Speaker 1: Those antimony, arsenic, aluminum, selenium and hydrogen and nyxogen and
Speaker 1: hydrogen and urenium and nicoliodinium, naponium, germanium and.
Speaker 2: Iron amoricia Hellostephonomics Here the podcast that brings you the
Speaker 2: global economy, and we're visiting some of the forgot hument
Speaker 2: corners of the periodic. Take in we these days and iodine,
Speaker 2: andium and thulium and thallia as the world struggles to
Speaker 2: get its hands on the critical minerals will need to
Speaker 2: power electric car batteries and all those other green machines.
Speaker 2: Good news for green tech companies maybe, But will it
Speaker 2: also spell new riches for the countries that currently have
Speaker 2: these much sought after materials. Historians would say, don't bet
Speaker 2: on it. As a long and deeply depressing tradition of
Speaker 2: commodity rich economies failing to benefit from their natural wealth.
Speaker 2: With a handful of notable exceptions, such countries all too
Speaker 2: often end up worse off than neighbours that weren't blessed
Speaker 2: with all those natural assets in the first place. Could
Speaker 2: this time finally be different? I'm going to debate that
Speaker 2: in a few minutes with Bloomberg commodity reporter and author
Speaker 2: Jack Farcie well backed senior economist Jim Cust But first,
Speaker 2: Bloomberg's Indonesia economy reporter Claire Joo and metals and mining
Speaker 2: reporter Annie Lee have an encouraging story to tell you
Speaker 2: from Indonesia. The reporting was done by both of them,
Speaker 2: but it's Claire's voice you'll hear doing the narration.
Speaker 1: When you think of elements like nickel and aluminum, they're
Speaker 1: probably just boxes on the periodic table. But these minerals
Speaker 1: are essential components that go into making batteries for electric vehicles.
Speaker 1: This is a four hundred billion dollar industry, and no
Speaker 1: one knows it's better than Indonesia. Made up of over
Speaker 1: seventeen thousand islands and lush rainforests, Indonesia sits a top
Speaker 1: an abundant reserve of native metal copper, gold, and nickel,
Speaker 1: the raw material used in evy batteries. For decades, Indonesia
Speaker 1: has been content with digging up the minerals and sending
Speaker 1: them to places like China, where skilled workers and factories
Speaker 1: turn them into higher value products like batteries or electric cars.
Speaker 1: But now the biggest economy in Southeast Asia has other ideas.
Speaker 1: Why should Indonesia stop at exporting role or when it
Speaker 1: can export the batteries that are made from them and
Speaker 1: even the cars powered by those batteries. Indonesia's ban on
Speaker 1: rule box site exports began over the weekend. The ban
Speaker 1: is meant to encourage more investment into.
Speaker 3: Higher value added activities on shore Indonesia.
Speaker 1: The bottom line, if you want our minerals, you have
Speaker 1: to process them here. For President Jokowidodo, Indonesia's natural wealth
Speaker 1: is the key for it to become a high income country.
Speaker 3: It is sassy in Dose three.
Speaker 1: Industrial downstreaming is very important. We will leap forwards if
Speaker 1: downstreaming is successful.
Speaker 3: Thistochi The Golden Indonesia of twenty forty five, smart execution
Speaker 3: is needed.
Speaker 1: It's estimated to add more than seven hundred billion dollars
Speaker 1: to the economy and create nearly ten million jobs. To
Speaker 1: push this strategy forward, Indonesia uses a carrot and stick approach.
Speaker 1: On one hand, it's clapped down on exports of some
Speaker 1: raw mineral ores. On the other, it's offered tax for
Speaker 1: certain incentives, viewering companies to build smelters and battery plants
Speaker 1: within its borders, and it's already working, but is it
Speaker 1: good to go to get a better idea of how
Speaker 1: the carrot and stick approach materialized. I spoke with Mohammad
Speaker 1: Faiz Naguza as an economist at Bank of America.
Speaker 4: We saw about eleven billion dollars of being realized into
Speaker 4: that sector.
Speaker 1: By that sector, he means nickel downstreaming.
Speaker 4: But that is just that sector. Beyond that, we're also
Speaker 4: seeing more investments likely coming into other smelters copper smelters
Speaker 4: for example, as well as battery grade nickel and even
Speaker 4: producing IV batteries themselves. So the investment inflows Intodonesia is
Speaker 4: getting beefed up because of this success in downstreaming.
Speaker 1: Nowhere is that boom more apparent than in Morowali. It's
Speaker 1: a nickel ridge district in Indonesia, Sulawesi island east of Borneo.
Speaker 1: Once a quiet fishing town, it now houses the bustling
Speaker 1: Morowali Industrial Park, which just celebrated its tenure anniversary this month.
Speaker 1: Trucks are busy transporting or from mines to smelters, Buses
Speaker 1: full of workers shuttling across the area. The park even
Speaker 1: has its own private airport and port facilities. It employs
Speaker 1: more than eighty thousand Indonesian and Chinese workers here. For
Speaker 1: the first five months this year, this park has already
Speaker 1: registered twenty two billion US dollars of investment. That's compared
Speaker 1: with a record of twenty one billion dollars for the
Speaker 1: whole twenty twenty two.
Speaker 3: To be clear, such success is quite rare. Indonesia holds
Speaker 3: the world's largest deposit of nickel, a mineral in short supply.
Speaker 3: The same goes for Botswana when it comes to diamonds.
Speaker 3: The global diamond manufacturer the Beers relies on Botswana's mines,
Speaker 3: leveraging that the Botswana government struck a deal that set
Speaker 3: aside a portion of rough diamonds to local cutting and
Speaker 3: polishing companies. Historically, polishing usually happened in places like Antwerp, Belgium.
Speaker 3: Other countries, though, face more basic challenges.
Speaker 5: And here's important to maybe use the example of the
Speaker 5: Democratic Republic of Congo.
Speaker 1: Rahi dash Dawa, head of the International Council on Mining
Speaker 1: and Minerals.
Speaker 5: In DRC, A decision was taken to process copper concentrate
Speaker 5: in the DRC itself, but that had to be delayed
Speaker 5: because copper producers simply didn't have enough electricity in order
Speaker 5: to be able to process the copper. So you can't
Speaker 5: do copper smelting without electricity. And the DRC was not
Speaker 5: producing enough of the electricity in order to keep that
Speaker 5: plant going. And so you might think why don't companies
Speaker 5: set up more processing plants. Well, actually, if you don't
Speaker 5: have enough of the energy you need and increasingly low
Speaker 5: carbon and low cost energy you need, it's very difficult
Speaker 5: to process.
Speaker 1: This success doesn't come free either. For one, there's the
Speaker 1: environmental price given the tons of waste generated and the
Speaker 1: coal to provide electricity for factories. Because Lane Calling, Annie
Speaker 1: Lee listed a residential building outside of the Indonesian Park
Speaker 1: where she met Ricky Ardiansha. Ricky rends rooms to Indonesian
Speaker 1: workers and owns a construction.
Speaker 4: The water, the rain rink is color is black?
Speaker 3: Oh really yes?
Speaker 1: Because the air the think.
Speaker 4: Us and in air maybe and then the dust here.
Speaker 1: Ricky told us when it rains, the rain drops turned
Speaker 1: black from the dust in the air. Just outside this building,
Speaker 1: there's a river that runs across the neighborhood. It looks
Speaker 1: like a canal of tomato soup. Now, President Jacobi also
Speaker 1: wants to apply the same strategy not only to other metals,
Speaker 1: but into agriculture, farming, and fisheries, every sector that Indonesia
Speaker 1: has clouds but not dominance. With the twenty twenty four
Speaker 1: elections booming a trace questions will his successor repeat the
Speaker 1: same trick. Here's economist Nagusa. Again.
Speaker 4: Success is so evident that I think most investors assume
Speaker 4: that it will be unlikely for any future governments to say,
Speaker 4: you know, we need to revert this policy. The success
Speaker 4: in terms of exports and the investments are very visible.
Speaker 4: So the assumption is that there will be pretty much
Speaker 4: a good degree of policy continuity on this downstreaming. So
Speaker 4: if something were to change, I think that will come
Speaker 4: as a negative and nasty surprise for investors.
Speaker 1: Whatever the outcome, other countries will be closely watching. If
Speaker 1: they want a bigger role in the supply chain, they're minerals,
Speaker 1: maybe their fastest way to get there in Jakarta Clari
Speaker 1: out for Bloomberg News.
Speaker 2: So I would step back to consider now how this
Speaker 2: has gone in the past, and whether there's any prospect
Speaker 2: for countries elsewhere in the world, especially Africa, to benefit
Speaker 2: from the rush to acquire the minerals that will be
Speaker 2: needed to wean the planet off fossil fuels and to
Speaker 2: help us do that. I'm joined by Jim Cust, senior
Speaker 2: economist in the Africa Department at the World Bank, who's
Speaker 2: written extensively on this subject, and Bloomberg's Energy and Commodities
Speaker 2: reporter Jack Faci, who co authored with Javier Blass, The
Speaker 2: World for Sale, which is a cracking book on global
Speaker 2: commodity trading. Jim Cust, Jack, thank you very much for this. Jim,
Speaker 2: let me start with you. Let's go back in time
Speaker 2: first and think what's the traditional story of a commodity
Speaker 2: boom for developing country before we get onto how this
Speaker 2: time might be drifferent. What has traditionally been the problem
Speaker 2: for developing countries looking to get full advantage from these
Speaker 2: kind of booms.
Speaker 6: Sure, many countries have found it very challenging to move
Speaker 6: from being a major resource dependent economy, so whether that's
Speaker 6: mining or in other cases it's been oil and gas,
Speaker 6: and turn that below ground wealth into above ground prosperity.
Speaker 6: So we've all heard of the resource curse, and this
Speaker 6: is sort of the classical case of countries that have
Speaker 6: commodity booms, followed by busts, and if they haven't saved
Speaker 6: and invested enough of their revenues, then the busts can
Speaker 6: hit them even harder than the boom in the first place.
Speaker 6: And so countries have got into these kind of cyclical
Speaker 6: challenges that ultimately has added up to many of them
Speaker 6: stagnating and growing a lot slower than their neighbors that
Speaker 6: didn't have the resources. And that's what economists think of
Speaker 6: as the resource curse, that you end up growing slower
Speaker 6: than you might have done otherwise.
Speaker 2: It's always striking how few there are, but there are
Speaker 2: a few countries that have managed to get round this.
Speaker 6: Yeah, absolutely, so the result curse is certainly not universal.
Speaker 6: So we can think of countries like Chile and Indonesia, Australia,
Speaker 6: of course, but in Africa, countries like Botswana have done
Speaker 6: very well from their resources and have really succeeded in
Speaker 6: taking something that is a sort of primary commodity dependence
Speaker 6: and then turning those revenues into something you can invest
Speaker 6: in the rest of the economy and have done well
Speaker 6: out of it.
Speaker 2: What of what would you advise countries who are trying
Speaker 2: to repeat the Botswana example or is it just impossible
Speaker 2: it's not impossible.
Speaker 6: So the way that we think about it is it's
Speaker 6: like a chain of decisions, and the chain of decisions
Speaker 6: is only as strong as the weakest link. So there
Speaker 6: are many places where the chain of decisions can go wrong.
Speaker 6: But governments have to make a series of decisions. So
Speaker 6: everything from negotiating a good deal in the first place
Speaker 6: with the private sector companies that you're typically working with,
Speaker 6: all the way through to making sure you get those
Speaker 6: revenues and then you use those revenues effectively that you
Speaker 6: avoid corruption and you avoid mismanagement and the boombus price
Speaker 6: cycle and so on. So there's a series of decisions
Speaker 6: and each step in that decision chain, there are examples
Speaker 6: from countries like Botswana that you can emulate. And actually
Speaker 6: Botswana has just been in the news very recently because
Speaker 6: they've renegotiated their deal with the Beers and they have
Speaker 6: a reputation for negotiating a very tough deal when they
Speaker 6: work with the private sector.
Speaker 2: And we actually heard a little bit about de Beers
Speaker 2: in the earlier piece. So Jack, when you think about
Speaker 2: the move to net zero, of course lots of people
Speaker 2: wonder whether we really make them move to net zero
Speaker 2: but there's certainly a massive rush for the materials that
Speaker 2: we need to build all of those batteries for electric
Speaker 2: cars and generally sort of power the transit transition away
Speaker 2: from carbon. What does that mean in practical terms? What
Speaker 2: kind of commodities are we talking about and where are
Speaker 2: they currently?
Speaker 7: I think the big one where markets are being totally
Speaker 7: transformed as a result of even the steps that we're
Speaker 7: taking at the moment towards net zero, even if together
Speaker 7: they're not enough necessarily to get us in at zero
Speaker 7: by twenty fifty. But the big ones where markets being
Speaker 7: totally transformed is the commodities that go into batteries for
Speaker 7: electric vehicles, and the key ones are things like lithium, nickel, cobalt,
Speaker 7: perhaps to a slightly lesser extent, manganese, graphite, and then
Speaker 7: things like copper and aluminium that are used in electrical
Speaker 7: wiring and therefore important both for the batteries but also
Speaker 7: the power cables, the charging stations, et cetera, et cetera,
Speaker 7: et cetera. Some of those markets are already quite large
Speaker 7: and well established, so things like manganese and nickel already
Speaker 7: have a large use in the steel sector. They're used
Speaker 7: as alloys in things like stainless steel and other steel alloys,
Speaker 7: and so there's already quite a large market, but something
Speaker 7: like lithium and cobalt were really quite small markets only
Speaker 7: a couple of years ago, and already they have increased,
Speaker 7: i think, probably doubled in size over the past five
Speaker 7: years or so, and the projections are that they would double,
Speaker 7: triple or even more in size over the coming decades.
Speaker 7: So those are markets where we're going from a relatively
Speaker 7: small market to suddenly a much larger market, and we're
Speaker 7: going to need to find lots more supply. In most cases,
Speaker 7: the supply or that the resources are there. So lithium,
Speaker 7: for example, there's a lot of lithium in South America,
Speaker 7: also in Australia. Nickel, as I think we just heard
Speaker 7: and we'll probably talk about quite a lot more. Indonesia
Speaker 7: has increased its supply of nickel enormously in the last
Speaker 7: few years, and it's projected to do so even more
Speaker 7: so in the coming years. So the resources are out there,
Speaker 7: but nonetheless it's a big challenge for the global mining
Speaker 7: industry to increase supply by a huge amount of some
Speaker 7: of these commodities.
Speaker 2: So I guess there's a nickel rush as opposed to
Speaker 2: a gold rush, as you say, but it's been transformative. Now,
Speaker 2: we heard about Indonesia, and a lot of people listening
Speaker 2: to that story would think, Okay, if you're a country
Speaker 2: that does is lucky enough to have these critical minerals,
Speaker 2: the government announcers it's going to ban the unprocessed form
Speaker 2: of those minerals, and lots of investment comes in and
Speaker 2: you get the downstream industry, which helps you perhaps avoid
Speaker 2: some of the issues that Jim was talking about earlier.
Speaker 2: Should we be encouraged by the Indonesia an example?
Speaker 7: I think the Indonesian example is a very impressive example
Speaker 7: of a government pursuing a policy here to encourage investment
Speaker 7: into its nickel industry and also to develop some more
Speaker 7: of the processing of the downstream and being successful. I
Speaker 7: also think it's a very rare, I'm hesitant to say unique,
Speaker 7: but it's a very rare example of a number of
Speaker 7: factors that Indonesia had in its favor. The number one
Speaker 7: being is today a vast share of the world's nickel supply,
Speaker 7: a significant share of the world's nickel reserves. But even
Speaker 7: when they started this policy direction nearly a decade ago.
Speaker 7: So Indonesia first actually banned exports of nickel or in
Speaker 7: twenty fourteen, and they were much smaller player in the
Speaker 7: global nickel market at that point, but they were still
Speaker 7: the key supplier of nickel or to China and to
Speaker 7: the Chinese industry that was turning it into nickel pigeye
Speaker 7: in which then was an input into the Chinese stainless
Speaker 7: steel industry. And so when they did that, the Chinese
Speaker 7: stain and the steel industry had little alternative but to
Speaker 7: come to Indonesia and build nickel pigeye and plants there
Speaker 7: because there wasn't an alternative it. So, I think if
Speaker 7: we're talking about how countries can capture the most rents
Speaker 7: from these industries, Indonesia is a rare example because they
Speaker 7: have such a dominant position in a particular market. Botswana
Speaker 7: is a good example in diamonds. They also have a
Speaker 7: very large share of the global diamond market, and so
Speaker 7: that puts them in a very obviously puts them in
Speaker 7: a much stronger position, give them much more leverage if
Speaker 7: they're negotiating with companies country to try and extract more
Speaker 7: rent from their natural resources industry.
Speaker 2: And jet you also had said that perhaps there were
Speaker 2: quite a lot of attractions to going to Indonesia anyway,
Speaker 2: and even without the policy, you might have seen this
Speaker 2: kind of inward investment.
Speaker 7: Yeah. Absolutely, so they were really kind of pushing water downhill.
Speaker 7: The origin of this was the nickel pig iron industry,
Speaker 7: which is a kind of low grade nickel that was
Speaker 7: used in stainless steel built and rose up originally in
Speaker 7: China after about two thousand and six when nickel prices
Speaker 7: shot up a lot, and that made this process of
Speaker 7: making nickel pig iron economic. And at the time when
Speaker 7: Indonesia started this process of restricting exports, it was way
Speaker 7: cheaper to make nickel pig iron in Indonesia than it
Speaker 7: was in China, both because of the shipping cost because
Speaker 7: you weren't having to ship lots and lots and lots
Speaker 7: of very low grade ore, but also because Indonesia was
Speaker 7: very rich in coal, Coal powered energy was very cheap.
Speaker 7: It's an energy intensive process, so the kind of costs
Speaker 7: we're talking about, it was costing about six to eight
Speaker 7: thousand dollars a ton to make nickel and in Indonesia
Speaker 7: versus ten to twelve thousand dollars in China, So there
Speaker 7: was a really clear economic incentive behind it, and in fact,
Speaker 7: some of the Chinese companies that have invested now and
Speaker 7: build lots of I think say privately at least that
Speaker 7: they might have done it anyway even if the government
Speaker 7: hadn't banned exports. The other point I would make is,
Speaker 7: and it's a really interesting case study for lots of
Speaker 7: reasons that there's been this really close partnership and alliance
Speaker 7: between the Indonesian government and China, and in particular a
Speaker 7: couple of a few Chinese companies, prime among them Singshan,
Speaker 7: which is the world's biggest nickel and Staler's steel producer,
Speaker 7: and maybe familiar to listeners because it was at the
Speaker 7: center of a huge short squeeze on in the nickel
Speaker 7: market last year.
Speaker 2: Those who avidly look at the short squeens.
Speaker 7: Those who avidly follow the metals markets. But even if not,
Speaker 7: it's a fascinating company. It's one of the great innovators
Speaker 7: of the global metals industry, and they really bet the
Speaker 7: house on Indonesia a number of years ago, forged this
Speaker 7: very close partnership with the Indonesian government, and in exchange,
Speaker 7: the Indonesian government has really opened the doors to them,
Speaker 7: allowed them to make the investments and build the projects
Speaker 7: that they were building the way that they wanted to, so,
Speaker 7: you know, using Chinese workers, giving them tax breaks, all
Speaker 7: of these kind of things to really encourage them and
Speaker 7: to make it as cheap as possible for them to
Speaker 7: come and make those investments in a way that lots
Speaker 7: of other countries with nickel resources hadn't done. And so
Speaker 7: as a result, you've seen this kind of huge investment
Speaker 7: from China, principally into Indonesia, and as a result, this
Speaker 7: massive boom in the Indonesian nickel industry.
Speaker 2: Well for those listening who woke up this morning not
Speaker 2: realizing they were going to be much better informed about
Speaker 2: nickel pig iron by the end of the day. But
Speaker 2: really going back thinking now about Africa, Jim, we have
Speaker 2: this quite encouraging example in Indonesia. We do have a
Speaker 2: palpable boom in materials that, as we've already mentioned, are
Speaker 2: pretty are present in large amounts in certain African countries.
Speaker 2: What's the prospect for African countries announcing that they're not
Speaker 2: going to export unprocessed versions of these materials. I was
Speaker 2: one of the reasons we were doing. This story was
Speaker 2: that one of a recent Bloomberg conference in Morocco, the
Speaker 2: New Economy Gateway, we heard a Ghanaian minister say that
Speaker 2: they weren't going to export unprocessed lithium as they developed
Speaker 2: that industry. How feasible is that.
Speaker 6: Well, I think the first thing to say is that
Speaker 6: the overall opportunity is pretty exciting for African countries. So
Speaker 6: we do see a boom ahead in a whole range
Speaker 6: of different metals and minerals. Jack mentioned some of them already,
Speaker 6: the earliest around the battery minerals, but there are many others,
Speaker 6: including rare earths, that are found all over Africa in abundance,
Speaker 6: so there's a big opportunity here. Africa has been the
Speaker 6: most under explored region in the world, so it's not
Speaker 6: only that we know there's a lot there already, but
Speaker 6: there's probably even more to be found as well. On
Speaker 6: top of that, I think there's a recent growing recognition
Speaker 6: that supply chains for some of these metals are fragile
Speaker 6: but also quite concentrated. So of course a lot of
Speaker 6: the processing gets done in China, but also in places
Speaker 6: that are far from say, US markets, and so as
Speaker 6: the US tries to increase its capacity in electric vehicles,
Speaker 6: in batteries and things like that. There's a kind of
Speaker 6: a new sort of interest in figuring out how can
Speaker 6: Africa build out some of these supply chain themselves, which
Speaker 6: could help bring resilience not just in the interests of
Speaker 6: African countries, but in the interests of others in the
Speaker 6: global market. So there's this kind of alignment of interest
Speaker 6: that is quite new and quite unique that we hope
Speaker 6: will work in the favor of African countries. As Jack
Speaker 6: rightly points out that there are challenges to this. It's
Speaker 6: not as simple as oh, you just announced an export
Speaker 6: ban and everything will sort of follow suit. It's worth
Speaker 6: noting that even in Indonesia they had to give away
Speaker 6: some pretty pretty serious tax concessions to some of the
Speaker 6: mining companies to make this kind of work for them,
Speaker 6: and when they'd first tried this in around twenty fourteen,
Speaker 6: it wasn't a universal success. They did run into challenges.
Speaker 6: There wasn't enough smelting capacity, and actually they lost a
Speaker 6: lot of their market share in baulk side production to
Speaker 6: the baux side demand. Some of it got driven to Africa,
Speaker 6: to Guinea, and the share of Indonesia's bulk side supply
Speaker 6: fell and I don't think it's recovered since, so there's
Speaker 6: sort of cautionary tails here as well. But the ambition
Speaker 6: of governments like Ghana is to be applauded and to
Speaker 6: see if they can sort of seize the moment. Right
Speaker 6: you've got the increased bargaining power that some of these
Speaker 6: countries have. DRC, of course, is a great example of this,
Speaker 6: with a huge share of the world's cobalt supply in DRC,
Speaker 6: combine with the rising demand for these metals, combined with
Speaker 6: the fact that there's interest from other actors. But it's
Speaker 6: a window of opportunity and it's one that can close easily.
Speaker 6: So you may see headlines around this idea that is
Speaker 6: lithium the new oil, and I think we need to
Speaker 6: have a touch of realism to go with this, that
Speaker 6: lithium is not going to be the next oil for
Speaker 6: various reasons. The size of the market is a fraction
Speaker 6: of what oil is. It's the dominant battery technology of today,
Speaker 6: but it doesn't mean it remains to be the dominant
Speaker 6: battery technology of twenty fifty. For example, And actually, if
Speaker 6: prices were high and sustained between now and twenty fifty,
Speaker 6: the incentive for people to come up with alternative battery
Speaker 6: technologies would be even greater. So African countries need to
Speaker 6: see themselves in this global game where there's innovation puting
Speaker 6: at a very fast pace. And so while they might
Speaker 6: have some bargaining power, it's not a blank check. It's
Speaker 6: not a blank check to say we're going to ban
Speaker 6: exports and everything else will follow. You might actually inadvertently
Speaker 6: drive investment elsewhere and it could backfire, as we've seen
Speaker 6: in some countries.
Speaker 5: Well.
Speaker 2: And also, I mean we're speaking in the week where
Speaker 2: the British government has had to extend enormous inducements to
Speaker 2: persuade a Tata Industries to put their big battery factory
Speaker 2: in the UK, hundreds of millions of pounds supposedly, we
Speaker 2: don't know the exect number. I mean, this is a
Speaker 2: very competitive market and there's lots of subsidies flying around.
Speaker 2: There is a risk that you're just adding costs and
Speaker 2: adding reasons for companies not to go there.
Speaker 6: Yes, that's right. So I mean the first thing is
Speaker 6: to note that not every country that has an abundance
Speaker 6: of minerals has the processing supply chain, so huge amount
Speaker 6: of iron ore comes out of Western Australia. They're the
Speaker 6: biggest iron ore producer in the world. They're not even
Speaker 6: in the top twenty five of steel producers in the world.
Speaker 6: All of that iron ore for Western Australia goes to China,
Speaker 6: goes to the steel mills in China. Similarly, Chile is
Speaker 6: famous for being a successful copper producer, but more than
Speaker 6: half of Chile's copper is exported raw and that proportion
Speaker 6: is actually rising rather than falling. And so it's not
Speaker 6: the case that to be a successful mineral producing, affluent
Speaker 6: economy that you have to go down the supply chain
Speaker 6: of the minerals that you have in abundance. Actually, a
Speaker 6: lot of the processing makes sense to take place closer
Speaker 6: to the markets, closer to the manufacturing centers and so on.
Speaker 6: So this is not the This is not the recipe
Speaker 6: for success that is necessary. Right, This is not the
Speaker 6: path that countries like Australia and Chile have followed. It
Speaker 6: doesn't mean it can't be successful, as the Indonesian case
Speaker 6: is starting to demonstrate, but nor is it necessary for success.
Speaker 2: Both of you have spent a long time looking at
Speaker 2: this and Jack, you've reported on many commodity booms and
Speaker 2: busts over the years. Does this feel different? I mean,
Speaker 2: either in terms of the incentives facing the big industries
Speaker 2: involved and the governments that are pushing for those climate targets,
Speaker 2: or in the sort of underlying conditions in Africa and
Speaker 2: other commodity commodity producing countries.
Speaker 7: I don't know. I think you know this time is
Speaker 7: different is obviously the most dangerous phrase to utter in
Speaker 7: in finance and markets. No, I don't think so. I
Speaker 7: think you know. It's obviously a fascinating moment and a
Speaker 7: very exciting one if you are in the batteries or
Speaker 7: the battery metals industry. But fundamentally, these are commodity markets
Speaker 7: and they will and indeed are going through booms and busts. So,
Speaker 7: you know, Jim was talking about the differentistries going into
Speaker 7: different types of batteries, and already we've seen in the
Speaker 7: last few years as electric vehicles have grown and grown,
Speaker 7: and this has become a front page story that shifts
Speaker 7: in the battery chemical battery makeup, in part in response
Speaker 7: to things like concerns about the concentration of supply of
Speaker 7: cobalts ay from congo are making meaningful impacts. So, for example,
Speaker 7: the cobalt market at the moment is in a bit
Speaker 7: of a slump. That the price of cobalt is at
Speaker 7: the lowest in quite a number of years, in spite
Speaker 7: of the fact that the market is growing very rapidly
Speaker 7: and demand is growing very rapidly. That's absolutely true, but
Speaker 7: nonetheless the price is at a multi year low. One
Speaker 7: of the reasons is a big increasing supply. Another reason
Speaker 7: is actually the chemistry of batteries has been changing, so
Speaker 7: car makers, particularly in China, are using lower cobalt batteries
Speaker 7: and batteries have no cobalt at all in them. Lithiumyin
Speaker 7: phosphate batteries are rising very quickly in popularity. So if
Speaker 7: you look at some of the forecasts for demand for
Speaker 7: cobalt in twenty thirty, say from last year to this year,
Speaker 7: those forecasts have been cut pretty substantially. So for example,
Speaker 7: I was looking at earlier today at a company called
Speaker 7: Dartan Commodities, which is one of the key forecasters on cobalt,
Speaker 7: and they've cut their demand from electric vehicles for cobalt
Speaker 7: in twenty thirty by about twenty percent. As a result,
Speaker 7: of that shift. So these markets can absolutely still go
Speaker 7: through booms and bus and that does make it a
Speaker 7: competitive environment unless you're in a position like Indonesia in
Speaker 7: nickel or Botswana in diamonds. If you're not in that
Speaker 7: rare position of being a very dominant supplier of a market,
Speaker 7: it's much harder to have that negotiating leverage. It's not
Speaker 7: to say it's totally impossible, and I think one of
Speaker 7: the there's a couple of interesting things of the current
Speaker 7: moment that I would just point out. One is, you know,
Speaker 7: a lot of processing goes where energy is cheap, it
Speaker 7: tends to be quite energy intensive, and so you have
Speaker 7: big metal processing industries in places like Scandinavia with hydroelectric power,
Speaker 7: Iceland with geothermal power, the Middle East with cheap natural gas.
Speaker 7: Increasingly now as solar and wind become very cheap sources
Speaker 7: of power possibly and potentially you have hydrogen as well
Speaker 7: coming as a way of storing that renewable power at
Speaker 7: some point in the future. That can really democratize access
Speaker 7: to cheap power and make that availability of cheap electricity
Speaker 7: no longer such a stumbling block for countries that want
Speaker 7: to build processing industries and The other, of course, is
Speaker 7: what's happening in global geopolitics, where suddenly the US and
Speaker 7: EU in particular are saying are looking at the dominance
Speaker 7: of China in the processing of all of these metals
Speaker 7: and saying strategically that's not great for US, and willing
Speaker 7: to spend large amounts of tax payer money to try
Speaker 7: and change that situation, As the example of the UK
Speaker 7: is showing, probably they want to change that situation by
Speaker 7: building capacity in their own countries rather than in Africa, say,
Speaker 7: but potentially there's a possibility there for some kind of
Speaker 7: joint venture where you see countries in Africa or South
Speaker 7: America or Asia, or whether it might be being able to
Speaker 7: get some kind of government funding from the US or
Speaker 7: Europe or or other countries that want to try and
Speaker 7: diversify their battery supply chains.
Speaker 2: One of the most evocative examples of some of these
Speaker 2: issues from back in history was the Calico Acts, when
Speaker 2: Britain actively banned Indian cotton from the British market in
Speaker 2: the seventeen twenties to protect and help kickstart the British
Speaker 2: cotton industry and I think set back the textile industry
Speaker 2: in India for hundreds of years, so I guess we
Speaker 2: would hope that what is different now is that our
Speaker 2: industrial countries are not actively trying to thwart or openly
Speaker 2: trying to thwart the development of developing countries. Jack Farci,
Speaker 2: Jim Cust, thank you very.
Speaker 6: Much, thank you, thank you.
Speaker 2: Well, that's it for this episode of Stephanomics. Next week
Speaker 2: we'll have more, in fact the last in the current series.
Speaker 2: In the meantime, you can get a lot more economic
Speaker 2: insight and news from the Bloomberg Terminal website or app.
Speaker 2: This episode was produced by Magnus Hendrickson, Yang Yang and
Speaker 2: Summer Sudden. Special thanks to Claire Joo, Annie Lee, Chandra Asmara,
Speaker 2: Norman Hassano, Jack Farci and James Cust, and of course
Speaker 2: the brilliant Tom Lehra for the elements you heard at
Speaker 2: the start. Molly Smith is the executive producer of Stephanomics
Speaker 2: and the head of Bloomberg Podcast is Sage Bowman.