India’s critical gap

As India’s shift to renewable-energy sources accelerates, the rapidly growing economy’s requirement for critical minerals will soar. Australia’s ample resources make it well placed to take advantage.

With constrained domestic resources, India’s clean energy ambitions hinge on global supply chains. Given the intensifying import dependence, diversifying sourcing destinations — along with boosting domestic production — has become an urgent priority.

Solar and wind power, as well as electric-vehicle technologies, will be central to India’s transition, requiring more minerals — copper, aluminium, nickel, cobalt and lithium — than traditional power and transport.

India’s is moving towards a goal of 500 gigawatts (GW) of renewable energy by 2030. Solar in the economy is poised to double in capacity by 2030 and six-fold by 2040. While the expansion of wind energy infrastructure has not been as rapid, it is expected to catch up. More transmission infrastructure will also be needed to balance demand and supply across India’s regions.

The power sector’s demand for metals is expected to soar. Solar expansion will propel copper and aluminium consumption, with wind energy and grid upgrades adding impetus. Overhead transmission lines, which make up 90 per cent of India’s grid, rely heavily on aluminium, while copper is more suitable for underground installations. Demand for these metals is anticipated to grow from 1.4 million tons to nearly 4 million tons by 2040.

Battery storage, once niche, is becoming essential in the renewable-energy equation. As more renewables feed into the grid, storage will be needed to manage intermittency and ensure consistent power supply. India’s government has set the target of 42GW for storage by 2030, but a likelier outcome could be 24GW by 2030 and 180GW by 2040. The demand for minerals required to achieve this will rise from 4,000 tons to 237,000 tons in the next 15 years.

The electrification of India’s transport is accelerating. A conservative estimate suggests almost one in every five passenger vehicles could be electric by 2030, and penetration could reach 60 per cent by 2040. This will sharply increase the demand for copper and aluminium for wiring and frames, as well as nickel, lithium and cobalt for batteries. India’s need for these metals could rise more than 20 times to 4.5 million tons.

This part of the energy transition will likely make up over 70 per cent of the total metal demand linked to renewable-energy sources. Overall, the requirement for copper, aluminium, nickel, lithium and cobalt is set to rise to increase nine-fold to 6.2 million tons by 2040.

On top of the energy transition, India’s economic growth will fuel metals demand. For copper and aluminium, India’s share of global consumption will nearly double, making it the second-largest consumer after China. However, when it comes to battery metals, India will continue to trail behind key markets like China, Indonesia, Korea, Japan and the US.

While India’s demand trajectory is distinctly upward, domestic mineral supply is a challenge. The country is scarce in metals, so its reliance on imports can only deepen. It is currently only self-sufficient in aluminium and is expected to become a net importer soon.

Mineral supply is a global issue, with the world’s critical resources available from very few countries. The top five producers of major metals account for 60 per cent to 90 per cent of global supply. Such reliance magnifies vulnerability to disruptions from political, trade and environmental events.

Nickel, cobalt and lithium face pronounced supply concentration, making supply chains fragile. India’s growing reliance on these minerals implies an urgency to diversify sources, build robust international partnerships and bolster domestic production. As demand rises, India’s trade alliances are poised to adapt and expand.

Positioned

Australia is uniquely positioned to be a reliable supplier of resources to India. It has huge reserves of lithium, cobalt and nickel and the two countries already have a trade agreement in place. Yet, India only accounts for five per cent ($US13.8 billion) of Australia’s resource and energy exports. China takes up a much bigger share at 37 per cent.

A conservative projection suggests India’s imports for these minerals could grow more than sevenfold to the equivalent of around $US97 billion. Such export potential suggests India’s share in Australia’s resource exports could increase substantially from the current 5 per cent tentatively to double digits.

While Australia is able to diversify its export markets, India also has the opportunity to secure its critical minerals supply. Beyond Australia, India must also look to other resource-rich nations — such as Indonesia, renowned for its nickel reserves to secure its future, and the country’s trade alliances must evolve to meet this gap.   

Soni Kumari is a Commodity Strategist at ANZ Research