlenecks, which have held back the development of gold mi­nes in India, despite our geological po­tential. Currency volatility in the world has accelerated flights to safe havens like gold. India’s silver production has gone up to 10 times its levels of a decade ago, riding on the back of increased zinc mining and refining. Increasing gold production will yield even greater economic and strategic benefits.

The author is a former foreign secretary