Speaker 1: This is Dana Perkins and you're listening to Switched on
Speaker 1: the podcast brought to you by BNF. On this podcast,
Speaker 1: we're talking about the energy transition and how our energy,
Speaker 1: transportation and agriculture systems are changing in many respects. Decarbonizing
Speaker 1: means different infrastructure and different equipment, and very often this
Speaker 1: requires a critical ingredient. Lithium ion batteries are used for
Speaker 1: cars and stationary storage, electrolyizers for hydrogen, and transmission lines
Speaker 1: for the grid that connects these newer, cleaner power sources.
Speaker 1: So what do they all have in common? Well, they
Speaker 1: all rely on metals. So today I speak with Quasiampofo,
Speaker 1: who leads b and EF's Metals and Mining team globally,
Speaker 1: and his team member Rosemary Cats. In our conversation, they
Speaker 1: draw from research found in the Transition Metal's Outlook twenty
Speaker 1: twenty four. We get into things like which metals have
Speaker 1: seen the most fluctuation in the past year, how cooling
Speaker 1: electric vehicle demand is impacting some battery metals, and which
Speaker 1: metal they see as the most critical to the energy transition.
Speaker 1: We also highlight the forgotten metal, but I can't tell
Speaker 1: you what it is because I've forgotten it. Of course,
Speaker 1: don't worry. Rose will remember to access b and EF's
Speaker 1: research on metals. Clients will be able to find it
Speaker 1: at BNEF dot com or at BNFO on the Bloomberg terminal.
Speaker 1: So let's jump into the conversation with Quasy and Rose
Speaker 1: on the metals that underpin the energy transition. Rose, thank
Speaker 1: you for joining us today.
Speaker 2: It's lovely to be here.
Speaker 1: Dana and Quazy, welcome back.
Speaker 3: Thank you, Dana. Always good to be buck.
Speaker 1: So we're going to focus on the transition metals outlook,
Speaker 1: and today let's start with just defining their ten main
Speaker 1: transition metals quickly. What are they so?
Speaker 3: Transition metals? Actually, I know the chemist listening to us
Speaker 3: will forgive us because transition metals is actually at classifications
Speaker 3: for metals on the periodic table. But then we at
Speaker 3: BNF we use it and the slightly transitioned way. As
Speaker 3: most of our listeners would probably be aware that the
Speaker 3: energy transition is our bread and butter. And then we
Speaker 3: looked at the energy transition as a whole, and we
Speaker 3: came to the conclusion that every technology that would ensure
Speaker 3: we reach the parent goals would need some raw materials
Speaker 3: in them. So you think about your electrolyzers, you think
Speaker 3: about your winter turbines, you think about your solar pvs,
Speaker 3: you think about your batteries. All these would require some
Speaker 3: amount of metals in them. So we classified all these
Speaker 3: metals as transition metals simply because they would play a
Speaker 3: key role to the energy transition.
Speaker 1: Okay, so apologies to the chemists out there, but thank
Speaker 1: you for bearing with us on these energy transition critical metals. Now,
Speaker 1: this outlook that we do, we do it once a year.
Speaker 1: And what is it that you're hoping to achieve when
Speaker 1: you sit down once a year and look at these
Speaker 1: energy transition critical metals? What's the question you're asking yourself
Speaker 1: headed into it and what are you trying to solve?
Speaker 3: I think the fundamental question is that on the transition
Speaker 3: energy transition side, there's obviously a lot of optimism that
Speaker 3: in different scenarios, in the zero economic transition scenario, but
Speaker 3: then will there be enough raw materials to actually build
Speaker 3: these technologies? And I think is a question we ask
Speaker 3: ourselves every year. And if not, what should policymakers be
Speaker 3: thinking about? What should investors be doing, what should mining
Speaker 3: companies start doing? And more importantly, what should be these
Speaker 3: technology companies start doing if there's not enough, and.
Speaker 1: The price of these metals underpins how the companies are
Speaker 1: actually thinking about them, how much they're producing, exploring. So
Speaker 1: can you talk a little bit about the volatility in
Speaker 1: this space, which metals in particular really have been the
Speaker 1: most volatile, and well, then we'll come to whether or
Speaker 1: not twenty twenty four has been a recovery from what
Speaker 1: was a challenging twenty twenty three.
Speaker 3: Basically, when we talk about the prize of metals, there's
Speaker 3: always a temptation that is just a mining industry's problem.
Speaker 3: But then, Dana, I'm going to give you a formula
Speaker 3: that shows you that if we don't address the prize
Speaker 3: of metals, we could actually delay the energy transition. So
Speaker 3: let's say you are the precedent of a country and
Speaker 3: you set a target that by twenty thirty you expect
Speaker 3: five hundred people to drive electric vehicles. Now, the biggest
Speaker 3: cost component of electric vehicle is the battery. And if
Speaker 3: you slice open a battery, which I hope nobody listening
Speaker 3: to me will do, you will notice that the battery
Speaker 3: is simply made up of metals. So if you have
Speaker 3: metals constituting about seventy percent in some instances of the
Speaker 3: total cost of the battery. If prices of metals go high,
Speaker 3: prices of batteries go high, and if prices of battery
Speaker 3: go high, prices of electric vehicles go high as well.
Speaker 3: So essentially what you have is that five hundred people
Speaker 3: were hoping to buy electric vehicles, but then prices of
Speaker 3: these evs doubled and that five hundred becomes two hundred.
Speaker 3: So it's important that we address the price of commodities
Speaker 3: to ensure that governments are able to meet their target
Speaker 3: for clean energy adoption. If you look at the price
Speaker 3: market today, I think it's actually a very interesting dynamic.
Speaker 3: There are two teams that I do every morning arm Dana. First,
Speaker 3: I have my coffee, preferably a flat and the second
Speaker 3: thing is I check the prices of metals, cobalt and
Speaker 3: lithium being my favorite. Now, if you look at the
Speaker 3: prices of most of these metals, they're actually very low,
Speaker 3: and it comes down to one fundamental fact. Two things
Speaker 3: determine the price of a metal supply demand. If there's
Speaker 3: a lot of the metal in the market and less
Speaker 3: of it in demand, you have a surplus and nobody's buying,
Speaker 3: so prices drop, as we've seen with cobalt and lithium.
Speaker 3: On the flip side, if there is a lot of
Speaker 3: demand but less supply, we see actually the prices of
Speaker 3: these commodities rise, as we've seen recently with copper and aluminum.
Speaker 3: So essentially I think these are the two drivers. Lithium,
Speaker 3: cobalt and nickel. Battery metals in particular have been down
Speaker 3: the last couple of quarts as a result of the
Speaker 3: slowdown in China as we've seen, and then the overcapacity
Speaker 3: arm from around the world. But then for copper and aluminum,
Speaker 3: I think demand is going particularly from the grid, the
Speaker 3: supply is constrained.
Speaker 1: So when we're thinking about the use of transition metals
Speaker 1: in the energy transition, we're thinking about energy storage and
Speaker 1: electric vehicles. Predominantly. The vehicle space has seen a bit
Speaker 1: of a tapering off in terms of demand, and some
Speaker 1: of the forecasts coming from the auto manufacturers themselves is
Speaker 1: showing potentially cooling demand at least in the near term
Speaker 1: for electric vehicles. This of course would then have as
Speaker 1: you so aptly outlined, with supply and demand, this would
Speaker 1: have a lowering of prices for many of these metals.
Speaker 1: Does this then benefit the energy storage space and do
Speaker 1: they essentially scoop up the excess supply and take advantage
Speaker 1: of the lower prices or are we not really seeing
Speaker 1: that interplay between these two sides of the demand part
Speaker 1: of the equation.
Speaker 3: It's always a very interesting balance when you talk about
Speaker 3: that lower prices lead into low cost of battery. And
Speaker 3: I always say this that we as analysts, we focus
Speaker 3: on the excel, but every now and then we look
Speaker 3: around us to see whether the excel aligns with the
Speaker 3: row world scenario. And the example I always give is
Speaker 3: that over the last one year, you've noticed that pretty
Speaker 3: much every major electric vehicle company has reduced the price
Speaker 3: of its evs.
Speaker 1: Has this had a big impact on the price.
Speaker 2: It's about an eighty percent fall since twenty three, where
Speaker 2: lithium prices were at about sixty six and now they're
Speaker 2: sitting at thirteen point eight. So the prices of lithium
Speaker 2: plummeted quite quite a bit between twenty twenty three and
Speaker 2: twenty twenty four.
Speaker 3: And what that meant is that our electric vehicles became cheaper.
Speaker 3: But then here's the catch twenty two, So with lower
Speaker 3: prices of metals and lower prices of ev on what
Speaker 3: you realize is that miners need an incentive price to
Speaker 3: build new mice. Lower prices does not help the mining
Speaker 3: industry because everyone wants to be guaranteed their revenue when
Speaker 3: they are making a decision that would last thirty forty years.
Speaker 3: They're having some minds in Chili that have resisted over
Speaker 3: one hundred years. So people want higher prices to incentivize
Speaker 3: them to make their capital decision. So today the ev
Speaker 3: industry is benefiting from lower prices, but then the mining
Speaker 3: industry is actually complaining because they are not getting the
Speaker 3: incentive price to develop these new mince. And what is
Speaker 3: going to happen is that down the line, in this decade,
Speaker 3: after years of enjoying these low costs, you realize that
Speaker 3: there are no more new minds to me demind and
Speaker 3: we go back to that cycle where deficist prices start
Speaker 3: to go high. And that is why we always say
Speaker 3: that the mining industry is a cyclical industry.
Speaker 1: So within this group of ten metals that you've defined
Speaker 1: that are really critical, which ones are most exposed and
Speaker 1: which ones essentially were the highlight of this report and
Speaker 1: with other people maybe when they were drinking their morning
Speaker 1: coffee were flicking to is a section that was critical
Speaker 1: to read.
Speaker 3: I think, just like a responsible parent, I like to
Speaker 3: say that I love all my children equally, so I
Speaker 3: love all ten metals equally. But then if you look
Speaker 3: at there's actually an interesting metric we looked at in
Speaker 3: the report where we wanted to determine the exposure of
Speaker 3: each of these metals to the energy transition. So we
Speaker 3: looked at the percentage of demand coming from the energy
Speaker 3: transition relative to the percentage of demand coming from other sources.
Speaker 3: And lithium is actually the most exposed. Then you have cobalt,
Speaker 3: So these two are actually the most exposed. So when
Speaker 3: you talk about exposure, it goes both ways. Right, If
Speaker 3: the energy transition is growing, that ultimately also impacts our growth.
Speaker 3: But then if there is a decline in the growth
Speaker 3: of the energy transition, that also affect them negatively. So
Speaker 3: I think those are the only two in terms of
Speaker 3: which one was very interesting to me. Platinum was quite
Speaker 3: interesting because it's a metal that we have not looked
Speaker 3: at at B and EF in a very long time.
Speaker 3: We've done ad hoc studies and very few people would
Speaker 3: actually consider this metal or this group of metals has
Speaker 3: been related to the energy transition. So platinum metals, mostly
Speaker 3: found in South Africa are very interesting. So historically the
Speaker 3: are used has been in catalytic converters, and catalytic converters
Speaker 3: essentially is in every car that goes around. What it
Speaker 3: does is you have combustion between fuel and oxygen propelling
Speaker 3: cars and there is always a waste product that comes out.
Speaker 3: So these converts enshure that the toxic air or the
Speaker 3: toxic gases that are produced don't get emitted, and PGMs
Speaker 3: make these happen. Then we are saying that lectric vehicles
Speaker 3: we replace internal combusting egines, so that means that PGMs
Speaker 3: will see a significant decline river What we came to
Speaker 3: realize is that to be able to build electoralizers you
Speaker 3: need PGM. So we actually tried to estimate what would
Speaker 3: be this new demand or PGM that will come from
Speaker 3: the energy transition, and I bet you the results were
Speaker 3: quite interesting. I'll courage everyone reading to get a copy
Speaker 3: of it. Go straight to that page and you would
Speaker 3: identify some interesting things and you would understand why I
Speaker 3: think that was my favorite metal in this report.
Speaker 1: So We've done a show in the past on lithium,
Speaker 1: We've done a show in the past on coalbalt and
Speaker 1: the swapping potentially of aluminum as the prices go high.
Speaker 1: But within platinum group metals, which I don't think we
Speaker 1: have actually talked about on this show, are they countercyclical
Speaker 1: to the other metals and are there reasons why this
Speaker 1: behaves differently than the other cluster of those.
Speaker 3: Ten Yeah, Mahamasa Michaeligu Grousia from South Africa, which happens
Speaker 3: to be I think the largest produce. I don't know
Speaker 3: if you've been to any of these platinum one.
Speaker 2: I've been to a platinum and believe me, it's hot.
Speaker 2: It's dangerous to be down there. You see people mining
Speaker 2: without this shows on because it's so hot, and having
Speaker 2: ice packs in their boots. And you see from a
Speaker 2: structural geology side, just one th one meter scene for
Speaker 2: the value that it has in the market itself, so
Speaker 2: you sometimes ask yourself is it worth it? But from
Speaker 2: an energy transition point of view, right now we're finding
Speaker 2: the value in it since people want to move to
Speaker 2: electric vehicles, so we definitely are seeing the value of
Speaker 2: it within the electoralizer space, as Pasi alluded to.
Speaker 3: And also in terms of it being quite countercately called
Speaker 3: the fact that arms not many people realize that it's
Speaker 3: actually the only pressures metal, to the best of my knowledge,
Speaker 3: that also has a very significant industrial use. So they now,
Speaker 3: I don't know if you've ever been to a Tiffany.
Speaker 1: I have not been to a Tiffany. I've seen a Tiffany.
Speaker 1: I've worked pastor Tiffany, and I've seen breakfast at Tiffany.
Speaker 3: Okay, let me give you a task next time you
Speaker 3: actually you see a Tiffany, walk in there and take
Speaker 3: a look at some of the platinum you already have.
Speaker 3: So it's actually a pressures metal that happens to have
Speaker 3: industrial use. And you know that the horses that police
Speaker 3: cut are very different industrial use of your See you
Speaker 3: look at Macro grow China, Europe. Then for Juary, I mean,
Speaker 3: I don't know what the key drivers are and I
Speaker 3: would not even attempt to. And now it's actually got
Speaker 3: a TED dimension to it, which is the energy transition demand.
Speaker 3: So it's actually the fully metal in my estimation that
Speaker 3: actually has a very broad induced application, and that's what
Speaker 3: makes it quite unique and to a largest and counter
Speaker 3: cyclical to the other metals that we traditionally focus on.
Speaker 1: Well, let's talk a little bit about the environmental and
Speaker 1: also human element of this, and one of the things
Speaker 1: we've discussed in the past actually quasy is that you know,
Speaker 1: you've actually been to cobalt mines and seeing how there's
Speaker 1: been a verification process on mining operations using drones, and
Speaker 1: how blockchain has become a really important way and verifying
Speaker 1: that certain metals are actually coming from the minds that
Speaker 1: they're purporting that they are from. With platinum group metals,
Speaker 1: you know, what are some of the ways to actually
Speaker 1: ensure that those who are interested in well the e
Speaker 1: of ESG and the environmental aspect, but also interested in
Speaker 1: the impact on the individuals who are actually doing the
Speaker 1: mining and then environment in the broadest sense, given that
Speaker 1: mining operations are not in and of themselves unharmful.
Speaker 2: Coming from I guess the platinum group metals point of
Speaker 2: view being from South Africa where the largest reserves are found.
Speaker 2: Speaking about the social aspect of it, A couple of
Speaker 2: years ago, one of the biggest mining disasters happened in
Speaker 2: South Africa called Maricana, where a lot of families lost
Speaker 2: a lot of their family members, and the way that
Speaker 2: was handled was a little bit contentious, But I think
Speaker 2: the biggest lesson we took out of there is to
Speaker 2: break down how to better take care of our people
Speaker 2: within these tough environments within that they work, and how
Speaker 2: to ensure, you know, the longevity in terms of having
Speaker 2: work long term. But from an environmental point of view,
Speaker 2: I think the biggest thing that we've seen within that
Speaker 2: sector is a lack of land reclamation. So a lot
Speaker 2: of abandoned sites have been left after these mines have
Speaker 2: depleted their reserves and resources, and I think it's very
Speaker 2: humbent upon the Anglos of this world to focus on
Speaker 2: if there is a depletion of a resource, to actively
Speaker 2: be planning reclaiming that land or repurposing it into something
Speaker 2: that the society at large that are within these communities
Speaker 2: can still continue finding value in.
Speaker 1: So, when we're talking about the ecosystem surrounding an actual
Speaker 1: mining project, are we seeing signs that mining companies are
Speaker 1: taking this part of the project, the very tail end
Speaker 1: of the project, and are they taking it seriously and
Speaker 1: are things improving?
Speaker 2: So definitely, yes, they are taking it seriously. As a
Speaker 2: government requirement to get your license to mine, you need
Speaker 2: an environmental impact assessment that basically outlines what you're going
Speaker 2: to do with the land after you're done mining the
Speaker 2: metal from it. And we do see some really great cases,
Speaker 2: and we see some terrible cases. But I'd like to
Speaker 2: just highlight in areas like Groute Island South thirty two
Speaker 2: where they've actually reclaimed as they've mined because it is
Speaker 2: indigenous land, so as an agreement with the indigenous people,
Speaker 2: as you mine one quarry, you actually we have to
Speaker 2: reclaim the land, reforest the land as you go by.
Speaker 2: But we have also seen instances in Indonesia which we
Speaker 2: cover in some of our biodiversity work here at benif
Speaker 2: retailings that actually from the mining of nickel have contaminated
Speaker 2: water sources within the region. So there's definitely room for improvement,
Speaker 2: much more improvement, and that's why you see frameworks like
Speaker 2: the Global Biodiversity Framework coming in place to make sure
Speaker 2: that countries from a government level and a company level
Speaker 2: start focusing on the impact on biodiversity as we mine
Speaker 2: these energy transition minerals.
Speaker 1: So it's fair to say that companies are increasingly starting
Speaker 1: to think about the energy transition and decarbonization with biodiversity
Speaker 1: in mind, and both of those are being taken into consideration.
Speaker 2: Yes, yes, I would say so.
Speaker 1: So you brought up Indonesia and you specifically referenced also
Speaker 1: the platinum group metals in South Africa. What are the
Speaker 1: countries to watch? What are the main centers of mining
Speaker 1: that really are highlighted among this group of ten.
Speaker 3: Historically there has been focused if we talked about the
Speaker 3: countries to watch, the focus has actually been on the
Speaker 3: countries that produce these But then what the energy transition
Speaker 3: is actually teaching us is that a lot of people
Speaker 3: care beyond where these pits are located. And I think
Speaker 3: a few weeks ago we were the Climate Week in
Speaker 3: New York and myself in you and then it would
Speaker 3: amaze you the number of sessions that were held in
Speaker 3: New York on mining and there are no minds in
Speaker 3: New York. So I think countries to watch. The United States,
Speaker 3: they've implemented the Inflation Reduction Act, which essentially helps the
Speaker 3: US to meet some of his demand from raw materials.
Speaker 3: We have the Bloomberg events held during Climate Week as
Speaker 3: well on renewable energy, tripling renewable energy. I think, for me,
Speaker 3: one of the highlight was the President of the EU
Speaker 3: given her speech and at the tail entry talks about
Speaker 3: critical raw materials, So obviously EU is origin to be
Speaker 3: on the watch list as well. And then you've got
Speaker 3: the countries that actually produce these. We've already talked about
Speaker 3: South Africa, We've talked about Indonesia. We can also talk
Speaker 3: about Zimbabwe, we can talk about Chile, we can talk
Speaker 3: about Argentina, we can talk about of course Canada, who
Speaker 3: wouldn't and then the list goes on and on and on.
Speaker 3: But then essentially I think the key thing to highlights
Speaker 3: with this question is that it's no more just the
Speaker 3: producers that care about these the consumers also equally care
Speaker 3: and for us are being f and in the report
Speaker 3: we tried to actually highlight.
Speaker 1: So you've already established that there's not enough supply of
Speaker 1: some of these metals. Are there any countries that are
Speaker 1: essentially keeping it all to themselves and recognize the really
Speaker 1: high value in hagging it.
Speaker 2: Yeah.
Speaker 3: Thing, It's actually actually a very interesting conversation, Dana, that
Speaker 3: came up last week at Climate Week. So the Atlantic
Speaker 3: Council actually launched the public reports on Indonesia and how
Speaker 3: they managed to sort of I would say, put in
Speaker 3: place policies that restricted the export of nickel a few
Speaker 3: years back, and ultimately what happened is that that ended
Speaker 3: up making Indonesia the largest producer. And whether in that
Speaker 3: report whether that could be a template countries in Africa
Speaker 3: could actually in order to dominate the industry, and I think,
Speaker 3: just like everything else, it always depends. There are a
Speaker 3: lot of factors that come into play. Because internally, obviously
Speaker 3: that policy of banning raw materials, I think in the
Speaker 3: long term, if every country restrict the expert of these
Speaker 3: raw materials, that does not help the energy transition, right,
Speaker 3: So it's important to highlight that governments need to balance
Speaker 3: their local target with a long term ambition of reaching
Speaker 3: the zero and free flow of these raw materials would
Speaker 3: actually help make the world better. The second thing is
Speaker 3: also about how do you then incentiviize local economy because
Speaker 3: for most of these countries, the energy transition is not
Speaker 3: just a transition, is also an opportunity to industrialize. And
Speaker 3: what we saw in Indonesia is that raw materials can
Speaker 3: actually become a catalyst for industrialization with the right policies.
Speaker 3: So the policy in Indonesia's case was the fact they
Speaker 3: restricting export of these metals, which work for nickel for
Speaker 3: a host of reasons, the same policy did not actually
Speaker 3: work for copper. So it's not always universal that restricting
Speaker 3: export and consuming it locally always works. But what I
Speaker 3: think in March is for other economies looking to replicate
Speaker 3: the Indonesia model, is that it's always important to have
Speaker 3: good business friendly policies as well. It's good to have
Speaker 3: infrastructure because in the end, if you look at the
Speaker 3: Indonesian story again, a lot of investment went into producing
Speaker 3: these industrial packs, railways, power that actually help. It is
Speaker 3: good to really have that certainty of capital being deployed
Speaker 3: and recovered in the country because imagine going into a
Speaker 3: country where you put in place a planned two years
Speaker 3: later government changes policy that you can do XYZ, and
Speaker 3: I think that limits investments. So I think overall, I
Speaker 3: would just end by saying that other countries looking to
Speaker 3: replicate this model one should balance their local economy needs
Speaker 3: with a long term energy transition needs. Two, it's important
Speaker 3: to have the right business friendly policies. Three, it's also
Speaker 3: important to have infrastructure in place. And then finally they
Speaker 3: assurance that once company invests in the country they would
Speaker 3: be able to recover their capital and turns on it.
Speaker 1: So you brought up New York Climate Week, and actually
Speaker 1: the next place where policy makers, specifically the United Nations
Speaker 1: come together to discuss decarbonization is at COP twenty nine,
Speaker 1: and one of the things they've brought up is that
Speaker 1: it's more than likely we're going to be talking a
Speaker 1: lot about energy storage and a increase potentially sixfold increase
Speaker 1: of energy storage coming out of that meeting. So as
Speaker 1: we think about the future and COP meetings and these
Speaker 1: stated goals that all seem to focus on twenty to fifty,
Speaker 1: is this really important year? Do we have enough transition
Speaker 1: metals to actually meet twenty fifty net zero targets?
Speaker 3: Do you want the simple as all the long one?
Speaker 1: I want the long answer, Mark.
Speaker 3: Let's start with the short fast. So now it's the
Speaker 3: long answer. It depends, and it depends in the sense
Speaker 3: that there are ten metals, obviously, and some of them
Speaker 3: run outs based on today's reserves quicker than others. Because
Speaker 3: there are dos as I talked about earlier, there are
Speaker 3: some metals that we would need a lot more than others.
Speaker 3: So I think it's important to acknowledge that overall there's
Speaker 3: not enough, with the exception of platinum group, where we
Speaker 3: feel that there's silk quite some latent capacity in the
Speaker 3: market that could be ramped up to meet the growing
Speaker 3: demand from hydrogen. But with a reception of that, if
Speaker 3: you look at all these other metals, whether it's nickel,
Speaker 3: whether it's lithium, whether it's copper, whether it's aluminum, there
Speaker 3: is not enough. But then the problem is that it's
Speaker 3: very easy to figures on the trees and mister forests.
Speaker 3: If you look at the market today, it's very easy
Speaker 3: to assume that low prices supplus in the market is
Speaker 3: very easy to forget that it's a journey to twenty
Speaker 3: fifty and the long term prospect. If there's anything I
Speaker 3: want anyone to take out of the podcast, the long
Speaker 3: term prospect for supply demand is not looking good and
Speaker 3: that could affect the transition. And I think earlier on
Speaker 3: I talked about the formula that if we don't address metals,
Speaker 3: we are not addressed in climate change solutions.
Speaker 1: So you've outlined that there's not a sufficient amount of
Speaker 1: greenfield exploration in order to meet long term demand. But
Speaker 1: what about metals recycling and you know, in recent years,
Speaker 1: and we have talked about that on this show, that
Speaker 1: there has been not the most favorable economics for metals
Speaker 1: recycling from batteries and that it has been with many
Speaker 1: of these cheaper to actually focus on these green field sites.
Speaker 1: Do we see that changing in the future, and does
Speaker 1: metals recycling have a role to play and do we
Speaker 1: essentially have enough if we find a better way of
Speaker 1: reusing the metals that we've already extracted.
Speaker 3: Yeah, that's actually a good point, and I think it's
Speaker 3: time probably to use that opportunity to supportlight that this
Speaker 3: is the first time in the Transition Metals outlook that
Speaker 3: for each of the metals that we talk about in
Speaker 3: the report, we consider the supply that would come from recycling.
Speaker 3: And I think it's important to acknowledge, like I said,
Speaker 3: as analysts, once in a while, we take ourselves out
Speaker 3: of the excel and look around us for real life examples,
Speaker 3: and you can see that globally we've done very well.
Speaker 3: And when I say we, pretty much all of us
Speaker 3: have done well in recycling plastics. But then you ask ourselves,
Speaker 3: how many of us have actually bought a new phone
Speaker 3: and decided to recycle the old phone? And a number
Speaker 3: of our listeners will probably be having old phones stuck
Speaker 3: in their drawers next to their beds, right And for me,
Speaker 3: that indicates that, no matter how bullish or optimistic we
Speaker 3: are about recycling, if we are not sending in those
Speaker 3: scraps that would enable recycling companies to actually recycle these metals,
Speaker 3: then we're doing the cycle without the reed or the
Speaker 3: other way around. So dya That leads me to my
Speaker 3: next point. How can recycling play an important role in
Speaker 3: the energy transition? So one, it's about the availability of feestocks.
Speaker 3: So if you're listening to me, please, next time you
Speaker 3: buy your iPhone or your some song or whatever phone
Speaker 3: it is, please make sure that you recycle the old one.
Speaker 3: The same applies to our cars as well and other
Speaker 3: our household items. The second thing is that it's important
Speaker 3: that governments actually craft policies like they've done with plastics.
Speaker 3: So metropolitan cities have enforced laws that would ensure that
Speaker 3: you separate your plastics from your other things that end
Speaker 3: up in the landfills. So it's important that if we
Speaker 3: are to have metals play a key role, recycling play
Speaker 3: a key role in the energy transition, it has to
Speaker 3: be Poller sees that has to do with a collection
Speaker 3: and all the extents. And I think the third thing
Speaker 3: is about technology. Even if we send these to scrap,
Speaker 3: if the technology to recycle them is not there, there's
Speaker 3: very little these companies can do. So I think it's
Speaker 3: important that investments go into the technologies that would ensure
Speaker 3: that we recover most or all of these metals once
Speaker 3: they reach the end of life. And with these three things,
Speaker 3: I'm pretty sure that we're going to see magic happening
Speaker 3: in the recycling industry and it could potentially actually meet
Speaker 3: about a head of our needs by twenty fifty. From
Speaker 3: an energy transition perspective.
Speaker 1: I'll certainly be keeping an eye on what's happening in
Speaker 1: the recycling space and the technology developments there. But let's
Speaker 1: zoom out to what's happening now with these green field sites.
Speaker 1: How much money is actually needed to meet demand When
Speaker 1: it comes to exploring, is there enough money going into
Speaker 1: it to essentially facilitate the transition in the scope that
Speaker 1: we're talking about.
Speaker 3: So, I think, once again is a long term view, right,
Speaker 3: So I'm just going to take our listeners to acknowledge
Speaker 3: or to look at the forests and the simple answer
Speaker 3: is no. So in the report we actually crunch the
Speaker 3: numbers on how much investments need to go into new
Speaker 3: supply and to ensure that we don't fall off the cliff.
Speaker 3: So as our listeners will probably be aware, there are
Speaker 3: two scenarios we look at BNF that ETS which is
Speaker 3: economic transition scenario, which looks at technologies of today, no
Speaker 3: new policies coming online, and more importantly, the deployment being
Speaker 3: led by costs. And we think that to be able
Speaker 3: to meet that ETS demand, we need one point six
Speaker 3: trillion dollars by twenty to fifty and if you extend
Speaker 3: that into the net zero scenario, that number jumps out
Speaker 3: to two point one trillion dollars.
Speaker 1: So you've outlined how much money we actually need to
Speaker 1: go into that space. But how far are we have
Speaker 1: the mark.
Speaker 3: We're really far off at the moment. Like I said,
Speaker 3: it's just so easy. There's a lot of fixation on
Speaker 3: the fact that the market seems well supplied in the
Speaker 3: short term, but then by twenty thirty the cracks start
Speaker 3: to reveal, and I think we need to really start
Speaker 3: investing in these now in order not to bear the.
Speaker 1: Pain later twenty thirty is not that far off in
Speaker 1: the distance. Let's get even closer to now, though. Let's
Speaker 1: talk about prices. So we copper, the thing that you
Speaker 1: check in the morning when you're drinking your coffee. Are
Speaker 1: we seeing that swap with aluminum, and are we seeing
Speaker 1: that actually continuing to be a trend or with decreases
Speaker 1: in demand and therefore copper price is lowering, they're no
Speaker 1: longer that same impetus to actually think about aluminium or
Speaker 1: aluminium in the same way.
Speaker 3: Yeah, so I like you when you get the aluminium aluminum.
Speaker 3: That's actually what reminds me that they know you're American,
Speaker 3: aren't you?
Speaker 1: I am American?
Speaker 3: Okay, great, So we've seen this play out before. Prices
Speaker 3: Whenever prices of commodities go high, it's not actually only
Speaker 3: supply that response. Usually would see that people would build
Speaker 3: new mines because there's an incentive to make money in there.
Speaker 3: But then there's also something called a demand response. Mind you,
Speaker 3: the people who consume these metals also have budgets. Right
Speaker 3: If budget said that this year we're going to spend
Speaker 3: one billion only in cables between New York and DC
Speaker 3: or Johanna's Big and Cape Town, then all of the
Speaker 3: suddudden prices of copper, which is a key row material
Speaker 3: for great rises. So then they probably go back to
Speaker 3: the draying board and ask themselves, we can't keep up
Speaker 3: with this, what are some of the alternatives that we
Speaker 3: could potentially look at instead of copper? And what usually
Speaker 3: comes up is aluminum. We've known that aluminium has sixty
Speaker 3: percent of the conductivity, but then were prices obviously going
Speaker 3: so high, they come to a conclusion that sixty percent
Speaker 3: conductivity compared to copper is actually not that bad. So
Speaker 3: I think those are some of the unintended consequences of
Speaker 3: letting price rise so high to the point where companies
Speaker 3: start looking for alternatives beyond just a grade. We saw
Speaker 3: that happening battery as well. Everybody thought little Man batteries
Speaker 3: will last forever, but they're stdio highn right. So I
Speaker 3: think the unintended consequences of not managing prices is the
Speaker 3: fact that human ingenuity knows no bound. People get a
Speaker 3: lot more creative when they hit that wall of higher
Speaker 3: prices and they start thinking about alternatives, and that is
Speaker 3: actually going to play quite significantly in the energy transition
Speaker 3: across all the technologies.
Speaker 1: Well, when you're dealing with commodities, because they are so
Speaker 1: responds to disapply and demand balance, and the prices fluctuate,
Speaker 1: and certainly traders want some degree of fluctuation in order
Speaker 1: to make money off of this. It looks like it's
Speaker 1: a nonlinear path. So we've established that the platinum group
Speaker 1: metals may actually, because they have different sources of demand,
Speaker 1: may actually have a smoother near term. Lithium highly exposed,
Speaker 1: coalbalt potentially very exposed. Where does graphite fall on this
Speaker 1: gradient of metals that are really exposed to the transition
Speaker 1: and therefore fluctuating or potentially you know, have a little
Speaker 1: bit of a smoother future other than my graphite pencils.
Speaker 1: Where does graphite fall in here?
Speaker 3: Graphite pencils? Indeed, and I always say this that so
Speaker 3: graphits is actually carbon. So there are three popular products
Speaker 3: of carbon that we know is a pressure and heats
Speaker 3: of carbon that result in multiple products that we know.
Speaker 3: The lease of them is coal, which we burn to
Speaker 3: produce power, which is mostly not clean. When it gets
Speaker 3: a little bit more pressure and heats, it produces graphites.
Speaker 3: And actually when you get them more pressure and heat
Speaker 3: to produce diamond. So i'd say this is that graphite,
Speaker 3: it's a disappointed diamond, and then well, please don't.
Speaker 1: Tell you the price fluctuate wildly is in question.
Speaker 3: It does, and it's mostly is historically has been tied
Speaker 3: to steel production, so in electrodes, but increasingly we are
Speaker 3: seeing that the demand from anode. So every battery has
Speaker 3: a positive and a negative, So the positive part of
Speaker 3: the batteries are cathode, the negative part is the anode,
Speaker 3: and historically the metal or the mineral that has been
Speaker 3: used as the anode material is graphite. So because we
Speaker 3: see the steel industry being relatively stable, we've not seen
Speaker 3: that fluctuation in graphite prices for a while. But now
Speaker 3: that we gain increase demand from the anode batteries, we
Speaker 3: think that towards the end of the decade we might
Speaker 3: start seeing the volatility we see in other commodities that
Speaker 3: get exposed to their energy transition.
Speaker 1: So with somebody who lives their day thinking about the
Speaker 1: metals industry, how often do you speak to your colleagues
Speaker 1: who are actually focused on these sources of demand. So
Speaker 1: the electric vehicle space, you know, trying to figure out
Speaker 1: whether or not that is going to increase down the road,
Speaker 1: for various reasons, whether or not they are consumer driven
Speaker 1: or policy driven. Is that something that is heavily weighing
Speaker 1: on you when you're looking at something like the Transition
Speaker 1: Metals outlook and trying to put all of these different,
Speaker 1: you know, seemingly disjointed but all interconnected things together.
Speaker 3: I think you really spot on there. That's actually the
Speaker 3: main reason for TMO. When we started thinking about TMO,
Speaker 3: there was a lot of disjointed conversation. You've got miners
Speaker 3: talking about supply from one end, We've got electric vehicle
Speaker 3: teams talking about even demand from one end, and then
Speaker 3: you've got the hydrogen team talking about electoralizer. So the
Speaker 3: whole idea of TMO was to really aggregate all the
Speaker 3: different conversations we have at BNF around supply chain into
Speaker 3: one document, but then extending that to the industry. I
Speaker 3: think for us a keep out of our job. It's
Speaker 3: really taking all these different end US sedgement conversations that
Speaker 3: you talk about and compiling them into that one narrative
Speaker 3: for us to ask the fundamental question is enough metals
Speaker 3: to meet the needs of the energy.
Speaker 2: Transition And just to add on that quasi so benef
Speaker 2: recently hosted the TMO outlook as part of the LME Week,
Speaker 2: and I think that came out quite prominently from our
Speaker 2: panelists to say, you need to understand the supply chain
Speaker 2: from end to end, and we this is a time
Speaker 2: with the energy transition to actually start talking to each
Speaker 2: other because in the past we always had our end
Speaker 2: users didn't understand where the metal came from and we
Speaker 2: didn't understand how the metal transformed into the end. Using
Speaker 2: what challenges they have with the energy transition, we see
Speaker 2: a lot more collaboration from end to end. One of
Speaker 2: those examples is like Tesla that's now very integrated into
Speaker 2: understanding where the demand or where the supply of its
Speaker 2: material is coming from and to build out its supply
Speaker 2: chain understanding exact nuances.
Speaker 1: So LM being the London Metals Exchange Week and then
Speaker 1: this conversation came up perfectly. So while I know neither
Speaker 1: of you is going to pick a favorite metal, I
Speaker 1: am going to ask you to pick a favorite source
Speaker 1: of demand in terms of how much you I think
Speaker 1: it's influencing prices at the moment. Is it the electric
Speaker 1: vehicle space or is it energy storage that you're more
Speaker 1: focused on, or something that maybe I'm missing.
Speaker 2: I would say we're focused on the electric vehicle space.
Speaker 2: Energy storage definitely has its place because from a renewable
Speaker 2: energy point of view, you need something to store the
Speaker 2: energy when everything is varied. But I would say from
Speaker 2: an electric vehicle space, I'm not sure about you crazy.
Speaker 3: I mean, I jump on the buzz where that has
Speaker 3: become pretty popular in the enerty in hydrogen. So for us,
Speaker 3: this is the first time that we actually looked at
Speaker 3: the metals that were going to the production of electrolyizers.
Speaker 3: I'm used to produce hydrogen, and obviously PGM will play
Speaker 3: a key role. So for us, it was really from
Speaker 3: a research and analytical perspective. It's really that particular end
Speaker 3: use that stretch our thinking as to how can we
Speaker 3: actually accurately estimate this when there's so much noise in
Speaker 3: the hydrogen market. And I'd like to say that I
Speaker 3: think we did quite well in trying to give this estimating.
Speaker 3: With that that makes it my favorite end use.
Speaker 1: Introduce a new metal to the conversation, one that actually
Speaker 1: crosses between a source of emissions and also as part
Speaker 1: of the solution, so manganese sits between steel and then
Speaker 1: the batteries that we've been talking about that are part
Speaker 1: of the solution. Can you talk a little bit more
Speaker 1: about manganese and way many people think it might be
Speaker 1: a forgotten metal.
Speaker 2: Thanks for the question, Dana. I was just waiting for that,
Speaker 2: because no one ever talks about manganese. It is the
Speaker 2: forgotten metal. From a market cap point of view, it's
Speaker 2: one of the smaller ones compared to copper and nickel.
Speaker 2: But you are right to say that, yes, it plays
Speaker 2: an important role in the steel industry in that ninety
Speaker 2: seven percent of manganese consumption goes into steel, but also
Speaker 2: the more exciting part of my career now I was
Speaker 2: looking at it from a battery metal point of view.
Speaker 2: It's one of those that we hope to help cheapen
Speaker 2: battery chemistries because it's becoming quite popular in chemistries like LFP,
Speaker 2: So a lot of people are now looking into MFP
Speaker 2: as a substitute. So manganese is really good at substituting,
Speaker 2: similarly to elimini.
Speaker 1: Went to LFP and MFP stand for.
Speaker 2: So it's a battery chemistry variation that has these specific
Speaker 2: metals in it, specifically lithium. Obviously within manganese is a
Speaker 2: component iron and then phosphate. As we saw in this
Speaker 2: year's EVO, LFP, which is lithium ion phosphate, is taking
Speaker 2: quite a big share of the market. But we also
Speaker 2: see LMFP coming into play as it has similar characteristics
Speaker 2: to LFP, but it's slightly cheaper. So yeah, Dana, it
Speaker 2: would be great to actually come back and have a
Speaker 2: chat with you about manganese's role in the battery and
Speaker 2: specifically the lithium ion battery market.
Speaker 1: So manganese forgotten, no more Rose crazy. Thank you so
Speaker 1: much for joining.
Speaker 3: Thanks for having us, Dan, Thank.
Speaker 2: You for having us, Dana.
Speaker 1: Today's episode of Switched On was produced by Cam Gray
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