Can lithium energise the future of the Australia India relationship?
Tushar Joshi, Former Australia India Institute Research Associate and USYD Masters Student
In January 2021, while speaking at a session hosted by the Indo-Australian Chamber of Commerce, Australia’s High Commissioner to India, Barry O’Farrell said, “India and Australia will gain from expanded trade of lithium resources”. Who would have thought that two years later, India would find its own lithium reserves on home soil?
On February 9, 2023, the Geological Survey of India confirmed the discovery of 5.9 million tonnes of inferred resources (G3) of lithium in the Salal-Haimana area of Reasi District of Jammu and Kashmir. Lithium is an important component in the production of batteries for electric vehicles. This discovery is not only seen as a game changer for India’s own economy, but it also has geopolitical implications and offers greater scope for cooperation between Australia and India in critical and emerging technologies.
But what makes lithium so crucial? First, lithium achieves a perfect balance between range and saturation in comparison to other battery raw materials, meaning, unlike cobalt and nickel, lithium’s increased storage capacity also increases the range of the battery. Thus, electric vehicles with Lithium-ion (Li-ion) batteries can travel longer distances with less charging capacity. The second major factor is energy efficiency – 99 per cent of the energy stored in lithium batteries is converted to usable output, which is far better than the average efficiency of 70 per cent of lead acid batteries and 85 per cent of nickel-cadmium batteries. Thirdly, lithium is the lightest available mineral making it easy to store, yet it has the highest energy density, with a density of 50–26Wh/Kg, higher than the energy density of lead-acid and nickel-cadmium batteries, with an energy density of 30–50Wh/Kg and 45–80Wh/Kg, respectively.
While lithium is not a rare earth material, the demand for lithium batteries is expected to increase by 33 per cent year-on-year, from 700 GWh in 2022 to 4700 GWh by 2030.
However, challenges include how quickly lithium can be produced, supplied, and made profitable. Therein lies the geopolitical implications. The second most abundant lithium deposit in the world is found in Australia with 5.7 million tonnes, behind Chile’s 9.3 million tonnes. In terms of lithium production, Australia leads the world producing 61,000 metric tonnes, followed by Chile (39,000 metric tonnes) and China (19,000 metric tonnes). However, unsurprisingly it is China that dominates lithium supply markets. China is the biggest exporter of lithium with 313, 360 shipments recorded up until November 2022.
There are two main trends which could in the future shape the nexus of geopolitics and energy; first, countries with such resources could consider forming a union in pursuit of collective prosperity, such as OPEC. It is worth noting however that countries with lithium reserves have not yet been able to do so. The second trend is that the giants of geopolitics will continue to find ways to take control over resources and capitalise on them through coercive or strategically planned business and financial tactics. China, which does not have as many lithium resources as Australia or South American countries, controls the mining supply market through control of major shares within mining companies. For example, Tianqi Lithium, one of China’s mining giants, is the second largest shareholder of a Chilean mining company, SQM, and also acquired a 51 per cent share in the world’s largest hard rock lithium mine, Greenbushes Lithium Mine, located in Western Australia.
Aside from capturing market share in lithium industries around the world, China is also dominating critical and emerging technology fields through its high-impact research. According to ASPI’s new Critical Technology Tracker, China’s monopoly risk is high in electric batteries.
Both India and Australia are heavily dependent on China for lithium in different ways. Australia relies on China in terms of exporting its lithium into the Chinese market. In June 2022, China received 97 per cent of Australia’s total lithium exports. On the other hand, China dominates the Indian market with almost 70 per cent of lithium in India coming from China and Hong Kong. It is not good for both countries to put all their eggs in one Chinese basket whether it be in terms of exporting or importing.
For India, it lacks expertise in lithium production. India’s current finding of lithium falls in the G3 category, the second of four stages of geological assessment. It took India nearly two decades to achieve G3 from the G4 stage of exploration, which demonstrates India’s unfamiliarity in this sector.
If India wants to make the best use of its potential lithium reserves, it will require partnering with lithium industry experts and Australia is well placed to engage. IIT Bombay professor, Sagar Mitra, has said, “Australia has similar reserves like J&K reserves… we may need technology transfer and ties with lithium metal extraction industries outside India.”
India appears open to strengthening these ties, evident in its recently released Union Budget wherein India removed custom duty on capital goods/machinery for the manufacture of lithium-ion cells. This is also reflected in India’s plans to achieve 50% of its energy requirements from renewable energy by 2030, a transition to electric vehicles which will see 30% of total vehicles electric by 2030, and Modi’s Net Zero Vow for India by 2070. Australia’s expertise and assistance in lithium production will be crucial for India to achieve these goals.
In a recent interview with the Sydney Morning Herald, India’s High Commissioner to Australia, Manpreet Vohra said, “both nations should expand cooperation on critical minerals such as lithium, cobalt and silicon… you are blessed with a huge number of those minerals; we are blessed with a market size.”
Even Australia understands the scope of strengthening cooperation in this sector. In July 2021, Austrade published a comprehensive report addressing market dynamics and opportunities for bilateral cooperation in the supply chain of important minerals, including lithium. Then in 2022, both countries reached an agreement called the Australia–India Critical Minerals Investment Partnership wherein the Australian government allocated $5.8 million to strengthen cooperation in critical minerals. The recent free trade agreement between Australia and India known as ‘ECTA’ also recognises the importance of critical minerals.
While there is still a lot more that needs to be done, both countries can focus on increasing cooperation over the production, processing, and profitability of lithium both through bilateral engagement and through multilateral forums such as the Quadrilateral Security Dialogue which has a Critical and Emerging Technologies Working Group focused on enhance the four countries’ collective capacity in this area.
Even though India’s discovery of its new lithium reserve may be a long way from becoming commercial, it has the potential to drive the future of India’s own economy and its relationships with key strategic partners such as Australia, especially if it is able to leverage expertise and assistance from countries with lithium industry expertise.