Indian Council of World Affairs

The inclusion of lithium as a 'critical' mineral in India's Ministry of Mines Committee report of June 2023 highlights its vital role in India's economic development and national security.^[i] The Mines and Minerals (Development and Regulation) Amendment of August 2023^[ii] underscores the strategic importance of strengthening the exploration and extraction of critical minerals, with lithium at the forefront. 

In November 2023, the auction bids for critical mineral blocks, including a lithium block in the Salal-Haimana area of Jammu and Kashmir, further emphasised India's recognition of lithium's significance.^[iii] The discovery of 5.9 million tons of inferred lithium reserves in this block positions India as the 7th largest source of this crucial element.^[iv]

Lithium is the primary element in producing batteries for electric vehicles (EVs) and electricity storage systems. The demand for lithium-ion batteries will increase as India and the world transition towards cleaner and more sustainable energy solutions. Therefore, securing lithium becomes pivotal for energy transition goals in mitigation and adaptation to climate change. 

This Issue Brief aims to delve into the multifaceted significance of lithium, exploring its pivotal role in the energy transition, the geopolitics of its value chain, and India's strategic position within this context. 

Lithium for Energy Transition 

Global warming and climate change have compelled governments and businesses to set net zero emission targets. Transitioning from fossil fuel-intensive energy production to a greener variation is critical to achieving those targets. The most lucrative path that has evolved for achieving a low carbon emission economy while ensuring energy security is scaling the deployment of renewable energy technologies such as solar panels, wind turbines, EVs, and energy storage systems with integrated grid-level connectivity vital to sustaining the evolving energy systems for transition.^[v]

The lithium-ion battery has become the dominant technology due to its ability to store a high density of energy, faster recharge rates, and longer life cycles compared to other battery technologies that are in commercial use. Lithium is the lightest metal on the periodic table, dubbed as ‘white gold’ or the ‘new oil’ due to its low maintenance and high shape, size, and weight malleability with various applications that have made it the most viable form of battery technology currently available.^[vi] In 2022, the global lithium supply was more than 634,000 metric tons. The projection for 2030 suggests that the world's lithium supply will increase to over 2.14 million metric tons. In contrast, the global demand for lithium is expected to reach 3.1 million metric tons, creating a supply deficit by 2030. Over the next decade, as the global market for lithium is expected to increase significantly, new and significant lithium deposits will need to be discovered and brought online every year to keep up with the demand. The global vision for a net zero economic and energy transition depends on the technologies that use raw materials such as lithium.^[vii] This realisation has brought the value chains of lithium and other minerals under increased scrutiny. Hence, identifying ‘critical’ minerals is important as nations devise plans to secure them. 

Significant Actors in the Lithium Industry 

The most prominent actors along the Lithium value chain are China, Australia and the lithium triangle of South America (Chile, Argentina and Bolivia). Australia, with 6.2 million tons of lithium reserves and 61 thousand metric tons of production capacity, has the world's third-largest reserves and second-largest production capacity.^[viii] The lithium triangle caters to approximately 60 per cent of the world's lithium needs. The Andean salt flats in southwest South America are home to the world's largest lithium reserves, shared between Chile, Argentina, and Bolivia. Chile has the second largest lithium reserves at 9.3 million metric tons with 39 thousand tons of production capacity. Meanwhile, due to various socio-political and environmental challenges, Bolivia could not leverage possessing the world's largest lithium reserves of 23 million metric tons. Argentina produces 6,200 metric tons and has the fourth largest reserves with 2.7 million tons.^[ix]

China’s Near-Monopoly 

China produces 19,000 metric tons of lithium just after Chile, even while it is behind Argentina in its reserves at 2 million tons. China is estimated to possess 60 per cent of the world's capacity for processing and refining lithium.^[x] It also has the largest share in processing several critical materials needed for battery production. It comprises 42 per cent copper, 65 per cent of the world's lithium, 74 per cent of cobalt and 100 per cent of graphite processing units.^[xi] China is a dominant force in the production of lithium-ion batteries. In 2022, China accounted for 0.9 terawatt-hours of battery manufacturing capacity, constituting about 77 per cent of the worldwide total and surpassing the combined capacity of the rest of the world. Projections indicate that by 2030, it is anticipated to possess around 70 per cent of the overall manufacturing capacity for Li-ion batteries. ^[xii]

Nevertheless, China heavily relies on lithium imports, primarily from Australia and the lithium triangle. In 2021, 78.7 per cent of China's lithium imports came from Chile, totalling 64,000 tons.^[xiii] As of 2022, China also received 97 per cent of Australia’s Lithium exports.^[xiv] China’s import dependence prompted some major acquisitions by Chinese mining firms. Ganfeng, Tianqi, and Zijin now own substantial stakes in global lithium projects and extraction companies. China has acquired 50 per cent of the world's lithium projects made available for sale since 2018. Notable examples include Tianqi's majority ownership of the Greenbushes in Australia, which is the world’s largest lithium mine^[xv], and a 23 per cent stake in Chile's state-owned mining company, SQM.^[xvi] Ganfeng co-owns the Cauchari-Olaroz lithium project in Argentina.^[xvii] At the same time, Zijin owns their Tres Quebradas project.^[xviii] Additionally, Chinese company CITIC Guoan and the Russian Uranium One Group will jointly invest 1.4 billion USD in two lithium plants for Bolivia’s Pastos Grandes lithium project.^[xix] China's significant control of the lithium industry makes its value chains vulnerable amidst their growing power projection and increasing global demand for EVs and renewable energy.

The West and its Measures 

The US aims to catch up with China in processing and manufacturing for renewables. They have a significant one million metric tons of lithium reserves. However, they have just one active lithium mine in Nevada, which produces around 5,000 metric tons annually. The US has a lithium processing capacity of only 17,000 tones per year relative to China’s 19,400 tones.^[xx] The US is behind China at a mere 6 per cent of the world’s Li-ion battery manufacturing capacity, whereas China tops with a massive margin at 77 per cent.^[xxi] To fill this huge gap between China and the rest of the world, the US launched a Mineral Security Partnership with Australia, Canada, Finland, France, Germany, Japan, South Korea, Sweden, the United Kingdom, and the EU in June 2022. The MSP aims to ensure that critical minerals are produced, processed, and recycled to support the members' economic development. The Partnership aims to work with the host governments and industries to provide financial and diplomatic support for strategic projects. Italy, Norway and India later joined it.^[xxii] The European Union is also rushing to secure its value chains, considering the threat to its Russia-dependent energy security in the wake of the Ukraine crisis. The EU has developed a Critical Raw Materials Act to diversify the Union's imports of raw materials, including lithium. They aim to expand strategic partnerships and establish secure value chains.^[xxiii]

India in the Value Chain 

India's lithium requirements are primarily met through imports. It is the world's largest processed lithium importer, with  most of it coming from Hong Kong and China. India imported lithium worth more than 722.5 million USD during 2020-2021. India is also one of the world's largest importers of lithium-ion batteries. India imports them from China, Japan, and South Korea. In 2022, it imported 617 million units of lithium-ion batteries for $1.8 billion.^[xxiv] India aims to reduce its dependence on imports for strategic reasons, much like the rest of the world. Towards that purpose, India approved a Production Linked Incentive (PLI) Scheme for manufacturing Advance Chemistry Cell (ACC) batteries in May 2021.^[xxv]

Recently, India took up a ray of lithium exploration projects in Jammu and Kashmir, Karnataka, Rajasthan and Jharkhand and found positive results, a glimmer of hope for developing a robust domestic value chain of battery pack manufacturing. India is taking rapid steps towards making its future energy security fool-proof. It will, however, take around a decade to commercially operationalise a mine and even longer to establish a domestic value chain from extraction to manufactured Li-ion batteries. Nevertheless, India has already set a net-zero emissions target for 2070.^[xxvi] It also aims for a 30 per cent EV share in new vehicle sales and increasing non-fossil fuel energy capacity to 500 GW by 2030.^[xxvii] For all of these targets, India will need Lithium and the batteries made from it. 

In light of this need for its immediate future, India’s Ministry of Mines formed Khanji Bidesh India Limited, or KABIL, to identify, acquire, develop, and commercialise strategic minerals from overseas locations for supply in India.^[xxviii] In January 2024, KABIL signed a $24 million lithium exploration pact for five blocks in Argentina. The agreement gives KABIL the exclusive rights to evaluate, prospect, and explore lithium in Argentina. If lithium is discovered, KABIL will gain exploitation rights for commercial production in five lithium brine blocks in Argentina's Catamarca province.^[xxix] India is also collaborating with Australia on a Critical Mineral Investment Partnership to create new supply chains for critical minerals. The partnership will support India's efforts to become a manufacturing hub through critical minerals processed in Australia, which involves three projects of cobalt and two of lithium.^[xxx] India also joined the US-led Minerals Security Partnership in June 2023.^[xxxi] and is exploring opportunities to acquire overseas lithium assets in Chile and Bolivia. 

Conclusion 

Countries are trying to cooperate for energy transition while also seeking to secure lithium extraction operations for themselves and develop processing and manufacturing capabilities at home. They are taking measures to establish a domestic battery and EV industry for the new green revolution. Initiatives such as the Inflation Reduction Act in the USA (which calls for de-risking of value chains)^[xxxii], the Chilean National Lithium Strategy^[xxxiii], India's National Mission on Transformative Mobility and Battery Storage^[xxxiv], and similar programs in Australia and the EU aim to ensure their future growth and energy security. How much lithium can be produced for everyone to have a sustainable domestic industry must be considered and deliberated. Meanwhile, even multinational automobile companies also want to integrate their EV businesses vertically and horizontally.^[xxxv] Countries must work together to establish a circular economy by emphasising innovation and recycling batteries at scale. Given the considerable potential of the domestic EV market, India can be one of the first countries to capture the recycling market once there are enough exhausted batteries to sustain a business. 

As new developments in battery technology can change the geopolitics of the value chain discussed above, a nation’s positioning needs some fluidity. India can explore its prospects with Iran as it claims to have discovered an estimated 8.5 million tons of inferred lithium reserves in March 2023, potentially putting it only behind Chile. It reportedly plans to begin production by 2026.^[xxxvi] India can cooperate with Iran on this front in line with its policy of strategic autonomy. It will help India secure a consistent lithium supply in a market where the competition is just as much as the cooperation. Even Iran, a country sanctioned by some major powers, would profit from trade with India, similar to the trade in petroleum between the two countries. Therefore, cooperation with all the players in the market is vital, be it China, the USA, Australia, Iran, the lithium triangle countries or the automobile and battery MNCs, as the future rests on the mitigation of and adaptation to climate change. Only then will there be any kind of clean and green future.

*****

*Nikhil Guvvadi, Research Intern, Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal.

Endnotes

^[i] Report of the Committee on Identification of Critical Minerals. 2023. Ministry of Mines. June 2023. [https://mines.gov.in/admin/storage/app/uploads/649d4212cceb01688027666.pdf](https://mines.gov.in/admin/storage/app/uploads/649d4212cceb01688027666.pdf)

^[ii] The Mines and Minerals (Development and Regulation) Amendment Act. 2023. Ministry of Law and Justice. 9th August 2023. [https://mines.gov.in/admin/download/64dc579c4f9e31692161948.pdf](https://mines.gov.in/admin/download/64dc579c4f9e31692161948.pdf)

^[iii] PIB. ‘Launching of Critical Mineral Blocks Auction’, 6 December 2023. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1983066.

^[iv] PIB. ‘Lithium Deposits Found - GSI to Carry out More Exploration in J&K’, 15 March 2023. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1907239.

^[v] Zhao, Chunyang, Peter Bach Andersen, Chresten Træholt, and Seyedmostafa Hashemi. ‘Grid-Connected Battery Energy Storage System: A Review on Application and Integration’. Renewable and Sustainable Energy Reviews 182 (1 August 2023): 113400. https://doi.org/10.1016/j.rser.2023.113400.

^[vi] Moseman, Andrew. ‘Why Is It So Hard to Beat Lithium-Ion Batteries?’ Caltech Magazine, 28 March 2022. https://magazine.caltech.edu/post/next-generation-battery-technology.

^[vii] Statista. ‘Lithium Global Supply Projection 2030’, 30 October 2023. https://www.statista.com/statistics/452026/projected-total-supply-for-lithium-globally/.

^[viii] Ministers for the Department of Industry, Science and Resources. ‘Australia’s Lithium Powering the Global Energy Transition’, 6 March 2023. https://www.minister.industry.gov.au/ministers/king/media-releases/australias-lithium-powering-global-energy-transition.

^[ix] Lithium. 2023. US Geological Survey. January 2023. [https://pubs.usgs.gov/periodicals/mcs2023/mcs2023-lithium.pdf](https://pubs.usgs.gov/periodicals/mcs2023/mcs2023-lithium.pdf)

^[x] CGEP. ‘Fact Sheet: Lithium Supply in the Energy Transition’. Center on Global Energy Policy at Columbia University SIPA | CGEP, 20 December 2023. https://www.energypolicy.columbia.edu/publications/fact-sheet-lithium-supply-in-the-energy-transition/.

^[xi] Garcia, Lucia. ‘Complexities of Battery Supply Chain May Slow EV Adoption’. Economist Intelligence Unit, 2 August 2023. https://www.eiu.com/n/complexities-of-battery-supply-chain-may-slow-ev-adoption/.

^[xii] Statista. ‘Li-Ion Battery Production Capacity by World Leader’, 27 October 2023. https://www.statista.com/statistics/1420153/lithium-ion-battery-manufacturing-capacity-by-world-region-forecast/.

^[xiii] The Observatory of Economic Complexity. ‘Lithium Carbonates in Chile’, October 2023. https://oec.world/en.

^[xiv] Statista. ‘Australia: Monthly Exports of Lithium Concentrates to China 2022’, 2 January 2023. https://www.statista.com/statistics/1341091/australia-monthly-exports-of-lithium-concentrates-to-china/.

^[xv] Mining Data Online. ‘Major Mines & Projects | Greenbushes Mine’. ]. https://miningdataonline.com/property/829/Greenbushes-Mine.aspx. [Accessed on 23 January 2024]

^[xvi] Global Times. ‘Chile’s Lithium Nationalization Plan May Have Negative Impact on China’s Supply - Global Times’, 24 April 2023. https://www.globaltimes.cn/page/202304/1289705.shtml.

^[xvii] Lithium Argentina. ‘Lithium Argentina Corp. - Our Projects’. https://www.lithium-argentina.com/our-projects/cauchari-olaroz/default.aspx. [Accessed on 23 January 2024]

^[xviii] Zijin Mining. ‘Key Projects-Zijin Mining Group Co., Ltd.’ https://www.zijinmining.com/global/program-detail-71747.htm. [Accessed on 23 January 2024].

^[xix] ETEnergyworld.com. ‘China, Russia Pledge $1.4 Billion for Lithium Plants in Bolivia - ET EnergyWorld’, 30 June 2023. https://energy.economictimes.indiatimes.com/news/power/china-russia-pledge-1-4-billion-for-lithium-plants-in-bolivia/101392068.

^[xx] Fastmarkets. ‘“Huge Opportunity” for Lithium-Ion Battery Processing in US’, 11 May 2023. https://www.fastmarkets.com/insights/huge-opportunity-for-lithium-ion-battery-processing-in-us/.

^[xxi] Asenov, Grace. ‘“Huge Opportunity” for Lithium-Ion Battery Processing in US’. Fastmarkets (blog), 11 May 2023. https://www.fastmarkets.com/insights/huge-opportunity-for-lithium-ion-battery-processing-in-us/.

^[xxii] state.gov. ‘Minerals Security Partnership - United States Department of State’.. https://www.state.gov/minerals-security-partnership/. [Accessed on 23 January 2024]

^[xxiii] European Commission - European Commission. ‘European Critical Raw Materials Act’. Text, 16 March 2023. https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1661.

^[xxiv] PIB. ‘Lithium Import And Production’, 21 March 2022. https://pib.gov.in/Pressreleaseshare.aspx?PRID=1807681.

^[xxv] PIB. ‘Allotment Made for 50 GWh of Battery Capacity to 4 Successful Bidders for Incentive under (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage’, 24 March 2022. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1809037.

^[xxvi] PIB. ‘Net Zero Emissions Target’, 3 August 2023. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1945472.

^[xxvii] Popli, Manah. ‘India’s EV Production Capacity and Domestic Auto Market Trends’. India Briefing News, 9 November 2023. https://www.india-briefing.com/news/indias-prospects-as-an-ev-hub-consumer-market-and-production-capacity-30157.html/.

^[xxviii] PIB. ‘KABIL Set up to Ensure Supply of Critical Minerals’, 1 August 2019. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1581058.

^[xxix] PIB. ‘India Signs Agreement for Lithium Exploration & Mining Project in Argentina’, 15 January 2024. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1996380.

^[xxx] PIB. ‘Milestone in India and Australia Reach Critical Minerals Investment Partnership’, 11 March 2023. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1905863.

^[xxxi] PIB. ‘STRENGTHENING OF MINERAL SUPPLY CHAINS’, 7 August 2023. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1946416.

^[xxxii] The White House. ‘Inflation Reduction Act Guidebook | Clean Energy’.. https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/. [Accessed on 23 January 2024]

^[xxxiii] https://magnet.cl. ‘Litio Por Chile: Conoce La Estrategia Nacional Para El Desarrollo Económico Del País - Gob.Cl’. Gobierno de Chile.. https://www.gob.cl/litioporchile/.[ Accessed on 23 January 2024]

^[xxxiv] PIB. ‘Mobility Solutions Get a Boost’, 7 March 2019. https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1567807.

^[xxxv] Krauss, Clifford, and Jack Ewing. ‘Lithium Scarcity Pushes Carmakers Into the Mining Business’. The New York Times, 2 July 2023, sec. Business. https://www.nytimes.com/2023/07/02/business/lithium-mining-automakers-electric-vehicles.html.

^[xxxvi] Tasnim News Agency. ‘Iran to Start Up Newly-Discovered Lithium Mines by 2025 - Economy News’, 6 March 2023. //www.tasnimnews.com/en/news/2023/03/06/2863544/iran-to-start-up-newly-discovered-lithium-mines-by-2025.