India Must Build Midstream Muscle to Break China’s Mineral Chokepoint

Lithium, cobalt, copper, nickel, and rare-earth supply chains are no longer just the domain of commodity traders; they have become matters of commercial diplomacy and hard national security. As the clean-energy transition and advanced defence manufacturing accelerate, the world is confronting a vulnerability that mirrors the OPEC-era oil shocks of the 1970s.

The global narrative often misdiagnoses the problem as resource scarcity. As Mahesh Bakaya, an international trade specialist, points out, the earth is not running out of these minerals. The raw ore is abundant in Australia, Chile, the Democratic Republic of Congo, Indonesia, and Argentina.

The true geopolitical crisis is the severe shortage of capacity outside China to convert that ore into battery-grade or magnet-grade material. This processing chokepoint resembles the oil chokepoints of the past; it is highly concentrated, easily weaponisable, and extremely slow to replicate.

Midstream Monopoly

The numbers illustrating this bottleneck are stark. According to the International Energy Agency’s Global Critical Minerals Outlook 2026, China’s average share of global refining across 19 of the 20 most strategically important minerals is 70–72%. For rare earths, China’s refining share exceeded 90% as recently as 2023. Even after the fastest diversification push in a decade, it has fallen only to roughly 85%.

A recent study by the Council on Energy, Environment and Water illustrates China’s grip on the sector. It said China accounted for over 90% of global rare-earth and graphite processing, nearly 80% of cobalt processing, and 70% of lithium chemicals.

In 2024 and 2025, Beijing escalated its use of export controls, curbing shipments of gallium, germanium, tungsten, tellurium, and heavy rare earths in much the same way oil-producing states once used embargoes. Today, more than half of all globally traded energy-related minerals are subject to some form of export control.

A paper by the Research and Information System for Developing Studies says ‘the experience of China can be instructive in this regard’, and argues that India needs to invest heavily in processing and refining technologies rather than simply ship raw materials overseas for processing.

India’s exposure is substantial. The Observer Research Foundation noted in a May 2026 brief that the country’s demand for lithium, cobalt, nickel, and manganese will exceed 250,000 tonnes by 2030.

Africa is central to India’s response. The recent revival of negotiations on the India-Southern African Customs Union Preferential Trade Agreement provides a real-world anchor for this strategy.

In early August 2026, India signed the terms of reference to resume talks that had stalled between 2002 and 2010. At the BRICS 2026 Trade Ministers’ Meeting in Jaipur, Commerce Minister Piyush Goyal met South Africa’s Parks Tau, and the mineral dimension was explicit. India is seeking more reliable access to the bloc’s platinum-group metals, manganese, and copper.

This marks a significant pivot in India-Africa ties. Africa is no longer merely a recipient of development aid, but is increasingly seen as the backbone of India’s raw material security. South Africa is central, accounting for $7 billion of India’s $7.5 billion in exports to SACU in 2025–26.

Formal negotiations are scheduled for mid-September 2026. They are critical to converting diplomatic intent into binding trade deals that can underpin a durable, resilient supply chain.

Execution Gap
But that is only part of the solution. The more complex question is whether India has the institutional capacity to compete with China’s state-backed machinery. Intent expressed through MoUs, even when backed by on-the-ground geological surveys, will not mean much unless agreements spanning the US, UAE, Australia, and Argentina lead to tangible results in extraction and refining.

The experience of Coal India Ltd in Chile illustrates the execution gap. CIL has been seeking to acquire a Chilean unit of Wealth Minerals, Kuska Minerals, to tap Chile’s 13-million-tonne lithium reserves. The joint licence application was filed in October 2025, but the acquisition remains stalled pending regulatory approval from the Chilean government.

The Chilean venture nevertheless reveals an evolution in India’s strategy. Khanij Bidesh India Ltd was earlier the designated state vehicle for overseas mineral acquisitions. But KABIL lacked the financial muscle and risk appetite to compete globally, prompting a shift to Coal India, whose annual output exceeds 760 million tonnes and which has greater financial and domain muscle. Even as this course correction plays out, Chinese competitors are said to be rapidly acquiring African lithium mines and copper assets in Botswana and Mali.

To bridge this institutional deficit, the policy imperative is clear. Another RIS study says “while India is a mineral-rich country and has resources of several minerals, however, less than 10% Indian land mass has been geo-scientifically surveyed for an assessment of underlying minerals. Long delays in regulatory clearances and social resistance have prevented investment in mineral sector. Efforts should be made to address these concerns to fully exploit the domestic mineral potential. Additionally, India should explore leveraging development assistance programmes, similar to China’s approach, to support Indian firms mineral acquisition projects abroad.”

This is not beyond India’s policy reach. The Union government has already recognised the challenge. Early last year, the Ministry of Mines launched the National Critical Mineral Mission, a comprehensive strategic blueprint with proposed expenditure of ₹163 billion.

The mission provides for overseas asset acquisition, strategic stockpiling, and seven Centres of Excellence targeting 1,000 patents by 2030 to build domestic processing technologies. The Cabinet’s approval of a ₹15 billion incentive scheme for recycling critical minerals from e-waste and lithium-ion batteries also points to a pragmatic approach to securing secondary supplies.

The road ahead requires more than funding; it also demands agility. To master the new oil diplomacy, India must restructure its state-owned enterprises to move at the speed of global markets. It needs sovereign risk cover, long-term offtake agreements to guarantee demand, and, most importantly, domestic refining capacity to break China’s midstream chokepoint. Only then can trade agreements and overseas acquisitions secure India’s strategic autonomy in the 21st century.