WEBVTT - Canada Tops China for Battery Supply Chain Potential 0:00:00.360 --> 0:00:03.160 This is Dana Perkins and you're listening to Switched on 0:00:03.400 --> 0:00:06.760 the BNAF podcast. Which countries in the world are doing 0:00:06.800 --> 0:00:10.840 the best job of building a secure, reliable and sustainable 0:00:10.960 --> 0:00:14.360 lithium ion battery supply chain. As we know, lithium ion 0:00:14.400 --> 0:00:17.160 batteries are an important part of the energy transition. They 0:00:17.200 --> 0:00:20.560 provide everything from flexibility for wind and solar to the 0:00:20.600 --> 0:00:23.959 batteries that are found in electric vehicles and so much 0:00:24.000 --> 0:00:27.760 more so. Earlier this year, BNAF released the fourth edition 0:00:28.000 --> 0:00:31.280 of our Global Lithium ion Battery Supply Chain Ranking. We 0:00:31.400 --> 0:00:34.879 rank the top thirty countries using forty six metrics across 0:00:35.040 --> 0:00:38.040 five categories, and we take into account things like the 0:00:38.080 --> 0:00:43.000 sourcing of raw materials, battery manufacturing capacity, downstream demand, environmental, 0:00:43.040 --> 0:00:46.800 social and governance factors as well as innovation. So on 0:00:46.880 --> 0:00:50.400 today's show we speak with Eli Gomas Calous and Quisiampofo 0:00:50.560 --> 0:00:52.879 from b and EF's Medals and Mining team, and in 0:00:52.920 --> 0:00:55.440 addition to the ranking, they get into the last year's 0:00:55.480 --> 0:00:58.760 collapse of lithium prices as well as the impact that 0:00:58.800 --> 0:01:02.600 Indonesia has had on the global nickel market. To access 0:01:02.720 --> 0:01:05.959 this latest edition of the Global Lithium Ion Battery Supply 0:01:06.040 --> 0:01:08.600 Chain Ranking. B and EF subscribers can find it on 0:01:08.720 --> 0:01:11.320 b and EF dot com or at BNF on the 0:01:11.360 --> 0:01:14.760 Bloomberg terminal. Subscribe to the show to receive updates for 0:01:14.840 --> 0:01:17.760 future episodes, and consider giving us a review to help 0:01:17.800 --> 0:01:20.160 share us with others. But right now, let's jump into 0:01:20.160 --> 0:01:33.280 our conversation with Ellie and Quasy. Ellie, thank you for 0:01:33.319 --> 0:01:34.279 coming back on the show. 0:01:34.360 --> 0:01:35.399 Thank you for having me again. 0:01:35.480 --> 0:01:37.920 Dana and Cozy, good to have you here again too. 0:01:38.160 --> 0:01:39.520 Thank you for having me again, Dana. 0:01:39.720 --> 0:01:43.000 So we're here today to talk about the Global Lithium 0:01:43.040 --> 0:01:46.520 ion Battery Supply Chain Ranking, our own version of the 0:01:46.560 --> 0:01:50.680 OSCARS for metal. So the name is on the tin 0:01:51.160 --> 0:01:53.840 in that we're talking about the supply chains for all 0:01:53.880 --> 0:01:56.800 of the things that go into batteries with the metals specifically. 0:01:57.000 --> 0:01:59.640 But let's just have a moment for talking about who 0:01:59.680 --> 0:02:02.200 was in the running, who the nominees were for these oscars, 0:02:02.200 --> 0:02:05.600 if you will. How many countries were we reviewing when 0:02:05.640 --> 0:02:07.560 we set out to make this ranking. 0:02:07.760 --> 0:02:11.640 So unlike the Oscars, it wasn't just six, seven or 0:02:11.680 --> 0:02:14.519 eight nominees. Each year, we look at thirty countries and 0:02:15.120 --> 0:02:19.040 judge their potential to form a secure, unreliable and sustainable 0:02:19.080 --> 0:02:20.120 battery supply chain. 0:02:20.440 --> 0:02:23.640 Now, rather than make everybody wait for us to open 0:02:23.639 --> 0:02:26.960 the envelope, let's just get right into who the winner 0:02:27.120 --> 0:02:29.560 was and let me take a guess. Because on this show, 0:02:29.600 --> 0:02:32.640 the last couple of episodes, we've been talking about China 0:02:32.760 --> 0:02:36.680 dominating the electric vehicles market and the solar module market. 0:02:36.800 --> 0:02:38.280 So is it China? 0:02:38.880 --> 0:02:39.680 No? No? 0:02:40.040 --> 0:02:42.440 All right? So who? Yeah? Who came out on top? 0:02:42.639 --> 0:02:46.240 So it's undeniable that China leads the current supply chain. 0:02:46.320 --> 0:02:48.200 But the purpose of the ranking is to try and 0:02:48.440 --> 0:02:52.600 understand and see what countries canform supply chains for the future. 0:02:52.840 --> 0:02:56.040 And with that in mind, Canada actually came out on top. 0:02:56.520 --> 0:02:58.880 So the difference is with the ranking is that we 0:02:58.919 --> 0:03:01.280 don't only look at the but we look at the future. 0:03:01.360 --> 0:03:06.079 So we include two categories ESG Credentials and Industry Innovation 0:03:06.400 --> 0:03:09.520 and Infrastructure, And the inclusion of these help us look 0:03:09.520 --> 0:03:11.880 to the future because supply chains will need to be 0:03:11.960 --> 0:03:15.200 more sustainable as we go towards net zero, and also 0:03:15.280 --> 0:03:17.520 because demand is going to grow very quickly, so do 0:03:17.560 --> 0:03:20.800 these countries have the supporting sectors in place to be 0:03:20.880 --> 0:03:22.920 able to support the growth in supply chains. 0:03:23.120 --> 0:03:26.200 So let's take a moment on ESG, so environmental, social 0:03:26.280 --> 0:03:29.280 and governance factors. What do we mean by that in 0:03:29.280 --> 0:03:34.120 this context because that term gets reapplied to so many things, 0:03:34.400 --> 0:03:37.320 and we Bloomberg try and have quite a strict definition 0:03:37.840 --> 0:03:40.920 what does ESG mean for us in this specific context. 0:03:41.360 --> 0:03:44.800 So in the ranking, we include around ten ESG metrics 0:03:44.840 --> 0:03:47.800 are split between each of the three sub sectors, and 0:03:48.120 --> 0:03:50.720 we look at most of the ESG metrics on the 0:03:50.760 --> 0:03:54.200 country level, so we look at things like carbon pricing, 0:03:54.560 --> 0:03:57.840 environmental health of their ecosystems, as well as looking at 0:03:57.840 --> 0:04:01.560 the control of corruption and government effectiveness within the region. 0:04:01.800 --> 0:04:04.280 So with the rankings, a lot of what we do 0:04:04.360 --> 0:04:07.160 focuses on the country in that sense. 0:04:07.600 --> 0:04:09.760 Then also, I think one thing out our day naristat 0:04:10.040 --> 0:04:13.440 So the methodology overall was developed with the industry. So 0:04:13.480 --> 0:04:16.920 it's essentially what companies are saying in their boardrooms, what 0:04:17.360 --> 0:04:20.680 the supply chain industry is discussing. So when we select 0:04:20.839 --> 0:04:24.119 the criteria, particularly with respect to ESG, it was really 0:04:24.200 --> 0:04:26.560 dozed at the auto companies as well as the mining 0:04:26.600 --> 0:04:29.400 companies and governments are talking about that matters to them. 0:04:29.440 --> 0:04:31.080 In order to dominate the supply chain. 0:04:31.200 --> 0:04:33.480 Yeah, because we did a previous episode where we were 0:04:33.480 --> 0:04:37.520 talking about the use of blockchain and verifying minds and 0:04:37.560 --> 0:04:39.719 some of their social practices. It would kind of go 0:04:39.800 --> 0:04:42.279 into how they treat workers. So there's a wide basket 0:04:42.320 --> 0:04:45.159 of things, but a bit specifically related to metals and mining. 0:04:45.200 --> 0:04:49.040 Here you brought in ten important factors for this industry. 0:04:49.279 --> 0:04:52.920 So going back to the winner of this particular ranking, 0:04:52.920 --> 0:04:56.719 which isn't necessarily where the majority of the refining capacity is, 0:04:56.720 --> 0:04:58.719 but where it comes out on top when we're actually 0:04:58.760 --> 0:05:02.560 considering some of these different things like ESG. What does 0:05:02.600 --> 0:05:04.960 it take to come out on top? So you've gone 0:05:05.000 --> 0:05:08.680 through these various areas that went into the ranking, but 0:05:08.839 --> 0:05:12.680 essentially where does Canada really excel? Are they across the 0:05:12.720 --> 0:05:15.839 board or is there one specific area where really kind 0:05:15.839 --> 0:05:17.240 of set them over the edge. 0:05:17.520 --> 0:05:21.200 So Canada doesn't actually place in first position across any 0:05:21.200 --> 0:05:24.479 of the categories that we judge, but what they do 0:05:24.480 --> 0:05:27.039 do really well is that they have a consistent top 0:05:27.080 --> 0:05:30.120 ten performance across all of the five key categories, and 0:05:30.440 --> 0:05:33.120 ensuring that they can perform to a decent and sodid 0:05:33.160 --> 0:05:36.320 level across various different parts of supply chain has helped 0:05:36.360 --> 0:05:38.680 them get to first place. This is a fourth edition 0:05:38.720 --> 0:05:40.679 of the ranking, and what we've seen over the past 0:05:40.680 --> 0:05:44.280 two is in every single category they've continuously improved. So 0:05:44.279 --> 0:05:47.120 it's a combination of the consistency across the categories, but 0:05:47.200 --> 0:05:49.680 also the continuous improvement that has helped them get to 0:05:49.680 --> 0:05:50.480 where they are today. 0:05:50.680 --> 0:05:53.080 So they're an all rounder. Well, let's talk a little 0:05:53.080 --> 0:05:56.040 bit about the different geographic split then, if we will. 0:05:56.120 --> 0:05:59.680 Among those thirty countries, were they all centered in certain 0:05:59.680 --> 0:06:02.200 parts of the world or is this some really global 0:06:02.200 --> 0:06:02.800 supply chain. 0:06:03.200 --> 0:06:05.280 I think it's very global. One of the key things 0:06:05.279 --> 0:06:08.440 we should highlight is that we picked thirty countries out 0:06:08.440 --> 0:06:10.800 of over one hundred and ninety countries. So if you're 0:06:10.839 --> 0:06:13.719 in this ranking, you're probably already a winner. So I mean, 0:06:13.839 --> 0:06:16.800 going back to your scarce analogy, you've probably have won 0:06:16.880 --> 0:06:19.320 award an award in one of the five categories that 0:06:19.360 --> 0:06:21.839 we mentioned if you're in the top thirty arm In 0:06:21.920 --> 0:06:24.040 terms of the regional split, we wanted it to be 0:06:24.160 --> 0:06:26.839 very global. Obviously, you're going to find that in most 0:06:26.920 --> 0:06:29.560 of pretty much every region around the world. We did 0:06:29.560 --> 0:06:31.919 include some countries, so they are quite a number of 0:06:31.920 --> 0:06:34.719 countries in Europe, and for us, a minimum criteria to 0:06:34.800 --> 0:06:37.520 be part of that top thirty is really to have 0:06:37.680 --> 0:06:40.560 something going on within one of the criteria that we 0:06:40.640 --> 0:06:44.400 selected or that we assessed. So Europe would certainly feature 0:06:44.480 --> 0:06:47.000 quite strongly because they have a lot of battery manufacturing 0:06:47.040 --> 0:06:50.279 going on. We have North America where Canada, America, Mexico 0:06:50.320 --> 0:06:53.760 features quite strongly. You've got South America where Chile also 0:06:53.800 --> 0:06:56.880 features in addition to other countries. Then you go to Asia, 0:06:57.000 --> 0:06:59.279 you've got the Japan, the China, and then in the 0:06:59.279 --> 0:07:02.840 Pacific region in Australia as well. So certainly a global benchmark. 0:07:02.960 --> 0:07:05.080 But then to be included in that top thirty, I 0:07:05.120 --> 0:07:07.520 think the key criteria is that you need to feature 0:07:07.600 --> 0:07:10.280 quite strongly in the five areas that we assess, at 0:07:10.360 --> 0:07:11.120 least one of them. 0:07:11.320 --> 0:07:14.880 And so since this is the Metals in Mining team, 0:07:15.040 --> 0:07:18.640 can we talk about raw materials and really what's going 0:07:18.680 --> 0:07:20.480 on there and where it comes out on top because 0:07:20.520 --> 0:07:23.560 a lot of our conversations do tend to focus on 0:07:23.640 --> 0:07:26.400 Africa's in area that has a lot of raw materials 0:07:26.400 --> 0:07:29.560 that are necessary for the battery supply chain. How is 0:07:29.640 --> 0:07:32.400 that region faired when we come to the raw material 0:07:32.440 --> 0:07:33.960 space specifically, so. 0:07:34.040 --> 0:07:36.920 Actually, in this ranking, Africa is the only region where 0:07:36.920 --> 0:07:39.400 all the countries that we include in the ranking in 0:07:39.440 --> 0:07:43.480 this case it's Morocco, Democratic Republic of the Congo DRC 0:07:43.880 --> 0:07:47.240 and South Africa. Africa's the only region where all these 0:07:47.240 --> 0:07:50.680 countries have improved in the raw materials category. And we're 0:07:50.680 --> 0:07:53.880 seeing that as there's a renewed interest in energy transition 0:07:53.960 --> 0:07:57.200 and metals for the energy transition. Nations in Africa particularly 0:07:57.280 --> 0:08:01.160 are trying to harness the potential of their critical win reserves, 0:08:01.400 --> 0:08:04.360 as we've seen other supply chains try to decouple from 0:08:04.440 --> 0:08:06.960 China there turning to Africa to see if they can 0:08:07.040 --> 0:08:09.000 use some of their critical minerals there as well. 0:08:09.320 --> 0:08:11.800 So while we're on the topic of battery metals, let's 0:08:11.920 --> 0:08:15.440 talk about prices, because that is certainly something our clients 0:08:15.440 --> 0:08:17.760 on the commodity side are watching closely. And there are 0:08:17.760 --> 0:08:20.200 two medals that have had on one side of fluctuation 0:08:20.280 --> 0:08:22.480 on the other side a dip. So let's talk about 0:08:22.600 --> 0:08:24.920 lithium and nickel, and I know we could spend an 0:08:25.040 --> 0:08:28.280 entire show talking about each independently, So maybe let's start 0:08:28.320 --> 0:08:31.679 with lithium. Why the fluctuations and why did the price 0:08:31.720 --> 0:08:33.839 collapse in twenty twenty three, I. 0:08:33.760 --> 0:08:36.680 Think disclaim every morning day. Now, the first thing I 0:08:36.720 --> 0:08:39.240 do is so look at the lithium prices. So certainly 0:08:39.240 --> 0:08:40.960 you've got me on the right sport. And I think 0:08:41.200 --> 0:08:43.400 the key thing to understand is there are two factors 0:08:43.440 --> 0:08:46.640 that drive supply in the market. Okay, Obviously there's a 0:08:46.679 --> 0:08:50.160 supply and the demand. And for every commodity, if you 0:08:50.240 --> 0:08:54.280 have more supply than demand, you obviously get price dipping. Okay. 0:08:54.320 --> 0:08:57.360 And what happened in the lithium market is a few 0:08:57.400 --> 0:09:01.400 years ago, Batri became the biggest consumer of lithium and 0:09:01.480 --> 0:09:04.240 we saw battery demand grow, which essentially led to an 0:09:04.240 --> 0:09:07.000 increased in demand for lithium as well. Supply was very 0:09:07.040 --> 0:09:09.320 late to the game, so you had a lot of 0:09:09.360 --> 0:09:12.080 demand with very little supply, and we saw prices go 0:09:12.200 --> 0:09:14.600 from ten thousand to about eighty thousand in a matter 0:09:14.640 --> 0:09:17.360 of eighteen months, which is very rare in the commodities market. 0:09:17.480 --> 0:09:20.079 Right to go times eighteen such a short period. Now, 0:09:20.080 --> 0:09:22.400 what happened is that once you have a commodity go 0:09:22.760 --> 0:09:26.000 that high level, two things happen. Everybody now becomes a 0:09:26.040 --> 0:09:29.079 lithium minor, even my good old friends in Australia who 0:09:29.080 --> 0:09:31.800 were exploring for gold decided to go for lithium, and 0:09:31.840 --> 0:09:33.840 now that price point as well. The second thing that 0:09:33.920 --> 0:09:36.960 happens is that it becomes very easy to develop new 0:09:37.000 --> 0:09:40.679 technologies to improve assistant processes. So your efficieness has become better, 0:09:40.720 --> 0:09:43.000 your recoveries become better. So no, I'll think about it. 0:09:43.080 --> 0:09:45.760 My good old friends in Australia, all of them exploring 0:09:45.800 --> 0:09:49.600 for gold overnight and technology becoming better to improve recoveries 0:09:49.640 --> 0:09:53.440 meant that supply really increased significantly within a short period. 0:09:53.679 --> 0:09:55.720 Now let's go back to the laws of economics. Remember 0:09:55.760 --> 0:09:57.600 when I said, when there's a lot more demand, we 0:09:57.640 --> 0:10:00.679 few supply, prices go up. When the revers happen, prices 0:10:00.720 --> 0:10:03.319 go down. So that's precisely what happened last year, where 0:10:03.400 --> 0:10:06.720 the technology improvement in China, where there was a certain 0:10:06.760 --> 0:10:10.240 type of lithium deposit called epidolite, historically had not been 0:10:10.280 --> 0:10:12.800 able to be mined, but then with higher prices they 0:10:12.800 --> 0:10:15.400 were able to crack the technology code. And then suddenly 0:10:15.480 --> 0:10:18.520 China becomes a key producer with all those new projects. 0:10:18.600 --> 0:10:21.200 Even my home country Ghana discovered lithium and they are 0:10:21.240 --> 0:10:23.120 on their way to develop it, So that meant that 0:10:23.200 --> 0:10:26.120 prices came down significantly as a result of a lot 0:10:26.160 --> 0:10:28.599 more supply coming in at a time where demand was 0:10:28.640 --> 0:10:30.920 beginning to slow down. That was the story for lithium. 0:10:30.960 --> 0:10:34.120 But then you note that companies that were mining other 0:10:34.520 --> 0:10:37.400 things like gold have actually pivoted their businesses. So is 0:10:37.440 --> 0:10:40.280 this actually had a knock on effect for other commodities 0:10:40.320 --> 0:10:43.280 and driven prices up as companies have actually switched their 0:10:43.280 --> 0:10:46.000 attention as opposed to adding additional capacity. 0:10:46.360 --> 0:10:49.200 I think very minimal in the sense that most of 0:10:49.240 --> 0:10:53.480 these companies that were exploring have not started producing yet, okay, 0:10:53.520 --> 0:10:56.360 so their supply had not actually entered the market for 0:10:56.440 --> 0:10:59.240 it to distort the market if they pivoted away from it. 0:10:59.280 --> 0:11:01.559 So I think the good for gold producers as well 0:11:01.600 --> 0:11:04.640 as other commodity producers is that those were early stage 0:11:04.679 --> 0:11:08.080 exploration projects that's simply pivoted, so their supply never really 0:11:08.120 --> 0:11:10.840 added onto it. But then what happened with other metals, 0:11:10.880 --> 0:11:13.240 Obviously the impact will be different, but at least within 0:11:13.320 --> 0:11:16.559 the context of gold explorers pivoting to lithium, that was 0:11:16.640 --> 0:11:18.800 very minimal effect on gold and other metals. 0:11:18.880 --> 0:11:21.680 So after you checked lithium prices and had your morning coffee. 0:11:21.760 --> 0:11:24.720 Is it on to nickel? And why has nickel been 0:11:25.200 --> 0:11:28.120 from a pricing standpoint a somewhat similar story. So is 0:11:28.200 --> 0:11:30.520 the reason behind it? Is it the same? 0:11:30.920 --> 0:11:34.640 Quite similar? So also you had nickel ten years ago, 0:11:34.800 --> 0:11:37.840 prices went quite high and then technology played a key role. 0:11:37.920 --> 0:11:40.200 So back to what I said earlier, at higher prices, 0:11:40.440 --> 0:11:43.600 new technologists come online. In this case latrites. There are 0:11:43.600 --> 0:11:46.600 two types of nickel depicits. Obviously, you have what we 0:11:46.640 --> 0:11:50.160 call the sulfite, which historically had been the dominance nickel source. 0:11:50.240 --> 0:11:52.800 So you go to countries like Russia, Australia, Canada, you 0:11:52.840 --> 0:11:55.920 find the sulfit. It's high grade quality, all requires less 0:11:56.000 --> 0:11:59.280 energy to process. And then there had been historically low 0:11:59.360 --> 0:12:01.880 grade deposit is that nobody really touched because they were 0:12:01.920 --> 0:12:05.559 quite expensive to mind. Then the Chinese competition Shan discover 0:12:05.679 --> 0:12:09.120 the technology where they could actually convert those lattert or 0:12:09.160 --> 0:12:12.800 into what we call nickel peg ion using steel. So overnight, 0:12:12.920 --> 0:12:15.800 if you look at the last ten years, Indonesia moved 0:12:15.800 --> 0:12:19.360 from being an insignificant producer of nickel to the largest 0:12:19.360 --> 0:12:22.120 within ten years. They're enough for one reason, improvement in 0:12:22.200 --> 0:12:25.920 technology that made their deposit viable and economic. But here's 0:12:25.960 --> 0:12:28.439 what has happened over the last two years. Indonesia kept 0:12:28.559 --> 0:12:31.520 ramping up their production, kept ramping up their supply, and 0:12:31.559 --> 0:12:34.200 once again they coincided with the period where demand is 0:12:34.200 --> 0:12:36.920 slowing down, so prices began to fall. But the good 0:12:36.960 --> 0:12:39.520 news in Indonesia is that they are producing at a 0:12:39.640 --> 0:12:42.720 very competitive cost, so they don't feel the burniar whereas 0:12:42.840 --> 0:12:46.040 everyone else or most companies around the world are beginning 0:12:46.040 --> 0:12:48.720 to feel the impact. Called prices are actually at a 0:12:48.760 --> 0:12:51.560 point where it's lower than the cost of production. So 0:12:51.600 --> 0:12:54.600 we've seen glen Core BHB and other major producers in 0:12:54.640 --> 0:12:57.920 Australia beginning to put their minds into care and maintenance. 0:12:57.920 --> 0:12:59.720 And when we say care and maintenance, we are not 0:12:59.720 --> 0:13:02.080 going to produce anymore, but we're just going to maintain 0:13:02.120 --> 0:13:05.280 those minds. Simply cost prices are lower than your preating costs. 0:13:05.280 --> 0:13:06.959 But that is not happening in Indonesia. 0:13:07.120 --> 0:13:09.400 Is it common for a government to get involved in 0:13:09.440 --> 0:13:12.120 the supply and demand balance to keep prices or to 0:13:12.160 --> 0:13:14.199 attempt to make prices more stable. 0:13:14.520 --> 0:13:16.280 So you can do that in the oil industry through 0:13:16.280 --> 0:13:18.959 a peck in mind. And if you try to influence. Obviously, 0:13:19.000 --> 0:13:21.520 the EU has the anti trust laws, so two companies 0:13:21.520 --> 0:13:24.320 cannot speak to each other. So I've got my colleague here. Early, 0:13:24.559 --> 0:13:26.839 if Ellie was an independent nickel producer and I was 0:13:26.840 --> 0:13:30.360 an indictdent neickero producer, the EU laws andi trust laws, 0:13:30.559 --> 0:13:34.440 which enforces competition among companies, prevents us to try to 0:13:34.480 --> 0:13:38.120 moderate supply in order to influence prices. So the simple 0:13:38.120 --> 0:13:41.640 answer is no. And because governments don't actually produce these metals, 0:13:41.679 --> 0:13:44.960 they also don't have direct control over how companies are 0:13:45.000 --> 0:13:47.600 preid because then it goes against the rules of competition. 0:13:47.760 --> 0:13:50.040 So that's why it's like, all of a sudden you 0:13:50.080 --> 0:13:53.680 see everyone pumpinging supply. That leads us to a cliff 0:13:53.760 --> 0:13:56.200 edge in mining where overnight we wake up and everybody 0:13:56.240 --> 0:13:58.480 asks what happened simply because all of us we're producer 0:13:58.520 --> 0:13:59.120 at the same time. 0:13:59.360 --> 0:14:02.160 Now, as we're talking about these metals, in light of 0:14:02.240 --> 0:14:04.960 the rankings that we did that focus more on sustainability, 0:14:05.080 --> 0:14:07.400 this brings us to one of my favorite terms, so 0:14:07.520 --> 0:14:10.800 hybrid word the green premium together is the greenium. Is 0:14:10.840 --> 0:14:15.080 there a green premium for essentially those countries at the 0:14:15.080 --> 0:14:17.600 top of this ranking, are they selling their products at 0:14:17.600 --> 0:14:21.120 a higher price because the buyers, well not all of them, 0:14:21.120 --> 0:14:24.200 but some are looking more seriously at sustainability metrics. 0:14:24.680 --> 0:14:27.160 It's always a hard one, right. So the mining industry 0:14:27.280 --> 0:14:29.920 is one of the most unique industries in the world. Okay, 0:14:30.040 --> 0:14:33.760 so mining industry has what we call price takus in 0:14:34.040 --> 0:14:36.760 most other industries. So let's take the phone industry. If 0:14:36.800 --> 0:14:40.240 some song or Apple produces a phone today, they actually 0:14:40.320 --> 0:14:42.480 decide how much they want to sell it. If Timcook 0:14:42.520 --> 0:14:44.520 came out with a new iPhone, he decides that I'm 0:14:44.560 --> 0:14:46.560 going to sell this a thousand, three hundred because my 0:14:46.640 --> 0:14:50.880 cost was whatever plus my margin. In mining, mining companies 0:14:50.920 --> 0:14:53.960 won't have that luxury. They take whatever price and market decide, 0:14:54.200 --> 0:14:56.720 so that premium would have to come from the market. 0:14:56.840 --> 0:14:59.160 And now you need to understand how prices are set. 0:14:59.280 --> 0:15:02.240 So most prices it's either through benchmark or through exchanges. 0:15:02.280 --> 0:15:04.560 If you look at the current structure of the exchanges 0:15:04.600 --> 0:15:07.640 where the prices are discovered, there's very little room for 0:15:07.720 --> 0:15:11.000 them to actually have what we call it the word grimium. 0:15:11.000 --> 0:15:12.640 I'm going to seal that by the way there now, 0:15:12.840 --> 0:15:15.120 there's very little room for them to actually put on 0:15:15.160 --> 0:15:19.200 a premium because there's no structure to incentiviize. Prices are 0:15:19.240 --> 0:15:21.640 set at the macro level, not based on company. Now, 0:15:21.840 --> 0:15:24.200 the assumption is that companies can decide to go into 0:15:24.240 --> 0:15:27.400 bilateral agreements. Okay, so myself and Elie can decide that 0:15:27.720 --> 0:15:29.880 you produce the green to kill for me, I would 0:15:29.880 --> 0:15:32.680 pay it at an extra dollar because I want to 0:15:32.880 --> 0:15:36.320 reach my zero target faster than my competitors. But then 0:15:36.440 --> 0:15:38.240 the key thing is that you need to understand where 0:15:38.240 --> 0:15:41.400 the EV industry is. Every EV company is looking at 0:15:41.440 --> 0:15:45.440 improving its margins to break into profitability by reducing its costs. 0:15:45.520 --> 0:15:48.360 So at the moment, premium is not something any EVA 0:15:48.560 --> 0:15:51.360 company is willing to put on its costs given where 0:15:51.360 --> 0:15:53.800 we want to go with evs to increase the adoption, 0:15:54.040 --> 0:15:55.960 so green permium. Two things I want to end with 0:15:56.080 --> 0:15:58.440 on this question is that one, it will be difficult 0:15:58.560 --> 0:16:01.120 in the current structure of the exchanges where prices are 0:16:01.120 --> 0:16:03.120 discovered for there to be a premium in the market. 0:16:03.240 --> 0:16:06.720 But then secondly, what companies or to companies actually be 0:16:06.760 --> 0:16:08.760 willing to pay for green premiums. That will be hard 0:16:08.800 --> 0:16:10.800 because all of them are trying to reduce costs in 0:16:10.920 --> 0:16:13.640 order to improve the margins. Of the electric vehicle production 0:16:13.800 --> 0:16:15.000 to maximize their profit. 0:16:15.280 --> 0:16:18.560 So perhaps as learning rates improve and electric vehicles become 0:16:18.600 --> 0:16:22.160 more price competitive with internal combustion engine vehicles, which we 0:16:22.200 --> 0:16:24.920 are seeing happen, and we do have forecasts that actually 0:16:24.920 --> 0:16:27.400 think about when that's actually going to be, which is 0:16:27.440 --> 0:16:30.880 not too far away, then it becomes maybe potentially a 0:16:30.880 --> 0:16:33.840 bigger factor in the future, and this ranking maybe it'll 0:16:33.840 --> 0:16:35.600 go precisely. 0:16:35.720 --> 0:16:37.760 But then there's actually a plot twist, right. One thing 0:16:37.800 --> 0:16:40.640 I left out is policy. So look at the impact 0:16:40.680 --> 0:16:43.040 of Seabama as an example. So the Seabama I mean 0:16:43.080 --> 0:16:46.560 the carbon boder adjustment mechanism the European Union introduce, And 0:16:46.640 --> 0:16:48.800 what that means is that if you're a seal or 0:16:48.840 --> 0:16:51.600 aluminum important in the EU and you decide to import 0:16:51.680 --> 0:16:54.960 from a country whose emissions standards is not equivalent to 0:16:55.000 --> 0:16:57.000 what you have in the EU, you pay a premium 0:16:57.000 --> 0:16:59.160 on top of that, right or you pay a charge 0:16:59.160 --> 0:17:02.360 based on where the prices. So similarly, the EU is 0:17:02.360 --> 0:17:04.639 trying to introduce the battery passport. So what's going to 0:17:04.680 --> 0:17:07.000 happen is that the EU is hoping to track the 0:17:07.040 --> 0:17:10.280 emissions profile of auto companies in the EU. So if 0:17:10.320 --> 0:17:13.680 you don't want to pay that penalty, which is aligned 0:17:13.680 --> 0:17:16.600 with the carbon price. Then the good thing is that 0:17:16.720 --> 0:17:19.320 you go to the producers that produce the good stuff. 0:17:19.320 --> 0:17:21.600 And because everybody will be going to the producers that 0:17:21.640 --> 0:17:24.320 produce a lower emission nickel, that is where we think 0:17:24.560 --> 0:17:28.679 that obviously there might be a potential premium attach touced 0:17:28.680 --> 0:17:32.240 producers doing it in low emissions profile. So yes, character 0:17:32.240 --> 0:17:34.760 and stick. I think that one's a big stick, particularly 0:17:34.760 --> 0:17:38.040 from the EU is enforced. There's a probability that companies 0:17:38.080 --> 0:17:40.440 would have no option than to offer premiums in order 0:17:40.480 --> 0:17:42.080 to get access to the low emission stuff. 0:17:42.440 --> 0:17:45.320 So now we've entered our let's predict the future part 0:17:45.320 --> 0:17:47.840 of the podcast, which always seems to come at some 0:17:47.960 --> 0:17:51.119 point in the show when it comes to these different 0:17:51.160 --> 0:17:54.880 well nickel and lithium specifically, do we expect twenty twenty 0:17:54.880 --> 0:17:58.400 four to be a more stable year depends. 0:17:58.040 --> 0:18:00.359 On what world leaders have for coughing the more. But 0:18:00.400 --> 0:18:02.680 then what I tend to realize the near term price 0:18:02.760 --> 0:18:06.160 movement is mostly based on geopolitics, which is number one. 0:18:06.320 --> 0:18:09.480 A classic example is Russia is a major producer of nickel, 0:18:09.560 --> 0:18:12.000 so nichol is actually the only metal that has class 0:18:12.119 --> 0:18:14.200 class in the sense that there are two types of nickel, 0:18:14.200 --> 0:18:16.560 the Class one, which is a high priority stuff used 0:18:16.560 --> 0:18:19.600 in battery manufacturing, and then the Class two, which is 0:18:19.680 --> 0:18:22.879 used for seal steel production. So Russia is a key 0:18:22.920 --> 0:18:25.720 produce of Class one, and if America or any other 0:18:25.720 --> 0:18:29.840 country for that matter, decides to impose assanction on Russia's nickel, 0:18:29.960 --> 0:18:33.080 that certainly would move the market and unfortunately not make 0:18:33.080 --> 0:18:34.879 it a stable yet. So I think that's one. But 0:18:34.920 --> 0:18:38.840 then burying all these assumptions and geopolitical impact, we do 0:18:38.960 --> 0:18:41.240 think that we expect recovery in the market because we 0:18:41.280 --> 0:18:45.000 are seeing that companies are increasingly beginning to shut down supply. 0:18:45.160 --> 0:18:46.879 And then, if we go back to the economics one 0:18:46.920 --> 0:18:50.679 O one that I mentioned, when supply finally is lower 0:18:50.680 --> 0:18:53.600 than demand, or let me say, when demand finally exceeds supply, 0:18:53.840 --> 0:18:56.040 what you see is that prices begin to recover. So 0:18:56.119 --> 0:18:59.879 as more companies furlow or put their operations into care men, 0:19:00.320 --> 0:19:03.439 if it tips to skill to the point where supply 0:19:03.560 --> 0:19:06.080 becomes less than demand, we think that prices will recover. 0:19:06.280 --> 0:19:08.520 But overall our view is that that recovery would not 0:19:08.600 --> 0:19:11.240 be significant compared to the drop we saw last year. 0:19:11.480 --> 0:19:13.879 So we've spent a lot of time talking about countries, 0:19:14.040 --> 0:19:17.959 and invariably this is a really important policy discussion. As 0:19:18.000 --> 0:19:20.439 you've pointed out, Quazy, Let's talk a second about the 0:19:20.560 --> 0:19:23.720 companies involved here. What are some of the bigger companies 0:19:23.800 --> 0:19:27.359 and is that actively shifting. Are there new entrants in 0:19:27.400 --> 0:19:29.560 this market or is it really the same companies that 0:19:29.600 --> 0:19:31.000 have always been in the space. 0:19:31.320 --> 0:19:35.360 As Quzy mentioned earlier, we're seeing companies expand into different 0:19:35.400 --> 0:19:39.720 metals and into new portfolios. But in the terms of lithium, 0:19:39.720 --> 0:19:43.440 for example, we've seen that there's top five producers standing 0:19:43.520 --> 0:19:47.400