Speaker 1: Hi, this is Dana Perkins and you're listening to Switch
Speaker 1: on the B n A of podcast. Today we talk
Speaker 1: about battery metals, which are experiencing record high prices due
Speaker 1: to supply chain pressures, inflation, and demand growth. And it's
Speaker 1: no wonder since the sales of electric vehicles and stationary
Speaker 1: storage have grown, which in turn require batteries and then
Speaker 1: in turn require the metals that they're made of. But
Speaker 1: with most things, it's not quite that simple, and that's
Speaker 1: why we decided to bring our lead metals and mining
Speaker 1: analysts onto the show today. So let's take a quick
Speaker 1: step back and if we look at benfs annual Long
Speaker 1: Term Electric Vehicle Outlook, they look at the future of
Speaker 1: what demand for electric vehicles could look like. The transition
Speaker 1: is underway and road transport oil demand could peak as
Speaker 1: soon as the electric vehicle market opportunity between two and
Speaker 1: well it could be fifty three trillion dollars according to
Speaker 1: BENFS Economic transition scenario. So in short, this demand sees
Speaker 1: no lindes of abating in the future. But in order
Speaker 1: for any of this to happen again, we're going to
Speaker 1: need more batteries and therefore more battery metals, So what's
Speaker 1: important for a metals analysts to consider when thinking about
Speaker 1: the future of supply and demand in this space. In
Speaker 1: order to discuss this complexity with us and many of
Speaker 1: the factors just swimming around in his head, Quoisium Popo
Speaker 1: joins us today and he is the lead analyst on
Speaker 1: metals and mining for BENOF. To research more about these
Speaker 1: topics and to access the underlying data be enough subscribers
Speaker 1: can go to the Bloomberg terminal or b enof dot
Speaker 1: com or BNF smobil app and I recommend reading the
Speaker 1: piece titled one Battery Metals Outlook Supply Turbulence Ahead. As
Speaker 1: a reminder, B and e F does not provide investment
Speaker 1: or strategy advice, and you can hear our full disclaimer
Speaker 1: at the very end of the show. And also if
Speaker 1: you want to hear more of our shows on the
Speaker 1: future of energy, transport and sustainability and be alerted to
Speaker 1: when they come out, make sure to click subscribe on
Speaker 1: whatever podcast player you're listening to us on today. And
Speaker 1: now let's speak with Quzily about battery Metals Crazy. Thank
Speaker 1: you very much for coming back to the show. Thank
Speaker 1: you you know so the last time we were here,
Speaker 1: you and I discussed cobalt specifically, but today we're actually
Speaker 1: going to take it back and we're going to talk
Speaker 1: about kind of all battery metals because you recently did
Speaker 1: a market outlook for this group of metals. So as
Speaker 1: we get started, can you outline what are the battery metals? Yeah,
Speaker 1: so it really depends on who you ask, right, which
Speaker 1: batching technology that you're looking at For us specifically Bloom
Speaker 1: again the f When we talk about boutchy metals, we're
Speaker 1: trying to concentrain it within the contest of my technology
Speaker 1: called lethio, my own batteries. So little iron batteries have
Speaker 1: become the dominant battery technology in the space. That means
Speaker 1: a lot to us, which is i e. The electric
Speaker 1: vehicle industry and also the stationary storage. So what is
Speaker 1: a little iron batteries? So it's a battery wa I said,
Speaker 1: name sounds there's a lithium in there. So if you
Speaker 1: forget any battery metal, Danta, don't forget that lithium. Yeah,
Speaker 1: it's in the name exactly what is in the name? Yes,
Speaker 1: so that is number one, number two. It also depends
Speaker 1: on which battery chemistry beyond just having a lithium in there.
Speaker 1: It depends on which battery chemistry. Are quite a number
Speaker 1: of them, but what we've come to realize is that
Speaker 1: there are a few metals that are consistent with the
Speaker 1: dominant chemistry that is in our electric vehicles today as
Speaker 1: well as in our stationary storage. So I would name
Speaker 1: just those ones that we believe are quite dominant and
Speaker 1: also from a supply chain perspective, have a lot of
Speaker 1: importance because they would make the ev adoption dream happen ultimately.
Speaker 1: So number one I've mentioned lithium. I also want to
Speaker 1: add another one called nickel. So nickel you will find
Speaker 1: it in the min Southeast Asia, in Indonesia, you can
Speaker 1: also find it in countries like Australia. And then third
Speaker 1: to that, you have cobotes. And you reminded our listeners
Speaker 1: of our inter action the last couple of months ago
Speaker 1: where I just returned from the d r C as
Speaker 1: part of my work to identify what is actually happening
Speaker 1: in the cobalt industry. So that is the third one.
Speaker 1: The fourth one we have manganese. So manganese is predominantly
Speaker 1: extracted in South Africa, so they are the market leaders
Speaker 1: in the extraction of manganese, so that is also used
Speaker 1: as a battery metal. And I think in terms of cathode.
Speaker 1: Cathode is that if you ever had a look at
Speaker 1: a battery, there is a plast and a minor sign.
Speaker 1: So the plas sign represents what we call the cathode.
Speaker 1: So these four metals are the ones that are bloomed. Again, yes,
Speaker 1: we cover and classify them as the cathode. There is
Speaker 1: also a minor sign in another for there to be
Speaker 1: that extrage of energy. I own was moving from one
Speaker 1: point to data. So the minor sign on your battery
Speaker 1: is what it encompasses of a metal called graphic to
Speaker 1: a material called graphic. So all in all data I've
Speaker 1: mentioned five materials or metals. We've got lithium, we've got
Speaker 1: a nickel, we've got cobalts, we've got manganese, and then
Speaker 1: graph FLI. So for the battery metals that we're covering,
Speaker 1: or actually for battery metals generally, which are the raw
Speaker 1: materials that go into making these vehicle batteries that they
Speaker 1: were talking about as we're looking at electrifying transport, and
Speaker 1: that was covered actually in a previous episode where we
Speaker 1: talked a bit about the electric vehicle outlook that we
Speaker 1: put out every year. Do we have a sense for
Speaker 1: how much the cost of the raw materials the metals
Speaker 1: actually are in terms of the overall cost of the battery. Absolutely,
Speaker 1: So this is also a very interesting area. So depending
Speaker 1: on which chemistry use, you realize that a huge component
Speaker 1: of your battery it's coming out of the metals. But
Speaker 1: I think the key take home is the fact that
Speaker 1: most expensive component if you slide o peanut buttery, is
Speaker 1: a metals in there. And by this I'm not saying
Speaker 1: that please go slide open and electricy vehicle battery. Just
Speaker 1: take the motel cells. It's not safe. Don't do that.
Speaker 1: Although when you're done with it, circular economy recycling, that's
Speaker 1: a whole another show. We can have those battery metals
Speaker 1: like professionally extracted and reused. But anyway, I digress. We'll
Speaker 1: do that another day. So you're saying once you're in
Speaker 1: the battery, so once you in battery. So there are
Speaker 1: some chemistries where the battery, the total battery costs from
Speaker 1: materials will be able six of the total costs, so
Speaker 1: much cereals the total cost of the battery. And there
Speaker 1: are some chemistry day now that it could go as
Speaker 1: high as it really depends on the battery chemistry, but
Speaker 1: those are the ranges that acquis and our modeling is
Speaker 1: telling us that it could get through. Do you think
Speaker 1: that when individuals who are doing development on the battery
Speaker 1: chemistryes I know they're looking at batteries that will last longer,
Speaker 1: have longer range in theory for these vehicles when they're
Speaker 1: making them, do you think that they're also trying to
Speaker 1: remove dependence on specific metals and reduce the need for
Speaker 1: specific metals for various reasons, whether it be human rights
Speaker 1: issues around the extraction of that particular metal or around
Speaker 1: the costs, which is what we're really and delve into
Speaker 1: today because the supply and demand side of things, as
Speaker 1: we're looking at inflationary environment and supply chain disruption certainly
Speaker 1: is hitting this industry as it is so many. Do
Speaker 1: you think that that is a place where people are
Speaker 1: specifically trying to change the chemistry is to adjust to
Speaker 1: or is it really much more around battery performance battery life.
Speaker 1: So we actually looked at this question and analysis and
Speaker 1: we singled out cobalt. Right. We mentioned that a couple
Speaker 1: of months ago I came here, we talked about my
Speaker 1: experience in the DRC and the fact that there's still
Speaker 1: consense around ethical supply chain. At that time as well,
Speaker 1: the cobalt prices were at record high. To just stand
Speaker 1: that one of the major mining companies which extract cobalt
Speaker 1: had to shut down the MIND because the prices were
Speaker 1: not favorable for them. So what happened between that time,
Speaker 1: which is somewhere around twenty nine and now, is the
Speaker 1: fact that automakers reacted to first of all, the high
Speaker 1: price and then the ethical challenges associated with the supply
Speaker 1: chain what they do. So remember how I just talked
Speaker 1: about the fact that they are different battery chemistries. In
Speaker 1: other ways, there are different metals which form the catholic
Speaker 1: materials or the battery itself. So automakers realize that if
Speaker 1: they can divect to other chemistries like the lethio myron
Speaker 1: phosphate battery technology which uses lethion, iron and phosphate that's
Speaker 1: its name sounds, and they DIVECT from the high nickel
Speaker 1: chemistry which uses nickel, cobalt and manganese. If they could
Speaker 1: do this diversion, it would have saved themselves quite a
Speaker 1: lot of money simply because iron in phosphate are low
Speaker 1: cost metals. But then most importantly, they would have weaned
Speaker 1: themselves of cobalt because there's battery technology that's not require
Speaker 1: you to use cobalt. So that is absolutely happening. And
Speaker 1: when we run the numbers, what we've realized is that
Speaker 1: in twenty what bloom begin he thought would be the
Speaker 1: total demand for cobalt from batteries by have been reduced
Speaker 1: by half, simple because which is quite big cause I
Speaker 1: think for me it ended up being my favorite chart
Speaker 1: and also my most revealing experience during the production of
Speaker 1: this report. So you do realize that initially I was thinking, oh,
Speaker 1: maybe did we get it wround at the beginning, And
Speaker 1: actually it's industry that was switching. So let me do
Speaker 1: a little bit of name calling companies that are actually
Speaker 1: switched into this. I own little my own phosphate technology.
Speaker 1: Of course, the obvious one, Tesla, which was a big
Speaker 1: surprise to me because if four years ago you had
Speaker 1: told me that Tesla is going to use a battery
Speaker 1: technology that is currently dominant in China, that Chinese company
Speaker 1: c t L is the biggest manufacturer of LFP, If
Speaker 1: you have told me that Tesla and American company will
Speaker 1: switch to a China dominant battery chemistry four years ago.
Speaker 1: I probably have laughed. Right, that was the reality when
Speaker 1: elon mask Dancer stage and opened the Shan High factory.
Speaker 1: Months later, they announced that their entry model or this
Speaker 1: standard model, Model three, is going to use the LSP
Speaker 1: battery technology in China and there are discussions of even
Speaker 1: extending it to Europe. Just this morning, I woke up
Speaker 1: and then I had the fod 's also announced that
Speaker 1: its entry level electric vehicle is also going to use
Speaker 1: the LFP. Mes Cities has done that already, BM doub
Speaker 1: has done that. So you're absolutely correct when you mentioned
Speaker 1: that the demand side or electric vehica manufacturers are very
Speaker 1: open to change and they will switch or react to
Speaker 1: conditions within the supply G and B it's prices or
Speaker 1: ethical concerns. Now for a very short break, stay with us. So,
Speaker 1: which are the battery metals that you would say are
Speaker 1: the ones to watch right now and which ones are
Speaker 1: having kind of the greatest constraints on pricing. It feels
Speaker 1: like looking at your children and then trying to decide
Speaker 1: which which of the metals. Yeah, I had a chat
Speaker 1: with our transport team led by Collins, my colleague Collins,
Speaker 1: about which of these is important, which of these should
Speaker 1: we highlight as the most at risk? And it turns
Speaker 1: out all of them, Dana, when we did the numbers specifically,
Speaker 1: so to be able to put that in contest, let's
Speaker 1: just shorten the time frame. So when we looked at
Speaker 1: this year, which of them from a supply needs in
Speaker 1: demand perspective is the one at most risk? All of them?
Speaker 1: And it comes down to a couple of factors that
Speaker 1: we've been experienced. And I know you talked about inflation earlier,
Speaker 1: but beyond just inflation, which are probably addressed down the line,
Speaker 1: Beyond just inflation, you would realize that over the last
Speaker 1: three years the world has gone through and not so
Speaker 1: good experience. Particularly we covered right, We've lost some life
Speaker 1: sadly that people who have not been able to recover
Speaker 1: and they're experiencing long symptoms. It's not really been a
Speaker 1: very good experience. Beyond just this experience as well, the
Speaker 1: supply chain has taken a hit, and part of that
Speaker 1: hits is the fact that companies that were supposed to
Speaker 1: bring on production to me growing demand had to readjust
Speaker 1: their capital location right if you're printing and on certain
Speaker 1: market where you don't know what tomorrow is gonna look like,
Speaker 1: you want to retain as much cash as you can
Speaker 1: on your balance sheet. So what that means is that
Speaker 1: if you're supposed to invest in expanding in Indonesia, or
Speaker 1: building a new plant in South Africa, or even diversifying
Speaker 1: into a new market in the United States of America,
Speaker 1: you think about that twice simply because there's so much uncertainty.
Speaker 1: And that is what happening at the supply side. That's
Speaker 1: what happened there where companies failed to invest in their
Speaker 1: expansion programs but demanded and stop. China did not stop
Speaker 1: buying electric vehicles. Europe did not stop buying electric vehicles.
Speaker 1: They kept growing. So we are in this year where
Speaker 1: hold on, we've realized that actually there's some enough supply.
Speaker 1: Litm is faced on that challenge and prices have risen
Speaker 1: between seven six hundred to seven percent over the last
Speaker 1: eighteen months. In day now, if you're in a business
Speaker 1: where the price of your input commodity has risen to
Speaker 1: that level in eighteen months, you matter as well. That's
Speaker 1: packed right, because everything changes and these are costs you
Speaker 1: cannot easily pass on too. You can assumer if you
Speaker 1: look at cobalts as well, there are things happening in
Speaker 1: the d r C that is beginning to threaten some
Speaker 1: percentage of supply which will make supply inadequate to meet demand.
Speaker 1: If you look at manganese so fit as well, lack
Speaker 1: of investment in China and elsewhere in the world is
Speaker 1: leading to a scenario where the world would have to
Speaker 1: think twice whether there is enough to meet demand. Also,
Speaker 1: if you extended to graph it it's a little bit balanced.
Speaker 1: So I would say that I wouldn't be worried about
Speaker 1: graphite this year so much. But then just in one
Speaker 1: is nickel, and we are actually quite both in the
Speaker 1: nickel space and called a deficit that we might actually
Speaker 1: be heading into a deficit of thtor tons. That's not much, right,
Speaker 1: but these are the things that drive prices and also
Speaker 1: slow down their adoption to electric vehicles, because if auto
Speaker 1: companies cannot lay hands on these metals that are who
Speaker 1: shell to the productional electories, they get till manufacturing they
Speaker 1: are not able to produce, and then it's just extense
Speaker 1: the delivery of electric vehicles and it begins to eat
Speaker 1: into our ability or electric vehicle ability to penetrate markets. Yeah,
Speaker 1: because this isn't just a discussion around prices and whether
Speaker 1: or not prices are high and those will get passed
Speaker 1: on to the consumer. It's about delivery of these things altogether.
Speaker 1: Will we be able to make enough to electrify in
Speaker 1: the timelines that have been so clearly outlined for us
Speaker 1: in terms of the carbon budget for example, this being
Speaker 1: you know, one of the key ways of decarbonizing transport.
Speaker 1: So let's talk a little bit actually just about where
Speaker 1: this might break down and whether or not we are
Speaker 1: already seeing or we think we may see in the
Speaker 1: next couple of years, real slow down in terms of
Speaker 1: you know, production and delivery of vehicles. Are there specific
Speaker 1: choke points that that you're watching super closely at the
Speaker 1: moment where your things are just not getting to where
Speaker 1: they need to be physically, given that this is a
Speaker 1: truly global supply chain, So we tried to use a
Speaker 1: qualitative way of you know, testing the pose of how
Speaker 1: this is translated into their consumer and then obviously being
Speaker 1: being there if we're also very data heavy, so we
Speaker 1: tried to use a quant way of defining this. So
Speaker 1: then if you have a friend that has ordered a
Speaker 1: Tesla folks World an electric version or a BM doub
Speaker 1: electric vehicle, just ask them how the weight in time
Speaker 1: game has been going the last few weeks or the
Speaker 1: last few months, and I think not many people are
Speaker 1: having good experiences because the weight in time keeps getting
Speaker 1: longer and longer. And as test that reported in this
Speaker 1: recent update company update, what material shortages or the supply
Speaker 1: chain shortage is actually becoming a material concern for them
Speaker 1: because it's beginning to impact the ability to produce. So
Speaker 1: that is a qualitative way where we realize that these
Speaker 1: supply chain issues are beginning to translate an impact in
Speaker 1: the end consumer. The second way we look at it
Speaker 1: is we do think that the tipping point for electric
Speaker 1: vehicle adoption is actually going to count from costs. Then
Speaker 1: if you worked in the showroom and you could get
Speaker 1: the price of an internal combustion let me name call again, Corolla,
Speaker 1: the same price as you get an electric vehicle Tesla
Speaker 1: Mod three. Well, the option which would you choose? Probably
Speaker 1: the Corolla it's less expensive, right, But then if they
Speaker 1: were the same price as a Tesla, it's the same
Speaker 1: price maybe the Tesla. Yeah, the Tesla they see, and
Speaker 1: that is where we believe that it will be the
Speaker 1: tennant point for mass adoption of electric vehicle when you
Speaker 1: walk into the showroom and you don't have concent about
Speaker 1: I need to pay extra money to be able to
Speaker 1: afford an electric vehicle. But then it's just a matter
Speaker 1: of which one appeals to be more So, I think
Speaker 1: the tipping point will be that price, what we call
Speaker 1: price priority, and our storage team has crunched the numbers
Speaker 1: that what battery price would we attain price parity, and
Speaker 1: we came down to hundred dollar, taking on what our
Speaker 1: right that is the holy grown number that we do
Speaker 1: believe that all we that the industry is working towards.
Speaker 1: At what point that's the average price of batteries reach undred?
Speaker 1: Unfortunately for us at Blue Bag year for our storage
Speaker 1: team has built authority in this area where every year
Speaker 1: we push out this report and initially, prior to the
Speaker 1: supply chain concerns, our working census, based on our modeling,
Speaker 1: our forward looking model was stating that we could attained
Speaker 1: that price parity between twenty twenty three. Guess what that's
Speaker 1: feeling pretty far away? Yeah, exactly, once we started baking
Speaker 1: in a scenario of these higher commodity prices as a
Speaker 1: result of these shortages, what we're seeing is that the
Speaker 1: earliest we could not reach it. If these challenges, supply
Speaker 1: chain challenges extending to next year is beginning to look
Speaker 1: like and if it goes even further out, these four
Speaker 1: fatility goes further out, we could be looking at probably
Speaker 1: later in the decade. Right. So that is also the
Speaker 1: second way where we try to quantitatively assess what the
Speaker 1: impact of these higher prices would be on the electric
Speaker 1: vehicle consumer. So when I talked about the fact that
Speaker 1: I find out from your friends Collis family who have
Speaker 1: ordered an electric vehicle and asked them how the weiting
Speaker 1: game is going at the moment, and I'm pretty sure
Speaker 1: they will tell you that it keeps getting longer and longer.
Speaker 1: And two, at what points are we going to be
Speaker 1: able to attain a hundred dollar you know, a particular
Speaker 1: at our battery cost on average, and you realize that
Speaker 1: that access tended further than what we initially thought. And
Speaker 1: that is the point where we believe that evs will
Speaker 1: reach price priority with internal composting engine. And if that
Speaker 1: goes further out, then the mass abdorction of ev could
Speaker 1: potentially end up being delayed. So you mentioned as a year,
Speaker 1: and I just want to be really clear on that.
Speaker 1: And I know it's impossible to predict the future. We
Speaker 1: are trying to say, when do we all things remaining
Speaker 1: constant today, when do we think things may normalize? And
Speaker 1: I know in the natural gas space, for example, and
Speaker 1: we've covered that on this show. You originally it was, oh,
Speaker 1: it's going to be another two years, and then now
Speaker 1: that timeline is looking like it's it's it's kind of
Speaker 1: going further away. When all things constant you expecting start
Speaker 1: to normalize in the battery supply chain space or could
Speaker 1: it be significantly further out than that? So let me
Speaker 1: let me think I'll listener through it. Behind the scenes
Speaker 1: of very polt I published in January. Right in January,
Speaker 1: Bloomberg any of published It's fast Battery Metals Price Outlook,
Speaker 1: where we trying to look at where prices would be
Speaker 1: in twenty thirty and actually went on stage to confidently
Speaker 1: present these results at our San Francisco summit, so focused
Speaker 1: on batteries, right, like, that's one of the topics that
Speaker 1: comes up a lot of the San Francisco summit exactually
Speaker 1: and I confidently said at that time that base on
Speaker 1: where we have seen supply chains, and I'm we don't
Speaker 1: think that list. Your price at that time was forty
Speaker 1: dollars on average parametric m. We don't think that we
Speaker 1: will see it go higher. We potentially might have hit
Speaker 1: the roof at that time. Three months later, prices doubled,
Speaker 1: and then I have to do the hard and difficult
Speaker 1: job of presenting the reports to a clients every now
Speaker 1: and then. So what I did then there is that
Speaker 1: rather than use that report I saw a forecast of
Speaker 1: the future, I used it to teach our clients how
Speaker 1: not to forecasts. So I think that is how I'm
Speaker 1: going to answer your question, right, okay, so how not
Speaker 1: to poecast? So so what did you learn from that experience?
Speaker 1: Because again, you know, we can only make decisions, not decisions.
Speaker 1: We can only think about for looking scenarios based on
Speaker 1: the information we have today. But what were the moving
Speaker 1: parts that you now feel are potentially too volatile to
Speaker 1: be able to really confidently look too far out? The
Speaker 1: short term should not be deterched from the long term.
Speaker 1: They are they are. There are two parts really joined
Speaker 1: ot the hip right, and at that time we're pretty
Speaker 1: confident that nothing in the short term would matter dramatically
Speaker 1: to impart our long term average. Few a month later,
Speaker 1: the Russia War happened, and then it just change you
Speaker 1: organized supply chain against I think the key s and
Speaker 1: we learned is that you should one way or the other,
Speaker 1: find a way to connect the short term which our
Speaker 1: long term view, not just number one. Number two. We
Speaker 1: need to also understand that if the historical challenges, or
Speaker 1: if the historical factors that drove the market to where
Speaker 1: it is now have not been resolved, it's very important
Speaker 1: not to assume that the future is going to be different.
Speaker 1: And I think if we have thought about that a
Speaker 1: little bit more and realized that the overhang. Yes, I
Speaker 1: live in London and if you if you sat in
Speaker 1: the tube in London today, you probably assume that COVID
Speaker 1: doesn't exist anymore, right, But then if you go to
Speaker 1: countries like China where they are still aggressively enforcing policies
Speaker 1: to contain COVID, you would come to a realization that
Speaker 1: some key markets that actually drive the commodity market are
Speaker 1: still under the not so comfortable more difficulty impact of
Speaker 1: COVED and that is a factor in the manufacturing. So
Speaker 1: if we have thought about the fact that if these
Speaker 1: challenges that were experienced last year, last two years have
Speaker 1: not been eliminated globally still persists, then the challenge that
Speaker 1: drove us to higher prices will still remain. So that
Speaker 1: is less than number two, right, And I think less
Speaker 1: than number three is the fact that the market is
Speaker 1: not as rational as we probably as human is right.
Speaker 1: Where prices would only move based on supply demands, sometimes
Speaker 1: government policies in key countries also impact prices. Sometimes short
Speaker 1: term reactions like what has happened would end up being
Speaker 1: long term also impact prices. So I think these are
Speaker 1: the three things. And to answer your question as to
Speaker 1: where we see prices, so let's take number one. The
Speaker 1: short term factors that are beginning to look long term.
Speaker 1: Have they been resolved And the answer is no. If
Speaker 1: you look at Russia and other issues that we thought
Speaker 1: would just be a short term issue, they're beginning to
Speaker 1: look long term and they will continually impact supply chain.
Speaker 1: So what that What does that mean for prices? It
Speaker 1: means that whatever prices are today is very unlikely that
Speaker 1: they will move below what it is today because those
Speaker 1: challenges have not resolved to COVID issue of COVID, it's
Speaker 1: not been resolved yet in China right, China is still
Speaker 1: aiming for a zero COVID policy that is affective manufacturing.
Speaker 1: So would we see a tsunami of supplied come on
Speaker 1: line this year? No, So if we're not gonna see
Speaker 1: scenami of supplied but demand keeps growing, does that mean
Speaker 1: that we'll see prices begin to fall? Probably not right.
Speaker 1: So I think these are the two things that I
Speaker 1: would say what probably lead us to having prices remain elevated,
Speaker 1: specifically for major battery matters in a short to near term,
Speaker 1: so until probably about the end of next year, I
Speaker 1: would say that prices are likely to remain elevate. It
Speaker 1: what I can confidently tell you that I don't think
Speaker 1: we will see a seven percent to jump in the
Speaker 1: next eighteen months like we did the last eighteen months.
Speaker 1: And that's exactly what we've seen in the LFP on
Speaker 1: switching battery chemistry, right, because when you go beyond a
Speaker 1: certain limits the market, you just destroying demand. Because the
Speaker 1: market and alternatives now for a very short break stay
Speaker 1: with us. So you're saying that there are a number
Speaker 1: of things that have disrupted the market that frankly, we're
Speaker 1: fairly unpredictable. And one was around this Russian invasion of
Speaker 1: the Ukraine. Another one was around COVID containment policy in China.
Speaker 1: And another thing that I know that we've not really
Speaker 1: mentioned much but is definitely actively affecting pretty much all
Speaker 1: commodities markets and anything moving from place to place, is
Speaker 1: disruption within the shipping industry due to COVID and movement
Speaker 1: of you know, things in ways that they weren't moving
Speaker 1: prior to that. And we're still kind of recovering from
Speaker 1: that a couple of years on getting ships back to
Speaker 1: where you know, they previously had been to manage supply
Speaker 1: and demand balance. So here we are, we've got these
Speaker 1: points of disruption. You're mentioning that things are going to
Speaker 1: start leveling off. That's how I interpret you saying that,
Speaker 1: you know, the prices have risen, but we're not going
Speaker 1: to see them rise to the same volume as before.
Speaker 1: But within that we still are going to see rises,
Speaker 1: right Like, things are still going to get more expensive exactly.
Speaker 1: So in the industry there is something probably like most industries,
Speaker 1: is something called demand destruction, right And if you recall
Speaker 1: Ale and I talked about the fact that based on
Speaker 1: what was happening in the DSc with cobalt and the
Speaker 1: fact that prices rules overnight to dollars pero metric tone,
Speaker 1: companies started looking for alternatives. Right, So you destroy a
Speaker 1: portion of demand, because, look, money has a way of
Speaker 1: really making people think beyond their comfort. Zonne. Right, if
Speaker 1: you are in a business where your commodity put commodity
Speaker 1: costs champs over a thousand percent in a matter of
Speaker 1: days or months, you don't just think about where you're
Speaker 1: gonna look for money to pay that thousand percent in
Speaker 1: commit You start thinking about what could actually be substituted
Speaker 1: for the ex expensive commodity. And we saw that happening
Speaker 1: in the grid the utility industry, where when copper prices
Speaker 1: shot up so high you're under certain limit, companies realize
Speaker 1: we're hold on Actually aluminum doesn't conduct so good as copper.
Speaker 1: I think you can do the job data, maybe we
Speaker 1: can sort of create aluminium lies instead of copper. So
Speaker 1: that is what could potentially happen if prices rise as
Speaker 1: rapid as they did the previous man, you destroy demand
Speaker 1: and companies start looking for alternatives new technologies, new ways
Speaker 1: of developing batteries, new ways of looking at the supplies,
Speaker 1: a new deposits that are not reliant on certain countries,
Speaker 1: and people really start putting on the innovation cup. So
Speaker 1: I think that's what's going to happen if the trend
Speaker 1: keeps going that way. What I can series that I
Speaker 1: don't think it's in the the supply side interest not
Speaker 1: to push the ball further. So now I understand why
Speaker 1: the title of your most recent battery Metals market outlooks
Speaker 1: that bumpy road ahead. Certainly there's a lot to consider here.
Speaker 1: Let me just back up and say that, you know,
Speaker 1: these are fundamental principles within understanding economics that are coming
Speaker 1: to light. And I don't think I've ever heard so
Speaker 1: many people discuss economics so often. How are we integrating
Speaker 1: information from economics which is, you know, not historically something
Speaker 1: that we have researched, But we have a team within
Speaker 1: Bloomer that does how have you integrated this into your research?
Speaker 1: Because there seems to be an almost seemingly never ending
Speaker 1: list of variables that is included in your analysis. And
Speaker 1: where does one draw the line? So there are two
Speaker 1: ways we look at it, right from the Dumont side
Speaker 1: and the supply side, And I think let's start with
Speaker 1: the Dumont And I like my holiday's data. I do
Speaker 1: try to go on one holiday. But then since ahead
Speaker 1: that there is a probability of our recession, I started
Speaker 1: thinking twice about some of the things that I actually
Speaker 1: do with my investment. So now I have a secularly
Speaker 1: about the various subscriptions I'm on. And I think a
Speaker 1: lot of companies also start thinking about things this way
Speaker 1: whenever they are talks about recession or an impending recession. Right,
Speaker 1: so you realize across board demand begins to decline. But
Speaker 1: what we've actually seen, particularly in our electric vehicle outlook,
Speaker 1: is that one of the few industries that could be insulated,
Speaker 1: is our view or is electric vehicle industry. Sales of
Speaker 1: electric vehicles is expected to grow this year and it's
Speaker 1: expected to grow next year as well, similar to when
Speaker 1: what we saw during the pandemic, where we thought that
Speaker 1: demand the struction will impact e V outlook, and it
Speaker 1: did not. So I think for the demand side, the
Speaker 1: demand for these battery metals will still remain. What does
Speaker 1: economic recession and inflation do to supply and that is
Speaker 1: where the dynamic, it's quite different. So then I've always
Speaker 1: I know, I've promised I will take you on the
Speaker 1: mind one day. If one day I get to do it,
Speaker 1: there are two days where you would land on the mind.
Speaker 1: Is that your three most important cost factors. Number one,
Speaker 1: the diesel you use in your trucks, so you hauld
Speaker 1: your large boulders, big rocks with large trucks. And to
Speaker 1: put it in contest, if you're looking at the Caterpillar
Speaker 1: seven seven seven, which is a brand new for one
Speaker 1: of those mega trucks, high loss two high loss right,
Speaker 1: if you're putting them side by side, the tire of
Speaker 1: the caterpular truck is bigger than a two high locks.
Speaker 1: These are more stross equipment you're looking at, and you
Speaker 1: need barrels of diesel to fill them, to power them.
Speaker 1: And to put that in contest again, if you're operating
Speaker 1: a five hundred thousand olysis capacity gold mine, you will
Speaker 1: need about a hundred and ten million dollars on your
Speaker 1: diesel annually. I learned, okay, So that is one. Number
Speaker 1: two is your electricity bill that you will use to
Speaker 1: power your smell test and your processing plant. So this
Speaker 1: is also quite very very important part. So about of
Speaker 1: your cost is going into the electricity, and the third
Speaker 1: one is your labor and a cross board for all
Speaker 1: these three things, what is happening. We've seen high inflation
Speaker 1: for diesel or gas depending on where you are. We
Speaker 1: are seeing high inflation on the electricity builds as well.
Speaker 1: And finally, also labor cost keeps going and going cost
Speaker 1: labor but schedually becoming scared. So that is going to
Speaker 1: be the impact of inflation on the operations of mind right.
Speaker 1: And what that means is that even though we have
Speaker 1: seeing prices elevate and other and people are thinking Minus
Speaker 1: are cashion, they're probably not because inflation is catching upward costs.
Speaker 1: And once this happens, you don't have that much money
Speaker 1: sitting around on your balance sheet to invest in new project,
Speaker 1: to invest in new capacity, to invest in growth. So
Speaker 1: I think the biggest impact that this current inflation crisis
Speaker 1: would have on MINUS or mining company or companies that
Speaker 1: supply battery metals is a fact that I'm depending on
Speaker 1: where you sit, there will be much more capital discipline,
Speaker 1: just like I have been cutting back on holiday and
Speaker 1: subscriptions I don't need. Similarly, they would also be cutting
Speaker 1: back on projects that could have potentially helped us to
Speaker 1: meet growing demand. In future, they will have a second
Speaker 1: look at that. So that would be the impact of
Speaker 1: inflation on the mind. In terms of a potential recession.
Speaker 1: We still don't know for set to whatever will happen.
Speaker 1: What we do know is that it's very unlikely to
Speaker 1: impact himand in fact, demand is actually going to grow
Speaker 1: the rest of this decade. So crazy. Where do we
Speaker 1: go from here? What other questions? These are the things
Speaker 1: I wanted to cover. So I remember watching a box
Speaker 1: on game and it was a gunny and I just
Speaker 1: fought in Las Vegas, and he was asked the same
Speaker 1: question and he said, I'm going home. Okay, fair enough,
Speaker 1: But then I'm just going on. I'm going to spend
Speaker 1: time to think about a couple of facts. So crazy.
Speaker 1: You know, as we're looking at this, I think this
Speaker 1: has been more of a discussion around complexity in the spaces.
Speaker 1: We're all trying to grapple with what this really means
Speaker 1: for the future. We know that demand for electric vehicles
Speaker 1: is up and right, as many of the charts are,
Speaker 1: but this is definitely bumpy. This is changing how we
Speaker 1: think about the for delivery of what the electrification of
Speaker 1: transport could it could potentially look like. And it's a
Speaker 1: really important factor as you outlined huge amount of the
Speaker 1: overall cost in a in an an electric vehicle, because
Speaker 1: the battery is a huge amount of the overall cost
Speaker 1: of an electric vehicles. So give me some final things
Speaker 1: to think about. What are the main things that I
Speaker 1: should just keep in the back of my mind as
Speaker 1: I'm looking to analyze this space myself going forward. Yes,
Speaker 1: so number one, I think let's start with the optimistic
Speaker 1: fans right just so far that demand growth is common
Speaker 1: that remains from change, and if we look across various
Speaker 1: scenarios of what the future hosts economically for countries and
Speaker 1: us from a global perspective, I think that all the
Speaker 1: electric vehicle or the battery metals demand market is quite
Speaker 1: insulated and we expected to grow up to about now
Speaker 1: we're doing quite a few millions in terms of material
Speaker 1: demand that could reach about eighteen million metric tons by
Speaker 1: twenty thirty from the ton batteries alone. Number two, the
Speaker 1: little market is in a tight balance right like currently
Speaker 1: there has been delayed investment and delayed production expansion that
Speaker 1: needs to change. That ship needs to turn and we
Speaker 1: need to see a lot more capital. My colleague Albert,
Speaker 1: who leads our global analysis every year, put other report
Speaker 1: which looks at the amount of investment going in the
Speaker 1: energy transition. Unless start with the electric vehicle. Last year,
Speaker 1: two hundred and seventy billion dollars went into the electric
Speaker 1: vehicle industry. At the same time, seven billion went into
Speaker 1: the storage industry. At the minding level, less than one
Speaker 1: billion went into direct investment that went into products. So
Speaker 1: this needs to change if we need to balance the
Speaker 1: equation between supply and demand. For let's number three, for
Speaker 1: nicol as well, there are certain things that are beginning
Speaker 1: to become a concern. Indonesia produces about twent of global
Speaker 1: nickel's supply, and if you look at Indonesia where we
Speaker 1: are getting the supply form those corners of the world
Speaker 1: are places that have one of the most polluting grids,
Speaker 1: mostly coal. And all the government is thinking about using
Speaker 1: hydro electric power as well as other sources of clean
Speaker 1: energy for these minds and these smeltors, but until then
Speaker 1: they remain one of the most pollutant And if you
Speaker 1: think about the fact that the world would depend on
Speaker 1: nickel and by extension Indonesia's nickel. Something drastic needs to
Speaker 1: be done about that. Number four. I've talked about cobalts,
Speaker 1: and I've talked about the supplies and challenges with ethical
Speaker 1: issues around and child living the g r C. Inspite
Speaker 1: of the demand instruction that this has caused and the
Speaker 1: fact that companies have switched significantly two technologies like LFB,
Speaker 1: there's only that much that you can switch, right, because
Speaker 1: he has this limitation of range. And regardless of that,
Speaker 1: if you're looking at long range electric vehicles, you still
Speaker 1: need cobalt inclusive batteries speaking generally right, So we'll still
Speaker 1: depend on cobalts and demand will ultimately grow when you
Speaker 1: look at it from the overall market perspective, and as such,
Speaker 1: we cannot do our way with the DRC. You've seen
Speaker 1: quite a number of companies actually move into the DRC
Speaker 1: to work with our tisanal minors, and I think that
Speaker 1: that will be the writing to do, where companies partner
Speaker 1: with these small skilled protests to ensure they do the
Speaker 1: right things, so we can bring their supply chain into
Speaker 1: the ethical sources of COBA as well to ensure that
Speaker 1: we don't follow over a cliff. But then we do
Speaker 1: have consistent supplied that would enable us to me demand,
Speaker 1: and once we do that, prices will be contained and
Speaker 1: we wouldn't have the adoption of EVI is being delayed.
Speaker 1: And I think the fifth one, I would sort of
Speaker 1: deviate from all that I've talked about in our report,
Speaker 1: and I would say that don't panic. We've talked about turbulence.
Speaker 1: But then one thing that I have not talked about
Speaker 1: yet because obviously it's out of scoope, is the ingenuity
Speaker 1: of human capability that we've seen quite a number of
Speaker 1: industries where there are points where you sort of hit
Speaker 1: the wall, but look, humans, humans, human intelligence, news, no limitation.
Speaker 1: Out of nowhere, there could be a potential new technology
Speaker 1: to extract lythium, and there's directly to instraction technology that
Speaker 1: a companying Leila is currently trying. Out of nowhere, you
Speaker 1: could have a different battery chemistry that would go to
Speaker 1: market within a short period to address some of the
Speaker 1: supply chain concents. Out of nowhere, we're gonna make a
Speaker 1: newer mineral deposit who knows in the country like America, Europe,
Speaker 1: Southeast Asia, South America, which would ease the supply crunch
Speaker 1: were out of nowhere, we could have most of these
Speaker 1: supply chain issues resolved. And also out of nowhere we
Speaker 1: could have world peace, whether disruption term disruptions that we
Speaker 1: have seen now would be eliminated, and by then these
Speaker 1: turbulence that I did talk about, which could actually impasse
Speaker 1: CV adoption, EV sills and the EV revolution would have
Speaker 1: been resolved. And I'm pretty sure that we'll get back
Speaker 1: on track, So don't panic. Well, on that optimistic note, Quaise,
Speaker 1: You've certainly given us a lot to think about. I'm
Speaker 1: not so sure that world pieces on the cards underpinned
Speaker 1: by the battery metals market, but I do appreciate your
Speaker 1: very positive outlook on things, but also the fact that
Speaker 1: you know there's certainly maybe it's the better way to encapsulate.
Speaker 1: From my end, what you were just saying is, don't panic,
Speaker 1: but do analysis. And also the innovation is central to
Speaker 1: not just this industry, but so many industries of the
Speaker 1: topics that we cover, and that certainly is true. I mean,
Speaker 1: the amount of change even just since we started doing
Speaker 1: this show. It's been a couple of years, not that long,
Speaker 1: and I have seen so much innovation and convention market
Speaker 1: over these conversations that we've had and just like you
Speaker 1: were saying regarding the you know, coldball chart, that you
Speaker 1: were looking at the change in battery chemistries, it's truly
Speaker 1: fascinating to see how things are developing going forward. So
Speaker 1: on that note, I look forward to having you back
Speaker 1: on the show to see what has happened in the
Speaker 1: battery metal space over the next year to a couple
Speaker 1: of years. And in the meantime, we'll keep producing market
Speaker 1: outlooks to ponder these and thank you for joining us today.
Speaker 1: Thank you, and thank you to listeners as well. Today's
Speaker 1: episode of Switched On was edited by Rex Warner of
Speaker 1: gray Stoke Media. Bloomberg an e F as a service
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