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Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast.

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Speaker 1: I'm Tracy Alloway.

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Speaker 2: And I'm Joe. Why isn'tal Joe?

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Speaker 1: I have a joke for you, A very special joke.

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Speaker 2: Go on.

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Speaker 1: Why did Anglo American write down it's nickel.

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Speaker 2: Business because it was only worth five cents?

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Speaker 1: That's so good. That's actually okay. My line was because

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Speaker 1: it was a few cents short of a viable return.

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Speaker 1: But yeah, same thing. That's really good.

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Speaker 2: But you know what the thing is is my daughter

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Speaker 2: has gotten really into reading me jokes, and I like,

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Speaker 2: she has all these joke books. Like my brain is

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Speaker 2: you can anticipate and like see where these all are going?

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Speaker 3: All right?

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Speaker 1: Well, on a serious note, Anglo American rejected that bid

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Speaker 1: from BHP Bulletin, which is something that came up in

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Speaker 1: our conversation with Jeff Curry recently, and as a result

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Speaker 1: of that, it is now undertaking this formal process of

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Speaker 1: selling off a bunch of assets and exploring options for

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Speaker 1: its nickel operations. And one thing that I hadn't realized

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Speaker 1: is just how much the nickel market has actually changed

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Speaker 1: in recent years. Like I sort of heard some rumblings

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Speaker 1: of it, but I read something recently that really crystallized

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Speaker 1: a lot of what's been happening in that market, and

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Speaker 1: it is phenomenal.

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Speaker 2: I have to say, I have not given any thought

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Speaker 2: about how much the nickel market has changed, in part

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Speaker 2: because I never at and you point hit some conception

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Speaker 2: of what the nickel market was in the first place.

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Speaker 2: To your way ahead of.

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Speaker 1: Me on this the one we're not thinking about the

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Speaker 1: nickel market on a like at least weekly basis.

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Speaker 3: No.

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Speaker 2: I know like two three things maybe about nickel, which

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Speaker 2: is that a lot of it's from Indonesia. I believe

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Speaker 2: it has some role in batteries or green energy, and

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Speaker 2: so it's kind of an important commodity. What's the third one, Oh,

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Speaker 2: it's also Indonesia. Could Indonesia move further downstream in the

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Speaker 2: process so that it's not just exporting the raw nickel

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Speaker 2: but also exporting some of the actual like or doing

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Speaker 2: some of.

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Speaker 1: That pretty sophisticated factory. Those about the nickel market.

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Speaker 2: These are the three facts I'm aware of about nickel.

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Speaker 2: But beyond that, nun like, I could definitely not tell

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Speaker 2: you the number two producing nickel country.

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Speaker 1: Okay, well, I have a bunch of I definitely.

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Speaker 2: Don't know why nichol is important in batteries either, so

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Speaker 2: maybe we'll learn that.

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Speaker 1: Oh that's a good question. Well, I have a bunch

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Speaker 1: of interesting stats that I think will sort of hit

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Speaker 1: home stuff that has happened recently. But you mentioned the

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Speaker 1: role of Indonesia in this market, and this is something

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Speaker 1: that's relatively new. So I think they became the world's

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Speaker 1: top supplier of nickel just in twenty nineteen they overtook

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Speaker 1: I think it was the Philippines and they now supply

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Speaker 1: more than fifty five percent of the world's nickel. So

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Speaker 1: just insane dominance of that market. And in addition to

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Speaker 1: that dominance in terms of market share, there's also lots

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Speaker 1: of geopolitical intrigue with China. China, by the way, is

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Speaker 1: about to become a net refined nickel exporter, and I think,

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Speaker 1: like just a few years ago it imports, so not exports.

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Speaker 1: It's imports accounted for like fourteen percent of global supply.

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Speaker 1: So it's gone from being like a net importer potentially

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Speaker 1: to a net exporter in just a few years. Crazy, right,

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Speaker 1: So these are crazy stats, and I feel like we

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Speaker 1: really need to dig into what has happened here. Because

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Speaker 1: there are all these sort of thematic, odd lots ideas

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Speaker 1: embedded in the nickel market. So one is just the

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Speaker 1: idea of structural long term demand for battery related materials

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Speaker 1: that will be important in the clean energy transition. I

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Speaker 1: think nickel is used in hydrogen production. Two, I'm not sure.

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Speaker 1: But in addition to that, you also have the difficulty

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Speaker 1: of actually building out sustainable business models for getting these

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Speaker 1: strategically important minerals that we need for the transition. And

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Speaker 1: we've seen Indonesia there are a lot of accusations that

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Speaker 1: it's been flooding the market with cheap and low grade nickel,

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Speaker 1: and so that makes it harder for everyone else, like

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Speaker 1: Anglo American to make money on this specificlar nickel. We'll

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Speaker 1: get into that, we'll talk about all the different types

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Speaker 1: of nickel. So anyway, I just think it's such an

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Speaker 1: interesting story, and it's one that's sort of flown under

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Speaker 1: the radar, at least for me recently, and so I

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Speaker 1: am very pleased to say that we do, in fact

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Speaker 1: have the perfect guests to discuss this. We're going to

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Speaker 1: be speaking with Michael Vidmer. He is the Bank of

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Speaker 1: America head of Metals Research and it was his report

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Speaker 1: that really put this on my radar, and he just

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Speaker 1: laid out some of the numbers that I cited to

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Speaker 1: you a couple months ago, and I'm so glad we

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Speaker 1: could get him on the show to further discuss this. So, Michael,

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Speaker 1: thank you so much for coming on our box.

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Speaker 3: Thank you very much for having me.

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Speaker 1: Should we start with the basic question the Joe already

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Speaker 1: sort of alluded to, what is What is nickel? Because

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Speaker 1: it's not a singular commodity in some respects, It's sort

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Speaker 1: of like oil. There are all these different grades and

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Speaker 1: production uses for it. So what exactly when we say

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Speaker 1: nickel or the nickel market, what are we talking about?

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Speaker 3: Yeah, so nickel is an element I think that's the

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Speaker 3: first thing I would say. It comes in elementary form

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Speaker 3: out of the Earth. But what normally happens is that

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Speaker 3: consumers use a nickel in processed form. So you have

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Speaker 3: got the refined nickel that you can use, for instance,

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Speaker 3: in your in your buckles, in your belt buckles to

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Speaker 3: make them nice and shiny. You can then use it

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Speaker 3: or another form of nickeline former. It's more like a

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Speaker 3: chemical in ev batteries. And then there's still another type

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Speaker 3: of nickel is more called nickel pick or ferro nickel

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Speaker 3: that you can then use in a stainless steel mil

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Speaker 3: so it comes in very different forms. What all of

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Speaker 3: those have in common is they have some form of

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Speaker 3: nickel in them.

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Speaker 2: The batteries is probably the one. You know, belt buckles

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Speaker 2: have been around for a while. Stainless steel has been

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Speaker 2: around for a while. Obviously a lot of interest, particularly

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Speaker 2: now strategically with the energy transition, etcetera, related to batteries.

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Speaker 2: What is the role of nickel in batteries and how

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Speaker 2: crucial is it as one of the you know, we

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Speaker 2: talk about copper, we talk about lithium. How important is nickel?

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Speaker 3: So we can we can break down the battery sector.

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Speaker 3: When you're looking at China and when you're looking at

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Speaker 3: the world outside China. It's different type of EV batteries

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Speaker 3: that common effactors can use. In China, the EV manufacturers

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Speaker 3: have gone down the route of using what is called

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Speaker 3: a lithium r and phosphate battery. It used to be

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Speaker 3: a very simple chemistry, didn't have the same kind of

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Speaker 3: energy density, didn't give you the same kind of driving

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Speaker 3: ranges that you would get these other types of batteries,

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Speaker 3: but it was cheap, and I think that's one reason

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Speaker 3: why the Chinese evs are not as expensive as the

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Speaker 3: VEST and evs. The world outside China has relied on

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Speaker 3: a different type of EV battery chemistry, and these batteries

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Speaker 3: contain nickel. They give you more energy density, they give

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Speaker 3: you a higher driving range as well. And when you're

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Speaker 3: then breaking down the battery, you have got three elements effectively.

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Speaker 3: So you have got an anode and a cathode and

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Speaker 3: between those that's where the electricity flows. And it's the

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Speaker 3: cuthode specifically where you then have the nickel in them.

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Speaker 1: So where does nicol actually come from? So we mentioned

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Speaker 1: Indonesia already, I think I mentioned the Philippines. But who

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Speaker 1: are the big players in this market? And how is

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Speaker 1: it actually extracted from? Presumably the ground?

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Speaker 3: Again, very different, very different methods of extracting the nickel. Again,

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Speaker 3: if you're breaking it down a little bit, you tend

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Speaker 3: to have two types of deposits out there. The wond

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Speaker 3: deposit is more in the cola regions, and then you've

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Speaker 3: got another set of deposits that's more in the warmer

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Speaker 3: and wetter regions that you have got a lot of

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Speaker 3: oxidized locks of oxidized or some weather ors a little

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Speaker 3: bit more difficult to treat the former. So the nickel

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Speaker 3: ores that are in the colder regions like Russia, for instance,

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Speaker 3: are relatively easy to extract. You take them all over

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Speaker 3: the ground, send them through a smellter, refine them, and boom,

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Speaker 3: you have got your your refined nickel. The nickel ores

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Speaker 3: that are in the warmer and wetter regions, because they're

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Speaker 3: oxidized and weathered, they are a little bit more difficult

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Speaker 3: to process. So the different technologies that you can use

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Speaker 3: as one technology again where you're using fire refining, and

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Speaker 3: then there's another technology where you are using sulfuric acid

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Speaker 3: effectively to lead the nickel out of the out of

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Speaker 3: the oars. When you're looking at the biggest players in

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Speaker 3: the space, it has actually changed a lot. And you

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Speaker 3: mentioned it already in the at the outset. Historically, when

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Speaker 3: you're looking at it, you had Russia as a big

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Speaker 3: nickel producer, Australia as a big nickel producer, the Philippines

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Speaker 3: were in the fold as well, Canada to some extent too.

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Speaker 3: But what's happened recently is as the energy transition started

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Speaker 3: to take off market participants. We're really focused on increasing

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Speaker 3: nickel supply quickly. And there's one country that's just summed

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Speaker 3: at the industry in that country is Indonesia. It has

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Speaker 3: the weather type of war, but it has that in abundance,

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Speaker 3: so it's very easy to actually take it out of

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Speaker 3: the ground. And the Chinese went into Indonesia innovative also

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Speaker 3: in the production technologies and managed to take the nickel

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Speaker 3: out that they then needed to drive the EVE battery industry.

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Speaker 2: So I definitely want to get into Indonesia what they've

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Speaker 2: done to sort of rapidly expand their domestic nickel industry

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Speaker 2: so fast. But just one more question before we get

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Speaker 2: to some of these policy questions and supply. When looking

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Speaker 2: at a total demand global demand for nickel, how much

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Speaker 2: is batteries and how much has the rise of the

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Speaker 2: so called energy transition, how much has that changed demand

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Speaker 2: curves relative to say where we were ten years ago,

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Speaker 2: Like how important is it as a buyer of nickel?

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Speaker 3: Name massive massively has changed massively? Ten years ago, the

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Speaker 3: battery sector had literally no share in nickel demand. When

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Speaker 3: you're looking at it now, literally all of the demand growths, Like.

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Speaker 2: How many tons of nicol do we produce? And how

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Speaker 2: many tons would we be producing every year if it

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Speaker 2: weren't for that battery.

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Speaker 3: So look a few years back, the nickel market was

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Speaker 3: around two million tons. By twenty thirty, it's potentially twice

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Speaker 3: as much, and literally all of the demand rules is

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Speaker 3: then coming through from the EBI battery side. Okay.

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Speaker 1: So going back to Indonesia, so it seems like they

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Speaker 1: made a strategic decision that this was an industry that

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Speaker 1: they wanted to build out. And I think it started

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Speaker 1: under the former president of Indonesia whose name I am

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Speaker 1: sure I'm going to mispronounce, but Sisilo Bambang you doing?

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Speaker 1: Is that right?

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Speaker 3: Yes? Okay?

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Speaker 1: But it's been continued under Djokovidodo. Why did they decide

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Speaker 1: this was an area of strategic or financial interest?

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Speaker 3: So it was the Indonesians which opened up the country,

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Speaker 3: but ultimately was actually China which drove that development. And

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Speaker 3: I think you see that a lot in the public

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Speaker 3: discussion at the moment. I think the tariffs that President Biden,

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Speaker 3: for instance, imposed on Chinese EV's, I think there is

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Speaker 3: this undercurrent or the concern that the Chinese government very

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Speaker 3: strategically over the past twenty years built its EV industry.

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Speaker 3: And when we're talking EV industry, it's not just the

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Speaker 3: EV side of things that the Chinese government has focused on.

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Speaker 3: It's literally the entire supply chain. So they looked at initially, well,

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Speaker 3: let's build some cars as a combustion engine, but then

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Speaker 3: they read the China realized it's actually hard because the

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Speaker 3: US and Europe actually have quite strong industries. And then

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Speaker 3: they looked, well, if it's hard to compete in cars

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Speaker 3: with a combustion engine, why don't we do evs. And

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Speaker 3: that's exactly what they did. And then they set up

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Speaker 3: a long term strategic industry policy and looked at what

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Speaker 3: they need to accomplish becoming the dominant producer of evs.

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Speaker 3: And one of the things that the Chinese government realized

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Speaker 3: very early on is if you have a strong demand

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Speaker 3: growth for evs, you also need the roma tiers and

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Speaker 3: particularly the battery romatires. Without batteries, TVs don't go very fond.

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Speaker 3: So the Chinese government looked at where some of those

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Speaker 3: battery romatials are. They did it in lithium, another battery

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Speaker 3: romat heal, they lived in cobalt, and they did also

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Speaker 3: in nickel, and in twenty thirteen, the two presidents of

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Speaker 3: China and Indonesia effectively set together and the discussion pretty

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Speaker 3: much went like that. The Chinese said, look, we need

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Speaker 3: the nickel. The Innetian said, well, we have the nickel.

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Speaker 3: The Chinese said, well, can be invested, and then he said, yeah,

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Speaker 3: do Let's develop that industry together. And so the Indonesian

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Speaker 3: government then, together with the Chinese, set up industrial parks,

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Speaker 3: and through that industrial park, supported by Chinese money, the

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Speaker 3: nickel industry and then developed very very quickly. It's remarkable

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Speaker 3: at the pace with which Indonesia and China in conjunction

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Speaker 3: have been building that industry.

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Speaker 2: Let's talk a little bit about how fast that happened.

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Speaker 2: So I think Tracy, did you say it was like

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Speaker 2: twenty nineteen. Even it was the Indonesia wasn't that big

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Speaker 2: of a player.

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Speaker 1: I'm citing Michael here, but in twenty nineteen it became

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Speaker 1: the biggest producer of nicolas.

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Speaker 2: And now it's overwhelmingly Yeah, what were the nature of

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Speaker 2: those early relationships, What did China get, what did they

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Speaker 2: have to offer from a technological transfer? And then what

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Speaker 2: is Indonesia ge I guess in terms of royalties and jobs,

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Speaker 2: like how what was the economics of those So but.

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Speaker 3: In Dntia realized Nidia always was an exporter of nickel wars,

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Speaker 3: which is unprocessed stuff. You basically put it on the ship,

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Speaker 3: send it off the Chinese to China. The Chinese then

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Speaker 3: processed it. And then the Indonesian government realized at some

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Speaker 3: stage that it's actually another a lot of value added

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Speaker 3: in that. And they also saw that demand potentially increases

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Speaker 3: very strongly, and so they wanted to build more of

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Speaker 3: a value added downstream industry. Indonesia wanted to build a

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Speaker 3: downstream processing industry invited and then was looking at how

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Speaker 3: to actually accomplish that. So in the first instance, what

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Speaker 3: they did is they stopped the exports of unprocessed nickel oars.

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Speaker 3: So in twenty fourteen you could no longer ship unprocessed

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Speaker 3: was In that year, Indonesia had a global nickel market

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Speaker 3: share of less than ten percent, like five or six percent,

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Speaker 3: very low. And then I think various countries and operators

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Speaker 3: were looking at the Indonesians or and Indonesian was and

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Speaker 3: I set before the Indonesian oars are weathered, was oxidized,

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Speaker 3: was very difficult to process and the Chinese then went

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Speaker 3: into Indonesia. It's one comedy in particular who then looked

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Speaker 3: at innovative productive production technologies and started experimenting with different

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Speaker 3: methods of extracting the nickel from the nickel oars and

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Speaker 3: were actually quite successful and once they had distemplate in place,

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Speaker 3: the nickel industry then expanded quite quickly.

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Speaker 1: Has anyone else been able to replicate what that Chinese

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Speaker 1: processing technology that you just mentioned, Like, is this something

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Speaker 1: that other people are doing that has also increased supply

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Speaker 1: elsewhere in the world aside from Indonesia or is it

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Speaker 1: sort of a China Indonesia exclusive thing.

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Speaker 3: So there's two two technologies. One called pressure as a

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Speaker 3: leading that has been tried before, but literally when you're

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Speaker 3: looking at all the projects that have been brought online

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Speaker 3: in Australia over the lifetime of those projects, those projects

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Speaker 3: feel not pay for the initial investment because it's just

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Speaker 3: a very difficult technology. The Chinese have been very good

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Speaker 3: in bringing that online. The other technology, which is more paramatology,

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Speaker 3: which is fire smelting and refining, that is also a

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Speaker 3: dominated by the Chinese, so they already had a very

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Speaker 3: strong wall.

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Speaker 2: It used to be clear Australia has basically tried to

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Speaker 2: do the exact thing thing and internally have not been

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Speaker 2: able to do it economically.

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Speaker 3: Yeah, So there was a discussion it was about ten

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Speaker 3: fifteen years ago on the type of ores that are

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Speaker 3: available in Indonesia, and I think the undertone always was, look,

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Speaker 3: the oars are there, but they're just very difficult to process,

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Speaker 3: and therefore it's going to it might be hard to

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Speaker 3: see a very big production increases coming through. And that

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Speaker 3: was through up to the point where the Chinese actually

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Speaker 3: then went into Indonesia and started developing those assets.

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Speaker 1: So talk to us more about the sort of virtuous

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Speaker 1: cycle of the supply chain that this is creating. So

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Speaker 1: China now has access to this cheap and abundant nickel

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Speaker 1: that feeds into their ev industry. How crucial has that

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Speaker 1: nickel been in sort of building out the electric car

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Speaker 1: business in China.

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Speaker 3: I think nickel on its own probably wouldn't have made

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Speaker 3: much of a difference, but I think where China was

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Speaker 3: very strategic in making sure that all of the raw

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Speaker 3: materiers that I needed it are available. So it's not

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Speaker 3: just the nicer side, it is the lithium side as well.

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Speaker 3: It is the cobal side as well. That's everything that

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Speaker 3: goes into the cassos. And when you look at the

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Speaker 3: unknote the graphite side of things, again China is dominating.

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Speaker 3: So when you're looking at all of those critical raw materials,

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Speaker 3: a lot of that is being dominated by China. And look,

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Speaker 3: you can take a slightly different view on that. Take

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Speaker 3: the last twenty years during the period of globalization. I

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Speaker 3: bet around twenty ten twenty eleven, the guests that you

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Speaker 3: would have heard that would have had here, there was

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Speaker 3: a lot of talk about I don't know, Netflix, the

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Speaker 3: services industry and the cool stuff basically now, but no

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Speaker 3: one realized that actually, you can't run an economy without

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Speaker 3: having the basic the basic Roman here. So the vest

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Speaker 3: effectively created a vacuum in those supply chains that China

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Speaker 3: effectively filled. And that's the issue that that governments now

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Speaker 3: have to grapple with.

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Speaker 2: How much of the Chinese edge when it comes to

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Speaker 2: refining or processing or I guess even acquire raw commodities.

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Speaker 2: How much of the edge is just a sheer scale question.

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Speaker 2: There is a gigantic market in China period. There are

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Speaker 2: a lot of workers in China period, and so setting

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Speaker 2: even setting aside whether different groups of engineers and scientists

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Speaker 2: could replicate these processes on paper. How much is the

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Speaker 2: just the pure scale edge part of the story here.

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Speaker 3: I mean, having a big domestic market certainly helps, but

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Speaker 3: again what also helps is having a strategic industrial policy

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Speaker 3: to actually being able to capitalize on that on that

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Speaker 3: domestic market. And it's I think the conjunction of those

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Speaker 3: two that wrote about that dominance in the supply to

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Speaker 3: a Now the problem that we're having increasingly is and

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Speaker 3: this always happens in China. We had it in steel,

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Speaker 3: and we had it in aluminimum. When the Chinese government starts

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Speaker 3: developing industries. There's actually inherently a lot of competition also

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Speaker 3: within China, but you always get over investment, you have

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Speaker 3: got overcome. So take the last study from the European Union,

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Speaker 3: firms and the European Union estimates that last year the

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Speaker 3: Chinese could have produced twice as many cars than they

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Speaker 3: did through the over capacities that they've had. And so

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Speaker 3: what you're seeing now is that some of those over

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Speaker 3: capacities is or there's a threat that some of that

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Speaker 3: overcapacity is actually now being exploded to the Western markets.

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Speaker 3: And again that takes us back to the whole discussion

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Speaker 3: about terrorists and trade protectionism, But it is that entire

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Speaker 3: approach I think that we've seen the last twenty fifty

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Speaker 3: years that that brought kind of those supply chains together.

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Speaker 1: Okay, speaking of over capacity, I mentioned in the intro

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Speaker 1: that there have been these accusations of Indonesia essentially flooding

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Speaker 1: the market with low grade and low price nickel. What

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Speaker 1: impact has the dominance of Indonesia on the nickel market

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Speaker 1: actually had on other businesses?

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Speaker 3: So, if I put it very simply, I think for

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Speaker 3: China it's almost always about quantity, not about value, about volume,

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Speaker 3: but not about value. And so coming back to preventing

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Speaker 3: bottlenecks through the supply chain, when you're looking at the

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Speaker 3: industrial policy, I think what China wants to prevent is

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Speaker 3: constraints and bottlenecks and therefore higher prices that would effectively

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Speaker 3: make it difficult for the strategic industry likely V manufacturers

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Speaker 3: to produce those evs. And so what we see in

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Speaker 3: Indonesia at the moment is a lot of discussions about

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Speaker 3: where the production costs are Indonesia, what is a marginal cost?

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Speaker 3: Because ultimately, if you're prioritizing value volume over value, then

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Speaker 3: you're producing at costs. Now, the problem for the producers

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Speaker 3: outside China is if that is the name of the game,

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Speaker 3: there is not a lot of fat in producing nickel,

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Speaker 3: and that's why we've seen the Western producers like BHP

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Speaker 3: and Anglo actually taking a relatively bare review on their

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Speaker 3: nickel assets. PHP actually is probably the one data what

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Speaker 3: you mentioned Ungler before, but BHP is the one that

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Speaker 3: would highlight potentially even more so. They have one operation

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Speaker 3: in Australia called Nickel West. It's a really significant side

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Speaker 3: big side actually, and a few years back we thought

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Speaker 3: that that could actually be the supplier of choice to

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Speaker 3: the Western or to the ev industry. But that's actually

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Speaker 3: one of the one of the assets that BHP doesn't

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Speaker 3: assign a lot of value to anymore these things.

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Speaker 2: So prices have just come down so much that this

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Speaker 2: big project in Australia just can't make much more.

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Speaker 3: Yeah, it's effective that.

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Speaker 2: I want to go back to something you said in

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Speaker 2: the beginning about the two different types of chemistries. So

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Speaker 2: on some basic level, the nickel based batteries are not

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Speaker 2: as efficient as the sort of the chemistry that's in

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Speaker 2: the West, but the Chinese battery are like the best

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Speaker 2: in the world.

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Speaker 3: Right. Yeah, So again this is when you would have

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Speaker 3: to go back, because it's the second base evolving is

398
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Speaker 3: evolving a lot at the moment. So initially, I think

399
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Speaker 3: when we started talking about the ev industry, the idea was,

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Speaker 3: and that's seven eight years ago, that nickel based batteries

401
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Speaker 3: are the battery of choice in China and potentially outside China.

402
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Speaker 3: The Chinese always had that lithium iron phosphate battery which

403
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Speaker 3: doesn't contain any nickel, but initially because it's a much

404
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Speaker 3: lower energy density, was never thought to be kind of

405
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Speaker 3: the lap choice. But there was a lot of again

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Speaker 3: innovation in that space, and those batteries have become much

407
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Speaker 3: much better. They are folded differently, they are put together differently,

408
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Speaker 3: so the energy density has actually increased as well. And

409
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Speaker 3: so now you almost have this second lissim and phosphate

410
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Speaker 3: market that is becoming another mainstay of the industry.

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Speaker 2: So it is it just to understand this better in

412
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Speaker 2: theory or the you know, in the sort of the

413
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Speaker 2: chemistry lab so to speak. The nickel based bader batteries

414
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Speaker 2: due to the lower energy density.

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Speaker 3: Higher energy, higher and higher energy density.

416
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Speaker 2: The nickel base batteries of higher and higher enginety.

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Speaker 3: They're the better, but they're normally the better. But the

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Speaker 3: least on phosphate batteries that the Chinese produced historically had

419
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Speaker 3: the lower energy density. And that's fight. Oh, confused by

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Speaker 3: the idea always was value. You need to have those

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Speaker 3: nickel based batteries if you wanted to have a thousand

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Speaker 3: kilometera driving range in the in the EV side of things.

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Speaker 2: And so in the US we have nickel based batteries

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Speaker 2: in the Yeah, okay, sorry, thank you for clarifying.

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Speaker 1: Well, okay, on this note, I think the US and

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Speaker 1: Europe would agree that evs are a strategically important thing

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Speaker 1: that we want to have more of if we're serious

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Speaker 1: about the clean energy transition. And yet there seems to

429
00:23:42,920 --> 00:23:47,800
Speaker 1: be this tension where mining a component or a material

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Speaker 1: that is actually quite important for these things, viz. The

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Speaker 1: batteries is just not that profitable in the current situation.

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Speaker 1: So what do they do about it? How do we

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Speaker 1: resolve that attention.

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Speaker 3: That's the focus at the moment, Yes, how do you

435
00:24:05,119 --> 00:24:09,400
Speaker 3: resolve that? I think tariffs forez better words, I think

436
00:24:09,440 --> 00:24:13,040
Speaker 3: that's one thing that is clearly being discussed at the moment.

437
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Speaker 3: So if you don't allow any Chinese evs onto the

438
00:24:17,440 --> 00:24:20,920
Speaker 3: US market, which is seemingly the direction we want to take,

439
00:24:21,480 --> 00:24:28,280
Speaker 3: then by definition you're giving your domestic car manufacturers a

440
00:24:28,920 --> 00:24:31,680
Speaker 3: bit of breathing space to develop your own industry. The

441
00:24:31,800 --> 00:24:36,240
Speaker 3: DOE is also looking at different ways to boost nith

442
00:24:36,320 --> 00:24:38,639
Speaker 3: nickel supply, so there's a lot of focus, for instance,

443
00:24:38,680 --> 00:24:42,280
Speaker 3: on the recycling side of things. There's also a lot

444
00:24:42,320 --> 00:24:46,480
Speaker 3: of focus now on assets outside the Chinese supply chain.

445
00:24:46,520 --> 00:24:49,280
Speaker 3: I think there were envoys from the US government in

446
00:24:49,359 --> 00:24:53,560
Speaker 3: Indonesia to discuss a limited free trade agreement with Indonesia too,

447
00:24:54,000 --> 00:24:56,760
Speaker 3: So there's a lot of movement, but it's not impossible,

448
00:24:57,119 --> 00:25:00,800
Speaker 3: and I think there will be solutions to the shortfall

449
00:25:00,840 --> 00:25:03,439
Speaker 3: of critical materials that we do face to some extent

450
00:25:03,600 --> 00:25:06,800
Speaker 3: on the way to a net zero But both Yes

451
00:25:06,960 --> 00:25:09,639
Speaker 3: and Europe do have a fair bit of catching up

452
00:25:09,800 --> 00:25:11,040
Speaker 3: to do in the coming years.

453
00:25:11,440 --> 00:25:15,159
Speaker 2: Right now, so obviously with the Inflation Reduction Act, but

454
00:25:15,200 --> 00:25:17,240
Speaker 2: also the rise of Tesla and others. You know, there's

455
00:25:17,400 --> 00:25:21,679
Speaker 2: more of a domestic battery industry. In fact, I think

456
00:25:21,800 --> 00:25:24,400
Speaker 2: we talked to the CEO of one of the companies

457
00:25:24,720 --> 00:25:29,639
Speaker 2: several months no VANX. We're US based battery companies, startups

458
00:25:29,720 --> 00:25:33,520
Speaker 2: or various stages in development. Where are we right now

459
00:25:33,840 --> 00:25:36,359
Speaker 2: sourcing most of our sort of critical components for them,

460
00:25:36,480 --> 00:25:39,479
Speaker 2: or critical minerals or critical elements for batteries.

461
00:25:39,760 --> 00:25:42,320
Speaker 3: Look, there is an existing NICO market. Actually, yeah, there's

462
00:25:42,320 --> 00:25:43,359
Speaker 3: an existing NICO market.

463
00:25:43,359 --> 00:25:45,320
Speaker 2: Actually, but where do we get where do we import

464
00:25:45,359 --> 00:25:48,440
Speaker 2: it from? What are the big export or exporters to

465
00:25:48,520 --> 00:25:48,880
Speaker 2: the US.

466
00:25:49,000 --> 00:25:52,600
Speaker 3: So when you're looking at the key NICA producing countries

467
00:25:52,720 --> 00:25:57,480
Speaker 3: outside Indonesia and China, Brazil, that's Canada, Australia as well,

468
00:25:57,880 --> 00:26:00,320
Speaker 3: the letter two actually have got a green and with

469
00:26:00,480 --> 00:26:05,440
Speaker 3: US in place, I think it's the question really comes

470
00:26:05,600 --> 00:26:09,440
Speaker 3: more pressing when you're looking five, six, seven, eight years out.

471
00:26:09,920 --> 00:26:12,240
Speaker 3: The less cars of the combustion engine you're putting on

472
00:26:12,280 --> 00:26:15,520
Speaker 3: the road, the more pressing it then becomes to actually

473
00:26:15,560 --> 00:26:17,720
Speaker 3: make sure that you have got the raw materials available.

474
00:26:17,880 --> 00:26:20,919
Speaker 3: And again taking a step back, what we're seeing actually

475
00:26:20,960 --> 00:26:25,320
Speaker 3: at the moment is in the Western world that the evs,

476
00:26:25,520 --> 00:26:28,720
Speaker 3: the pure battery electric vehicles are actually downgraded a little bit,

477
00:26:28,800 --> 00:26:31,240
Speaker 3: so we actually have to take down our penetration rates.

478
00:26:31,640 --> 00:26:35,000
Speaker 3: What we're seeing more is kind of that intermediate solution

479
00:26:35,040 --> 00:26:37,720
Speaker 3: where you're putting hybrid or plug in hybrid electric vehicles

480
00:26:37,760 --> 00:26:39,800
Speaker 3: onto the road, and for those, for instance, you do

481
00:26:40,040 --> 00:26:43,160
Speaker 3: need less of the critical raw materials, so that buys

482
00:26:43,200 --> 00:26:45,920
Speaker 3: you effectively time potentially to build up more of a

483
00:26:45,960 --> 00:26:48,680
Speaker 3: supply chain. That building up a supply chain, I think

484
00:26:48,840 --> 00:26:51,440
Speaker 3: is right now the key focus that we have in

485
00:26:51,520 --> 00:26:53,240
Speaker 3: both US and in Europe.

486
00:26:53,440 --> 00:26:57,680
Speaker 1: So just broadening out the metals discussion. You are, of

487
00:26:57,760 --> 00:27:00,440
Speaker 1: course the head of metals research for BOAS, so we

488
00:27:00,520 --> 00:27:03,320
Speaker 1: should ask you about some other things going on as well.

489
00:27:03,400 --> 00:27:05,960
Speaker 1: But it seems to me like one of the major

490
00:27:06,080 --> 00:27:10,520
Speaker 1: stories in this market has to be volatility recently, and

491
00:27:10,880 --> 00:27:14,119
Speaker 1: perhaps copper is the best example of that. So we

492
00:27:14,240 --> 00:27:16,840
Speaker 1: had Jeff Curry on a few weeks ago talking about

493
00:27:16,840 --> 00:27:20,399
Speaker 1: how long copper was the trade of a lifetime, and

494
00:27:20,600 --> 00:27:23,800
Speaker 1: since then I think it's down what like ten percent.

495
00:27:23,640 --> 00:27:24,119
Speaker 2: Something like that.

496
00:27:24,400 --> 00:27:26,920
Speaker 1: I would say like a few weeks is probably not

497
00:27:27,040 --> 00:27:30,000
Speaker 1: the timescale he was thinking of in terms of trade

498
00:27:30,040 --> 00:27:33,280
Speaker 1: of a lifetime. But there's definitely been a lot of volatility,

499
00:27:33,320 --> 00:27:36,639
Speaker 1: and it feels like there's a weird dynamic going on

500
00:27:36,920 --> 00:27:40,800
Speaker 1: where like part of the thing causing volatility is the

501
00:27:41,320 --> 00:27:45,880
Speaker 1: restriction in is the type physical market basically, so we're

502
00:27:45,920 --> 00:27:50,159
Speaker 1: seeing these big swings up and down, partly because we

503
00:27:50,320 --> 00:27:52,880
Speaker 1: need more of this stuff. What's going on there.

504
00:27:53,600 --> 00:27:57,200
Speaker 3: So Coppa is really really different to Nika. On Nica,

505
00:27:57,400 --> 00:28:01,400
Speaker 3: we had the reserves and the resources, the deposits in Indonesia.

506
00:28:02,240 --> 00:28:06,399
Speaker 3: On copper, you don't. It's a very mature market. Some

507
00:28:06,560 --> 00:28:09,399
Speaker 3: of the best assets or mines that we actually have

508
00:28:09,640 --> 00:28:13,680
Speaker 3: in the world have been running for decades and it's

509
00:28:13,880 --> 00:28:19,120
Speaker 3: very hard to find really good new assets. In fact,

510
00:28:19,160 --> 00:28:21,199
Speaker 3: when you're looking at some of the projects that are

511
00:28:21,280 --> 00:28:24,000
Speaker 3: currently in the pipeline, just to highlight the difficulty and

512
00:28:24,040 --> 00:28:27,639
Speaker 3: bring those on lines, some of those weird discovered almost

513
00:28:27,680 --> 00:28:31,600
Speaker 3: thirty years ago, so it took you almost two generations

514
00:28:31,680 --> 00:28:34,080
Speaker 3: to bring them to the market, and so we now

515
00:28:34,600 --> 00:28:39,080
Speaker 3: facing an almost empty project pipeline. But doesn't help either

516
00:28:39,160 --> 00:28:42,360
Speaker 3: on the copper side, is that during the past ten years,

517
00:28:42,560 --> 00:28:46,080
Speaker 3: in the past decade, we had a bear market. Effectively,

518
00:28:46,200 --> 00:28:48,280
Speaker 3: I bet you in twenty fifteen I would not have

519
00:28:48,400 --> 00:28:50,320
Speaker 3: been sitting here. It was because there was not a

520
00:28:50,400 --> 00:28:52,360
Speaker 3: lot of interest in the metals in the metal site.

521
00:28:52,760 --> 00:28:55,280
Speaker 3: And so think about it, shortly after that or doing that.

522
00:28:55,480 --> 00:28:58,840
Speaker 3: During this ten years, Glenco almost went bankrupt. How did

523
00:28:58,880 --> 00:29:02,160
Speaker 3: the miners react to that cut? Kapex and their equation

524
00:29:02,240 --> 00:29:05,360
Speaker 3: there is very simple. You don't spend, you don't produce

525
00:29:05,680 --> 00:29:08,280
Speaker 3: further down the line, and that's not even something that

526
00:29:08,560 --> 00:29:12,720
Speaker 3: the Chinese government through a strategy industrial policy can resolve.

527
00:29:12,880 --> 00:29:15,520
Speaker 3: If you don't have the assets, you just cannot produce.

528
00:29:15,720 --> 00:29:19,640
Speaker 3: And so you're now effectively in a situation their copper

529
00:29:19,720 --> 00:29:23,320
Speaker 3: supply growth is really tailing off. It's coming down, but

530
00:29:23,480 --> 00:29:27,080
Speaker 3: structurally you have got much higher copper de mincros. Over

531
00:29:27,080 --> 00:29:31,040
Speaker 3: the last two decades, potential copper demandross was maybe two

532
00:29:31,080 --> 00:29:36,760
Speaker 3: percent out until twenty fifty, we can justify annual copper

533
00:29:36,800 --> 00:29:40,280
Speaker 3: demand rows of four percent, So twice twice is high,

534
00:29:40,360 --> 00:29:42,040
Speaker 3: and you don't have the supply grows, and that's I

535
00:29:42,120 --> 00:29:44,920
Speaker 3: think where then the volatility then effectively comes in because

536
00:29:45,400 --> 00:29:48,520
Speaker 3: if you don't have the safety buffer, so the inventories

537
00:29:48,760 --> 00:29:52,920
Speaker 3: that can help even out shortfalls here and there, that's

538
00:29:52,960 --> 00:29:55,760
Speaker 3: what ultimately creates grades at volatility. The one point I

539
00:29:55,840 --> 00:29:58,040
Speaker 3: would make about some of the calls that we've seen

540
00:29:58,120 --> 00:30:01,160
Speaker 3: in the copper market, like I've seen fifteen thousand I've

541
00:30:01,200 --> 00:30:05,800
Speaker 3: seen forty thousand dollars. That's all fine, I think if

542
00:30:05,880 --> 00:30:08,600
Speaker 3: it's a long term you, but it also is a

543
00:30:08,640 --> 00:30:11,360
Speaker 3: little bit of a disservice to the industry. To your point,

544
00:30:11,560 --> 00:30:13,720
Speaker 3: sim I'll give you a very simple if it's a

545
00:30:13,840 --> 00:30:16,240
Speaker 3: very simple example of say over the last two to

546
00:30:16,400 --> 00:30:19,680
Speaker 3: three weeks, for instance, so we've had it's more on

547
00:30:19,760 --> 00:30:24,520
Speaker 3: the option space, but we've had an explosion in interest

548
00:30:24,760 --> 00:30:28,160
Speaker 3: on the call side, or calls got really really expensive.

549
00:30:28,480 --> 00:30:31,160
Speaker 3: But then we also saw how the buying started to

550
00:30:31,240 --> 00:30:34,000
Speaker 3: subside a little bit. And so what has been a

551
00:30:34,160 --> 00:30:37,640
Speaker 3: very popular position recently in the last few days is

552
00:30:37,680 --> 00:30:42,480
Speaker 3: actually selling copper upside through those calls. Now, if you

553
00:30:42,600 --> 00:30:45,280
Speaker 3: believe in copper hitting forty thousand dollars per ton, immanutely

554
00:30:45,320 --> 00:30:48,239
Speaker 3: you're not taking that position. So I think with all

555
00:30:48,280 --> 00:30:51,080
Speaker 3: of those bullish calls, it is important that we write

556
00:30:51,160 --> 00:30:54,280
Speaker 3: size them and that we cavey at them, because if

557
00:30:54,320 --> 00:30:56,400
Speaker 3: you're just saying, oh, we're bullish copper and it's going

558
00:30:56,440 --> 00:30:59,920
Speaker 3: to the moon, you're missing an awful lot of profit

559
00:31:00,040 --> 00:31:02,160
Speaker 3: along the way. And the point that you just make, yes,

560
00:31:02,440 --> 00:31:04,880
Speaker 3: it looks good copper for a while, but right now

561
00:31:04,960 --> 00:31:08,440
Speaker 3: we're digesting that gains. It's those periods I think where

562
00:31:08,480 --> 00:31:10,560
Speaker 3: you see this location to the market that you actually

563
00:31:10,680 --> 00:31:12,720
Speaker 3: want to trade. So I think we need to take

564
00:31:13,080 --> 00:31:15,600
Speaker 3: a little bit of a more nuanced view on the

565
00:31:15,680 --> 00:31:17,600
Speaker 3: market then just saying oh, look, coppa is going through

566
00:31:17,640 --> 00:31:17,960
Speaker 3: the moment.

567
00:31:18,600 --> 00:31:21,280
Speaker 2: I think the tricky thing with trying to understand where

568
00:31:21,520 --> 00:31:25,200
Speaker 2: copper is going is just the sort of sheer physical

569
00:31:25,280 --> 00:31:29,200
Speaker 2: reality of there's a lot of demand. As you said,

570
00:31:29,280 --> 00:31:33,600
Speaker 2: the demand growth is going to basically effectively double, and

571
00:31:33,960 --> 00:31:37,560
Speaker 2: there's this sort of empty project pipeline, and so you're like, well, yeah,

572
00:31:37,560 --> 00:31:39,240
Speaker 2: of course copper has got to go to the moon.

573
00:31:39,520 --> 00:31:42,200
Speaker 2: How does that get resolved? Is there a price which

574
00:31:42,360 --> 00:31:44,400
Speaker 2: new projects start to like, all right, we got to

575
00:31:44,440 --> 00:31:48,080
Speaker 2: start putting shovels on the ground, or to your point,

576
00:31:48,280 --> 00:31:50,400
Speaker 2: is it a matter of we just need less price

577
00:31:50,520 --> 00:31:53,719
Speaker 2: volatility rather than a specific price signal itself, and then

578
00:31:53,760 --> 00:31:55,320
Speaker 2: we can start to figure out So it sounds like

579
00:31:55,400 --> 00:31:56,440
Speaker 2: something has to resolve.

580
00:31:56,200 --> 00:31:57,640
Speaker 3: That it would be good if you had both, But

581
00:31:57,720 --> 00:32:00,320
Speaker 3: the problem is I think more than rather than having

582
00:32:00,920 --> 00:32:03,640
Speaker 3: less price volatilely we're going to get more price volatility

583
00:32:03,760 --> 00:32:06,360
Speaker 3: going forward. The price I think that that we're hearing

584
00:32:06,360 --> 00:32:09,040
Speaker 3: a lot from the miners that we need to justify

585
00:32:09,360 --> 00:32:13,080
Speaker 3: investment in new minds is minimum twelve thousand dollars per ton,

586
00:32:13,400 --> 00:32:16,560
Speaker 3: but then Glencore is talking more towards like thirteen fourteen

587
00:32:16,600 --> 00:32:18,520
Speaker 3: thousand dollars per ton. Then just to put a reference

588
00:32:18,560 --> 00:32:21,320
Speaker 3: to that, right now, we're trading at ten thousand dollars

589
00:32:21,360 --> 00:32:23,800
Speaker 3: per ton, and then the whole problem becomes, well, if

590
00:32:23,840 --> 00:32:27,080
Speaker 3: the miners really eight for prices, hit twelve or thirteen

591
00:32:27,200 --> 00:32:30,000
Speaker 3: or fourteen dollars fourteen thousand dollars per ton and then

592
00:32:30,080 --> 00:32:33,480
Speaker 3: start investing, you have a lead time, so you're not

593
00:32:33,640 --> 00:32:36,880
Speaker 3: going to resolve those shortfalls imminently. And so did The

594
00:32:37,040 --> 00:32:40,600
Speaker 3: question on what resolves the potential shortfalls on the copper

595
00:32:40,680 --> 00:32:44,120
Speaker 3: market is a very tricky one. We've seen during the

596
00:32:44,480 --> 00:32:46,760
Speaker 3: doing the energy crisis around the Ukraine War. What happened,

597
00:32:46,760 --> 00:32:48,360
Speaker 3: so we had in the run up to the Ukraine War,

598
00:32:48,840 --> 00:32:52,880
Speaker 3: we had a very strong copper price rally and that

599
00:32:53,120 --> 00:32:57,240
Speaker 3: made many renewable projects loss making basically, so we've actually

600
00:32:57,320 --> 00:33:01,480
Speaker 3: seen how the deployment of green energy slowed down meaningfully,

601
00:33:01,680 --> 00:33:04,960
Speaker 3: and that's what I would call demand destruction ultimately, So

602
00:33:05,200 --> 00:33:07,240
Speaker 3: and we said we've been saying that for a while.

603
00:33:07,560 --> 00:33:10,200
Speaker 3: With the current technology that we have, with the current

604
00:33:10,360 --> 00:33:13,800
Speaker 3: investment that we see in the Mind Project pipeline, it's

605
00:33:14,520 --> 00:33:17,840
Speaker 3: very very hard. It's almost impossible to get to net

606
00:33:17,960 --> 00:33:21,360
Speaker 3: zero by twenty by twenty fifty. So something has to give,

607
00:33:21,480 --> 00:33:24,200
Speaker 3: I think ultimately, and you see that in the New

608
00:33:24,240 --> 00:33:26,959
Speaker 3: Slow almost daily now. As I think when we put

609
00:33:27,000 --> 00:33:29,280
Speaker 3: the initial estimates out, we basically said that it was

610
00:33:29,320 --> 00:33:32,040
Speaker 3: a few years back that limiting global warming to one

611
00:33:32,040 --> 00:33:34,920
Speaker 3: point five degrees celsius is going to be very hard.

612
00:33:35,320 --> 00:33:38,120
Speaker 3: The best you can do is potentially one point eight

613
00:33:38,200 --> 00:33:40,080
Speaker 3: one point nine degrees, and look like it very much.

614
00:33:40,360 --> 00:33:43,280
Speaker 2: Lead point three is a big and that copper is

615
00:33:43,320 --> 00:33:44,280
Speaker 2: a big part of that story.

616
00:33:44,480 --> 00:33:44,760
Speaker 1: Copper.

617
00:33:44,960 --> 00:33:48,160
Speaker 3: You need copper in virtually every technology when you're looking

618
00:33:48,200 --> 00:33:50,840
Speaker 3: at a kind of what the energy transition means. So

619
00:33:50,920 --> 00:33:55,840
Speaker 3: the decarbonization story, we're effectively talking about electrifying the global economy.

620
00:33:55,920 --> 00:34:00,640
Speaker 3: So we need power generation, transmission, distribution, and then all consumption.

621
00:34:01,120 --> 00:34:02,840
Speaker 3: All of that is in the elect in the form

622
00:34:02,880 --> 00:34:06,400
Speaker 3: of electricity, and you can't do those technologies without copper.

623
00:34:06,440 --> 00:34:09,360
Speaker 3: Copper is effectively ground zero of the energy transition.

624
00:34:09,480 --> 00:34:12,560
Speaker 1: Yes, so I mentioned in the intro that the Indonesian

625
00:34:12,760 --> 00:34:15,279
Speaker 1: nickel story is something that kind of flew under the

626
00:34:15,400 --> 00:34:18,239
Speaker 1: radar for me. Copper, not so much. We've done a

627
00:34:18,280 --> 00:34:21,640
Speaker 1: few episodes. You see the headlines every day now, as

628
00:34:21,719 --> 00:34:24,880
Speaker 1: you mentioned, But what other things should we be aware

629
00:34:24,920 --> 00:34:27,759
Speaker 1: of in the metals market right now? Like what could

630
00:34:27,840 --> 00:34:30,000
Speaker 1: we possibly be missing or what do you get the

631
00:34:30,080 --> 00:34:31,360
Speaker 1: sense that other people are missing?

632
00:34:31,440 --> 00:34:33,520
Speaker 2: You better give us a good answer, especially after having

633
00:34:33,680 --> 00:34:38,520
Speaker 2: especially after having shamed us for not talking about So okay,

634
00:34:38,600 --> 00:34:40,040
Speaker 2: we better, you better give us something.

635
00:34:39,920 --> 00:34:41,680
Speaker 3: An you're in good company. Then let me let me

636
00:34:41,719 --> 00:34:43,320
Speaker 3: tell you that I think that was that that was

637
00:34:43,360 --> 00:34:47,200
Speaker 3: a global theme. But I think what what really needs

638
00:34:47,239 --> 00:34:49,240
Speaker 3: to happen. I think we can go into the policice

639
00:34:49,360 --> 00:34:51,480
Speaker 3: policy sphere, but we can also go into the end

640
00:34:51,520 --> 00:34:54,560
Speaker 3: of the commodity fundamental sphere of fences. When you're looking

641
00:34:54,600 --> 00:34:57,239
Speaker 3: at E S T for instance, E s T is

642
00:34:57,400 --> 00:35:00,040
Speaker 3: very important, clearly, I think the energy transition is e

643
00:35:00,080 --> 00:35:03,759
Speaker 3: actively all about EESG. But there is a little bit

644
00:35:03,800 --> 00:35:05,560
Speaker 3: of a market failure there as well at the moment,

645
00:35:05,680 --> 00:35:08,160
Speaker 3: because we just discuss it. You can't have the energy

646
00:35:08,239 --> 00:35:11,920
Speaker 3: transition without actually taking the metals out of the ground.

647
00:35:12,440 --> 00:35:15,279
Speaker 3: But from an ESG perspective, it is still hard for

648
00:35:15,360 --> 00:35:18,960
Speaker 3: a lot of investors to actually invest in mining assets.

649
00:35:19,320 --> 00:35:21,120
Speaker 3: So you want to have the energy transition, but you

650
00:35:21,160 --> 00:35:24,360
Speaker 3: don't want to have the mining. Well, something has to

651
00:35:24,440 --> 00:35:27,760
Speaker 3: give give here, So that's that discussion is actually evolving.

652
00:35:27,800 --> 00:35:29,960
Speaker 3: I think the UPO, the US in the U actually

653
00:35:30,600 --> 00:35:34,520
Speaker 3: putting more effort into developing mining assets is certainly helping

654
00:35:34,800 --> 00:35:37,360
Speaker 3: helping that discussion. That's one thing. The other thing that

655
00:35:37,440 --> 00:35:40,960
Speaker 3: I would say is the energy transition clearly is a

656
00:35:41,040 --> 00:35:43,920
Speaker 3: game change for the metals. In my view. There are

657
00:35:43,920 --> 00:35:46,440
Speaker 3: some metters we talked about them at the outset, like

658
00:35:46,640 --> 00:35:49,520
Speaker 3: the battery romantials, so lithium, cobalt, innicate that look a

659
00:35:49,520 --> 00:35:53,359
Speaker 3: little bit better supplied that might not really quite as much.

660
00:35:53,480 --> 00:35:56,720
Speaker 3: But then there are others like copper and aluminum for instance,

661
00:35:57,040 --> 00:36:00,120
Speaker 3: that really look much that really look much stronger one

662
00:36:00,120 --> 00:36:03,479
Speaker 3: a fundamental perspective, so you do get actually relative value

663
00:36:03,480 --> 00:36:04,880
Speaker 3: there as well. And I think the third point that

664
00:36:04,960 --> 00:36:07,440
Speaker 3: I would make is innovation. I think we need to

665
00:36:07,520 --> 00:36:11,960
Speaker 3: see or evolution. We need to see different approaches to

666
00:36:12,120 --> 00:36:16,560
Speaker 3: making sure that we mitigate the shortfall in those commodities

667
00:36:16,680 --> 00:36:20,440
Speaker 3: that are actually under supplied. Recycling scrap that is fin

668
00:36:20,440 --> 00:36:24,600
Speaker 3: into something that is becoming likely much more important going

669
00:36:24,640 --> 00:36:27,640
Speaker 3: forward as well, and is one of the least transparent

670
00:36:28,000 --> 00:36:30,600
Speaker 3: segments of sectors of the metals industry at the moment.

671
00:36:30,719 --> 00:36:33,600
Speaker 1: Yeah, isn't it one of those industries where people still

672
00:36:33,719 --> 00:36:36,000
Speaker 1: like have to call up the junk yards and ask

673
00:36:36,160 --> 00:36:37,520
Speaker 1: for the latest pricing.

674
00:36:38,040 --> 00:36:39,520
Speaker 3: Yeah, I can, I can. I should tell you a

675
00:36:39,560 --> 00:36:41,759
Speaker 3: funny story about a funny story about there was a

676
00:36:41,800 --> 00:36:44,879
Speaker 3: few years back we went to visit a scrap yard

677
00:36:44,960 --> 00:36:47,560
Speaker 3: and there was a whole pile of metal lying somewhere

678
00:36:47,600 --> 00:36:49,759
Speaker 3: in the corner, and so we asked the master guy

679
00:36:49,800 --> 00:36:51,360
Speaker 3: in the scraplut what that is, and he said, well,

680
00:36:51,440 --> 00:36:54,160
Speaker 3: it's a dowry for my daughter. I'm saving that for

681
00:36:54,280 --> 00:36:58,000
Speaker 3: my daughter. So it is a very arcane industry to

682
00:36:58,120 --> 00:37:01,800
Speaker 3: some extent, still a lot of smaller and mid sized

683
00:37:01,960 --> 00:37:05,800
Speaker 3: companies operating in there, and certainly scope to evoive the

684
00:37:05,880 --> 00:37:08,680
Speaker 3: way the industry the industry works. I think the other

685
00:37:08,719 --> 00:37:10,920
Speaker 3: thing I think that that would certainly help there beyond

686
00:37:11,040 --> 00:37:13,520
Speaker 3: just that is and be seeing that increasingly as well,

687
00:37:13,600 --> 00:37:16,000
Speaker 3: is that governments focus really on recycling rates. How do

688
00:37:16,040 --> 00:37:18,880
Speaker 3: you make sure that you're actually getting recycling rates up.

689
00:37:19,080 --> 00:37:22,040
Speaker 3: Do you have designed products differently to make it easier

690
00:37:22,080 --> 00:37:25,640
Speaker 3: to recycle them. Do you have to compel manufacturers to

691
00:37:25,760 --> 00:37:29,319
Speaker 3: actually take spend products back and recycle them. So there's

692
00:37:29,320 --> 00:37:31,239
Speaker 3: a whole lot of development on that front as well.

693
00:37:31,280 --> 00:37:34,160
Speaker 3: I think that would certainly have the recycling space too.

694
00:37:34,480 --> 00:37:36,840
Speaker 2: I just have one more question, and you mentioned the

695
00:37:36,920 --> 00:37:40,640
Speaker 2: sort of I don't know, market failure, maybe market harmonization problem,

696
00:37:40,880 --> 00:37:44,440
Speaker 2: in which in order to have the energy transition you

697
00:37:44,520 --> 00:37:48,239
Speaker 2: actually have to invest in a lot of dirty businesses.

698
00:37:48,480 --> 00:37:51,359
Speaker 2: And we've done some episodes in the past, or at

699
00:37:51,440 --> 00:37:53,680
Speaker 2: least one that I recall about the amount of water

700
00:37:53,800 --> 00:37:56,520
Speaker 2: consumption of copper minds in Chile and some of the

701
00:37:56,640 --> 00:38:01,240
Speaker 2: backlash there is there a growing issue. And I'm curious

702
00:38:01,280 --> 00:38:06,080
Speaker 2: also in Indonesia and the local environmental impacts of all

703
00:38:06,160 --> 00:38:09,120
Speaker 2: this nickel production. Is there any sort of backlash happening

704
00:38:09,280 --> 00:38:11,919
Speaker 2: there in the vicinity of these and like what sort

705
00:38:11,920 --> 00:38:13,640
Speaker 2: of the general state of play on that stuff.

706
00:38:13,920 --> 00:38:16,680
Speaker 3: Yeah, I think that's certainly when when I said before

707
00:38:16,719 --> 00:38:19,240
Speaker 3: that from an easy standpoint, it's still hard to understand

708
00:38:19,560 --> 00:38:22,520
Speaker 3: investing in mining assets. I think mining historically has not

709
00:38:22,640 --> 00:38:24,400
Speaker 3: been the cleanest of our industries. But I think the

710
00:38:24,480 --> 00:38:27,040
Speaker 3: miners are trying are trying very hard to mitigate that.

711
00:38:27,440 --> 00:38:30,239
Speaker 3: So when you're looking at water being used in the mines,

712
00:38:30,280 --> 00:38:32,640
Speaker 3: I think there's an effort, for instance, to actually have

713
00:38:32,840 --> 00:38:34,680
Speaker 3: more of a run around system, so the water that

714
00:38:34,800 --> 00:38:37,000
Speaker 3: is once in the mind to produce a copper, you're

715
00:38:37,239 --> 00:38:40,439
Speaker 3: effectively cleaning up and then and then putting back into

716
00:38:40,520 --> 00:38:45,400
Speaker 3: the industry. Some operators that are better than others. What

717
00:38:45,520 --> 00:38:49,160
Speaker 3: we're seeing increasingly is that the better the operators are,

718
00:38:49,200 --> 00:38:52,440
Speaker 3: the better the better the miners are in engaging this

719
00:38:52,680 --> 00:38:57,080
Speaker 3: local communities, on the environment, on social on the social compound,

720
00:38:58,440 --> 00:39:01,440
Speaker 3: the more likely it is to get an interrupted supply.

721
00:39:01,560 --> 00:39:03,279
Speaker 3: So I think the industry over the last ten to

722
00:39:03,320 --> 00:39:05,719
Speaker 3: fifteen years has certainly gone a little bit through a

723
00:39:05,800 --> 00:39:08,640
Speaker 3: learning curve and has been trying to become a better

724
00:39:08,840 --> 00:39:09,640
Speaker 3: corporate citizen.

725
00:39:10,520 --> 00:39:12,839
Speaker 1: All Right, Michael Vidmer, thank you so much for coming

726
00:39:12,920 --> 00:39:16,120
Speaker 1: on odd lots and making sense of what's been going

727
00:39:16,200 --> 00:39:20,120
Speaker 1: on in the nickel market. Five cents exactly. No, thank

728
00:39:20,160 --> 00:39:21,879
Speaker 1: you so much. That was so much fun.

729
00:39:22,280 --> 00:39:36,120
Speaker 3: Thank you very much, Joe.

730
00:39:36,239 --> 00:39:40,480
Speaker 1: I've really enjoyed that conversation. That was such anclear explanation

731
00:39:40,600 --> 00:39:41,279
Speaker 1: of what's been going on.

732
00:39:41,520 --> 00:39:42,760
Speaker 2: It was so fun. I love Michael.

733
00:39:42,800 --> 00:39:43,719
Speaker 3: We have to have a Yeah.

734
00:39:43,960 --> 00:39:45,680
Speaker 2: I could have talked to him for like four hours.

735
00:39:45,840 --> 00:39:46,040
Speaker 3: Yeah.

736
00:39:46,160 --> 00:39:49,480
Speaker 1: I thought his point about the market failure of ESG

737
00:39:49,960 --> 00:39:52,880
Speaker 1: was a good one and probably one that is becoming

738
00:39:53,000 --> 00:39:56,120
Speaker 1: more common now than it was a few years ago.

739
00:39:56,360 --> 00:39:58,960
Speaker 1: But I think one of the problems with ESG in

740
00:39:59,239 --> 00:40:03,440
Speaker 1: its early the conceptualization is that no one ever really

741
00:40:03,520 --> 00:40:06,719
Speaker 1: figured out like do you want to engage with the

742
00:40:06,840 --> 00:40:10,759
Speaker 1: dirty industries and make them better or do you want

743
00:40:10,800 --> 00:40:13,920
Speaker 1: to stay away from them completely and thereby cut off

744
00:40:13,960 --> 00:40:17,080
Speaker 1: their access to financing and make them go away in

745
00:40:17,200 --> 00:40:20,520
Speaker 1: their totality. And I think, you know, a few years

746
00:40:20,600 --> 00:40:22,360
Speaker 1: on from all of this, we're kind of seeing the

747
00:40:22,440 --> 00:40:25,560
Speaker 1: result and the idea that you can get this tension

748
00:40:25,840 --> 00:40:29,200
Speaker 1: where you need to actually engage in a dirty industry

749
00:40:29,400 --> 00:40:33,480
Speaker 1: in order to promote the clean energy transition, and so

750
00:40:33,719 --> 00:40:37,839
Speaker 1: stranding that particular asset is problematic in some ways, let's

751
00:40:37,840 --> 00:40:38,400
Speaker 1: put it that way.

752
00:40:38,600 --> 00:40:40,560
Speaker 2: Yeah, I mean it's always seemed to me like this

753
00:40:40,800 --> 00:40:44,319
Speaker 2: term ESG means different things to different people. Some people

754
00:40:44,480 --> 00:40:47,640
Speaker 2: just don't want to invest in energy in industries that

755
00:40:47,760 --> 00:40:51,520
Speaker 2: they perceive as problematic. In some point. Others from a

756
00:40:51,600 --> 00:40:56,440
Speaker 2: more policy oriented standpoint, have these set of goals. Sometimes

757
00:40:56,560 --> 00:40:59,560
Speaker 2: those goals and the interests of investors are aligned, well,

758
00:41:00,120 --> 00:41:04,440
Speaker 2: sometimes not so much. I'm just astounded how fast I

759
00:41:04,680 --> 00:41:06,600
Speaker 2: guess I, like I said in the beginning, one of

760
00:41:06,680 --> 00:41:09,640
Speaker 2: the few things I knew about the nickel market.

761
00:41:09,920 --> 00:41:12,520
Speaker 1: I love that you have three factoids about the nickel market.

762
00:41:12,600 --> 00:41:14,959
Speaker 1: And one of them is actually a very sophisticated point

763
00:41:15,080 --> 00:41:17,000
Speaker 1: about the episode that we just had.

764
00:41:17,320 --> 00:41:21,799
Speaker 2: Well, I remember like twenty twenty one, twenty twenty two,

765
00:41:22,680 --> 00:41:25,600
Speaker 2: you know, like there was all those like polychrisis stuff

766
00:41:25,719 --> 00:41:27,759
Speaker 2: and like Adam Two's and all those guys, and like

767
00:41:27,880 --> 00:41:30,000
Speaker 2: one of them at some I probably clicked on an

768
00:41:30,080 --> 00:41:34,520
Speaker 2: article about like Indonesia aiming to capture more downstream value,

769
00:41:34,520 --> 00:41:36,839
Speaker 2: and I like, choke, you know, stroke my chin as.

770
00:41:37,280 --> 00:41:39,800
Speaker 2: That's very smart. Just really capture more of the value

771
00:41:39,840 --> 00:41:40,680
Speaker 2: coming out of the ground.

772
00:41:40,760 --> 00:41:42,719
Speaker 1: And so like just one of those things that were

773
00:41:43,280 --> 00:41:47,000
Speaker 1: at my next cocktail party, all talking about Indonesia's attempts

774
00:41:47,080 --> 00:41:48,520
Speaker 1: to capture the downsta.

775
00:41:48,400 --> 00:41:51,640
Speaker 2: Indonesian nickel markets at are real crossroads, and now they're

776
00:41:51,719 --> 00:41:54,400
Speaker 2: trying to capture more of the value add rather than

777
00:41:54,560 --> 00:41:57,360
Speaker 2: just below margin export But then the other thing is

778
00:41:57,400 --> 00:42:01,680
Speaker 2: I just did not realize how recent Indonesia's rise was

779
00:42:01,719 --> 00:42:04,360
Speaker 2: at all. If I would have guessed so Indonesia's always

780
00:42:04,400 --> 00:42:07,800
Speaker 2: made the big nickel exporter and now they're shifting, I

781
00:42:07,840 --> 00:42:09,800
Speaker 2: did not realize that this is basically a story of

782
00:42:09,800 --> 00:42:10,480
Speaker 2: the last decade.

783
00:42:10,719 --> 00:42:13,319
Speaker 1: It is phenomenal. The other thing that sort of hit

784
00:42:13,400 --> 00:42:15,880
Speaker 1: home in that discussion with Michael just then was the

785
00:42:15,960 --> 00:42:19,400
Speaker 1: technology aspect of it, by which I don't mean EVS,

786
00:42:19,520 --> 00:42:22,800
Speaker 1: but I mean like the actual processing technology of nickel

787
00:42:22,920 --> 00:42:25,719
Speaker 1: and the fact that that's been driving a lot of

788
00:42:25,760 --> 00:42:28,720
Speaker 1: the increase in production that China like kind of cracked

789
00:42:29,200 --> 00:42:32,680
Speaker 1: this new model for doing it and then just invested

790
00:42:32,840 --> 00:42:33,400
Speaker 1: a ton in it.

791
00:42:33,719 --> 00:42:36,759
Speaker 2: Well, you know, one of the conversations we did a

792
00:42:36,880 --> 00:42:38,400
Speaker 2: couple months ago or I guess a month and a

793
00:42:38,400 --> 00:42:41,040
Speaker 2: half ago or whatever, we did that trip to North

794
00:42:41,080 --> 00:42:44,600
Speaker 2: Carolina and one of the companies that we talked to

795
00:42:44,880 --> 00:42:47,680
Speaker 2: is part of our trip with Tom Bark and that company, Unify,

796
00:42:47,880 --> 00:42:50,640
Speaker 2: And like one point that has been very lodged in

797
00:42:50,760 --> 00:42:53,840
Speaker 2: my brain was just the CEO of Unified talking about

798
00:42:54,200 --> 00:42:58,640
Speaker 2: the huge edge that accrues to Chinese producers of things

799
00:42:58,800 --> 00:43:02,520
Speaker 2: like advanced textiles due to the sheer scale of the

800
00:43:02,640 --> 00:43:05,920
Speaker 2: domestic petrochemical industry that exists in China. And I realize

801
00:43:05,920 --> 00:43:09,920
Speaker 2: that's not that's petrochemicals, not metals, but it does feel

802
00:43:10,000 --> 00:43:15,800
Speaker 2: like the sheer scale of refining capacity for petrochemicals, for

803
00:43:16,400 --> 00:43:20,120
Speaker 2: critical minerals, et cetera in China is just a huge

804
00:43:20,280 --> 00:43:22,640
Speaker 2: part of the story here. And whoever is access to

805
00:43:22,719 --> 00:43:24,720
Speaker 2: that cheaper supply is obviously in a good position.

806
00:43:24,960 --> 00:43:27,239
Speaker 1: Well, it certainly seems to be a big advantage in

807
00:43:27,440 --> 00:43:30,799
Speaker 1: something like ev manufacturing, that's for sure. All right, shall

808
00:43:30,840 --> 00:43:31,319
Speaker 1: we leave it there.

809
00:43:31,400 --> 00:43:32,080
Speaker 2: Let's leave it there.

810
00:43:32,320 --> 00:43:35,520
Speaker 1: This has been another episode of the Odlots podcast. I'm

811
00:43:35,560 --> 00:43:38,240
Speaker 1: Tracy Alloway. You can follow me at Tracy Alloway.

812
00:43:38,400 --> 00:43:41,080
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.

813
00:43:41,400 --> 00:43:44,680
Speaker 2: Follow our producers Kerman Rodriguez at Carman Arman dash Ol

814
00:43:44,680 --> 00:43:47,960
Speaker 2: Bennett at Dashbot and Keilbrooks at Keilbrooks. And thank you

815
00:43:48,040 --> 00:43:51,160
Speaker 2: to our producer Moses Ondam. From our Oddlogs content, go

816
00:43:51,200 --> 00:43:54,279
Speaker 2: to bloomberg dot com slash odd Lots, where we have transcripts,

817
00:43:54,320 --> 00:43:57,279
Speaker 2: a blog, and a weekly newsletter and you can chat

818
00:43:57,320 --> 00:43:59,560
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819
00:43:59,680 --> 00:44:05,080
Speaker 2: our discord with fellow listeners discord dot gg slash outline.

820
00:44:04,960 --> 00:44:07,160
Speaker 1: And if you enjoy all thoughts, If you like it

821
00:44:07,400 --> 00:44:10,840
Speaker 1: when we mine the latest developments in the nickel market,

822
00:44:10,960 --> 00:44:13,640
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823
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824
00:44:17,719 --> 00:44:21,040
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825
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826
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828
00:44:31,320 --> 00:44:32,040
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