Lessons from Down Under

Ananta Aspen Centre  |  

Lessons from Down Under

 How India can harness Australia’s Critical Mineral Strategy

 

Modern industries and technologies are dependent on critical minerals such as lithium, silicon, nickel and cobalt, in their quest for green transitioning and meet net zero targets. Australia is blessed with abundant reserves of these critical minerals and plays a pivotal role in balancing the supply globally. The critical minerals market has doubled in size over the last five years and is projected to ‘double or quadruple by 2030, according to a report in CSIRO. This presents an opportunity for Australia to capitalise on its reserves of these strategic minerals. 

Recognizing the importance of these minerals, the Indian Government in its budget for 2024-25 announced a Critical Mineral Mission, focused on developing the country’s domestic production capacity and acquiring overseas reserves. The mission highlights technological development and a skilled workforce towards mining, recycling and refining processes to build self-reliance in these critical minerals. Australia, on the other hand, announced in June 2023 its Critical Minerals Strategy, setting the agenda for itself and a benchmark for the Indo-Pacific region.

 

Australian Bilateral Presence

As per the strategy, Australia has based its objectives on four guiding principles, namely to create diverse, resilient and sustainable supply chains through international partnerships; build sovereign capability in critical minerals processing; utilise critical minerals to become a renewable energy superpower; extract more value onshore to create jobs and economic opportunity including regional and First Nations communities. The strategy pushes for foreign investment and partnerships through international collaborations, highlighting the need for regional co-operation in developing alternative supply chains. The strategy illustrates how Australia has recognised the need to develop its raw materials to generate long-term capital through domestic reserves. Australia had 81 major critical minerals projects in the pipeline as of December 2022, this is up from 71 projects and $22 billion to $36 billion in 2021- showcasing 55 advanced and investment-ready critical minerals projects, according to the Critical Minerals Strategy.

Internationally, Australia is a part of a number of bilateral collaborations with countries such as the US, UK, South Korea, Japan and Germany. With India, Australia has established a Critical Minerals Investment Partnership working towards efficient cooperation and ease of investment between both nations. Australia is also a founding member of the Minerals Security Partnership of which India is a member, creating a space to strengthen supply chains essential to the energy transition.

 

Global Players

Globally, a lot of action is taking place in the critical minerals space. China has heavily invested in Africa for critical minerals, while the Middle East has increased efforts to develop its own critical minerals resources to meet global demand.

 Saudi Arabia is attempting to diversify its economy from oil and has partnered with US-based Ivanhoe Electric to probe Saudi Arabia’s relatively under-explored Precambrian Shield for copper, nickel, cobalt and lithium, according to a report by Middle East Institute. Countries such as Jordan and Turkey plan to develop their critical mineral reserves with a focus on rare earth elements (REEs) and are committed to utilising mineral wealth towards renewable energy systems. 

The US utilises the ‘C5+1’ dialogue, a regional diplomatic platform between the US and the Republic of Kazakhstan, the Kyrgyz Republic, the Republic of Tajikistan, Turkmenistan, and the Republic of Uzbekistan– to initiate critical mineral discussions. 

 

Investment Risks

India and Australia must recognise the growing need to collaborate with the Middle East, especially with UAE and Saudi Arabia joining the renewables race. Investment risks in the Middle East appear as a precursor to geopolitical instability. Examples of Afghanistan and Iran where government instability and ongoing tensions with Israel are prone to shocks in supply. This notably has not discouraged Chinese investment, with Iran and Afghanistan actively collaborating in the lithium industry and the Taliban sitting on critical minerals worth up to reportedly $1 trillion. Regarding strategy, Australia and India are seemingly poised to strengthen the Indo-Pacific and establish solidarity in the region. However, Australia continues to work closely with the EU to establish a bilateral Strategic Critical Minerals Partnership, an opportunity India could bandwagon to benefit from in the long run. 

 

Australian Domestic Policy Frameworks

Australia has established a well-directed structure for their critical minerals set-up. In terms of mapping critical minerals, from mining to financial mechanisms are in place to incentivise domestic production. Geoscience Australia is an established scientific institution tasked with mapping out critical mineral sources domestically, and further investigate local industries to generate downstream channels. The Critical Minerals Office, based in Canberra, provides strategic advice on national policy regarding critical minerals to bind domestic projects to investors, regulators and strategic partners. In terms of financing and regulation, there is a partnership between the Critical Minerals Office, Austrade and the Department of Foreign Affairs and Trade with the intent to improve access to regulatory approvals and help address supply chain risks. Australia’s well-connected regulatory framework creates a formidable resource hub to reshape supply chain networks in the space, a framework that India must take into consideration while drafting the Critical Minerals Mission. The goal is not merely to shape Australia’s intent towards being an international producer- but to evolve its domestic policies under changing global circumstances. 

Australia’s domestic incentives are supplemented by the Junior Minerals Exploration Incentive (JMEI), a policy that enables small companies to carry out greenfield mineral exploration in Australia. The incentive is that it allows small-scale companies to convert their tax losses into a tax credit. The scheme not only attracts investors in the short term but also allows Australia to accelerate its downstream capabilities. The country announced the Critical Minerals Production Tax Incentive (CMPTI) within the 2024-25 Federal Budget as part of its ‘Future Made in Australia’ plan. Starting 2027, the $7 billion package includes funding to map Australia’s critical minerals endowments. Indian industries and the central government must also consider such tax breaks to increase downstream production.  

 

Australians Technology Transfer & ESG Practices

As per Australia’s Resources Technology and Critical Minerals Processing data, the country globally ranks first for nickel in economic reserves and second for lithium and cobalt for the same. However, critical mineral reserves are only as beneficial as their processing and refining capabilities. China is the leader in downstream production of these critical minerals with global share of 68% of nickel, 59% of lithium and 73% of cobalt refining. Slow demand for electric vehicles globally has created challenges in regulating lithium, nickel and cobalt prices. Navigating through these hindrances is the first step for both India and Australia to realize the inevitable demand growth forecast in the next decade. Developing the technologies sector is imperative to reap the benefits of an exponential resource base such as Australia’s. Countries such as Sweden have shown how to grow a successful technology services sector on back of its capability in resource technologies. The contentious area of critical minerals development lies at the processing and early manufacturing stages as the markets are highly concentrated. Australian policy aims to focus on key technologies in the space not merely through investment, but to create a robust network that effectively supports sustainability, drives operational efficiencies, recovers value from waste materials and deploys cross-cutting manufacturing technologies to other sectors. The Australian intent displays enhancing manufacturing of cathode, anode, electrolytes and separators alongside the deployment of batteries for domestic industries engaged in green hydrogen production, renewables and energy storage. There is an argument to be made that Australian policy and governance must be swift and rapid to gain long-term economic benefits through their domestic reserves however, there needs to be cautionary regulations in place to emphasize environmental and sustainability standards. 

Australia’s Critical Minerals Strategy 2023-2030 highlights promoting the country as a world leader in ESG performance. The framework includes ‘enabling fast, efficient and durable environmental approvals and uphold robust environmental protections, embed strong ESG practices that enable access to global markets, support the sector’s enduring social license to operate and fairly share the benefits of critical minerals development with communities, including First Nations Australians. The Australian industry is aiming to adopt energy-efficient and lower-carbon practices; it is important to distinguish their critical minerals approach as ‘pro-environment’ rather than ‘pro-mining.’ In a sense of urgency, it is common for governments to breach sustainability standards or over-exhaust mineral sources to meet demand trends. Australia faces a complex set of social and environmental issues within its borders, ‘many of which are obscured by the country-level indicators used in the international arena- including a persistent gap in life outcomes between Indigenous and non-indigenous people in Australia, social disadvantage in rural areas and widespread land degradation’ 

India must be wary while drafting critical mineral proposals, taking into consideration the complexities of the climate crisis and upholding sustainable practices to prevent the loss of biodiversity and the displacement of rural communities. 

 

What Can India Adopt?

China’s isolated control over critical mineral resources has created supply chain vulnerabilities globally which calls upon India to undertake a balanced approach towards drafting responsible critical minerals policies. The next round of the India-Australia comprehensive trade pact is set to take place in November, presenting the opportunity to strengthen bilateral ties regarding critical minerals. This involves advancing technology transfer negotiations between the two countries. India’s goal of becoming self-reliant must be driven through improving production and refining technology running parallel to developing mapping and exploring infrastructure. India could leverage its public and private sector entities through to invest directly in Australian mining companies and projects. Given the strong mining foundation Australia currently possesses, collaborative funding models and development banks could aide in solidifying short-term requirements. Establishing R&D centres focused on mining as well as sustainable practices can aid India leapfrog to more efficient and cleaner technologies. Establishing long-term offtake agreements with Australian suppliers would guarantee a steady supply of critical minerals for India. The agreements could be linked with investments in Australian projects to benefit India to gain preferential access to resources for industrial and technological advancement. 

As the demand for critical minerals grows, government-to-government partnerships focused on mineral supply are expected to be a popular policy tool, not only to draft frameworks but to create multilateral ties to enhance co-operation between producer and consumer nations. India and Australia must collaborate in such spaces and create dialogues for the betterment of their economies. Utilising multilateral groups such as the QUAD and enhancing cooperation through the Mineral Security Partnership India can draft an effectively balanced Critical Mineral Mission. 

Related

News

News

Letter

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Ambassador Sharat SabharwalFormer High Commissioner of India to Pakistan and Distinguished Visiting Fellow, Ananta Centre

AFPAK DIGEST

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Ambassador Ashok Sajjanhar, Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of

Ambassador Ashok Sajjanhar, Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of

News

Letter

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Ambassador Sharat SabharwalFormer High Commissioner of India to Pakistan and Distinguished Visiting Fellow, Ananta Centre

AFPAK DIGEST

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Ambassador Ashok Sajjanhar, Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of

Ambassador Ashok Sajjanhar, Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of

News

Letter

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Ambassador Sharat SabharwalFormer High Commissioner of India to Pakistan and Distinguished Visiting Fellow, Ananta Centre

AFPAK DIGEST

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Pramit Pal Chaudhury, Foreign Editor, Hindustan Times, and Distinguished Fellow & Head, Strategic Affairs, Ananta

Ambassador Ashok Sajjanhar, Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of

Ambassador Ashok Sajjanhar, Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of