India joins US-led network to secure minerals and reduce dependence on China

India has officially become a part of the US-led network known as the Minerals Security Finance Network (MSFN), an initiative designed to strengthen cooperation between member countries to secure supply chains for critical minerals. The announcement, made by the US State Department on the sidelines of the United Nations General Assembly, comes as 14 nations, along with the European Union, have entered into this pact to address the growing global demand for essential minerals.

The Minerals Security Finance Network (MSFN) was created as part of a larger plan called the Minerals Security Partnership (MSP), which the US started in 2022. India became a part of this MSP in June 2023, showing that it wants to be more involved in making sure it has enough important minerals.

These minerals are needed for things like electric vehicles (EVs) and electronics, which India is trying to produce more of in the future. Joining the MSP helps India secure the materials it needs for these growing industries.

Concerns grow over china’s control of key minerals

The formation of the MSFN reflects global concerns over the dependence on certain countries, especially China, for critical resources like rare earth minerals, lithium, cobalt, and nickel. These minerals are essential components for electric vehicle batteries, semiconductors, and various high-end electronic products.

At present, China dominates global production and processing, especially in rare earth minerals, controlling around 70% of the supply. This overwhelming dependence on China has raised concerns about supply chain vulnerabilities.

“The energy transition is at risk. We need more production capacity for critical minerals that need to come online—many of these supply chains are concentrated in one or two countries and lack resilience,” said US Undersecretary of State Jose W. Fernandez during the UN General Assembly.

The MSFN aims to address this challenge by bringing together development finance institutions (DFIs) and export credit agencies (ECAs) from participating nations. These entities will collaborate with the private sector to deploy capital in new and existing markets for critical minerals, creating synergies to increase the impact and diversify the supply chains.

In a joint statement on the establishment of the MSFN, signatory countries acknowledged that meeting the growing global demand for critical minerals, necessary to support the clean energy transition, is beyond the capacity of any single institution or country. Therefore, public and private sectors in member nations must work together to ensure that production can meet this rising demand.

India’s growing role in critical mineral supply chains

India’s inclusion in the MSFN comes at a crucial time as the country aims to shift a significant portion of its public and private transport toward electric vehicles. With an ambitious push toward EV adoption and a strong focus on electronics manufacturing and semiconductor production, securing a reliable supply of critical minerals is vital for India’s growth strategy.

India’s participation in the MSP and now in the MSFN is a result of a strong diplomatic effort by New Delhi. Concerns had been raised within the Indian government over not being part of the MSP, a strategic partnership focused on reducing dependency on China for critical minerals. After the MSP expanded to include Italy in early 2023, India was subsequently inducted in June 2023.

This inclusion is particularly significant for India as it seeks to establish itself as a major player in the lithium value chain, with electric vehicles predicted to be a key area for disruption in the coming years. India is relatively late in entering this space but aims to capitalize on the global demand for batteries and related technologies.

The MSP and MSFN are focused on securing supply chains for critical minerals like cobalt, nickel, lithium, and 17 rare earth elements. Rare earth elements, which include materials like lanthanum, neodymium, and samarium, are vital in small quantities for the production of semiconductors and advanced electronic devices. Some of these elements, such as lanthanum and neodymium, are available in India, while others, such as dysprosium and terbium, are not present in extractable quantities in the country’s deposits.

This makes India heavily reliant on imports of rare earth elements, especially from China. As China continues to maintain its dominance in the rare earth minerals market, securing alternative supply chains is becoming increasingly important for India and other nations seeking to reduce their dependence on a single country for critical resources.

The MSFN initiative aims to address these vulnerabilities by encouraging collaboration among member nations on projects such as developing mineral processing facilities and fostering cooperation in the development of battery materials.

India’s inclusion in the Minerals Security Finance Network is a significant step toward securing its supply of critical minerals necessary for its clean energy transition and economic growth. As the global demand for electric vehicles, semiconductors, and advanced electronics rises, the need for a diversified and resilient supply chain for critical minerals has become more urgent.

By joining the MSFN, India is positioning itself to work closely with other nations and the private sector to meet these challenges head-on and reduce its dependence on imports from countries like China.

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