June 13, 2024 • 45 mins
There's been a huge change in the market for nickel, which goes into everything from electric vehicles to steel. Indonesia has grown to absolutely dominate production and now provides more than 55% of the world's supply. A lot of that is going to China, which has partnered with Indonesia to help grow its nickel industry at a phenomenal rate. Now, there are accusations that low-grade and low-priced Indonesian nickel is flooding the global market, to the detriment of other producers. Western miners like BHP and Anglo American have been shuttering their own nickel operations, and have written them down by billions of dollars in recent years. On this episode, we speak with Michael Widmer, head of metals research at Bank of America, about the sea change that's taken place in the world's nickel market and what it says about the green energy transition, as well as the scramble for other strategically important metals. We also talk about all those bullish calls on copper, and general volatility in the metals space.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:20):
Hello, and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 2 (00:24):
And I'm Joe. Why isn'tal Joe?
Speaker 1 (00:26):
I have a joke for you, A very special joke.
Speaker 2 (00:29):
Go on.
Speaker 1 (00:30):
Why did Anglo American write down it's nickel.
Speaker 2 (00:32):
Business because it was only worth five cents?
Speaker 1 (00:36):
That's so good. That's actually okay. My line was because
it was a few cents short of a viable return.
But yeah, same thing. That's really good.
Speaker 2 (00:45):
But you know what the thing is is my daughter
has gotten really into reading me jokes, and I like,
she has all these joke books. Like my brain is
you can anticipate and like see where these all are going?
Speaker 3 (00:56):
All right?
Speaker 1 (00:57):
Well, on a serious note, Anglo American rejected that bid
from BHP Bulletin, which is something that came up in
our conversation with Jeff Curry recently, and as a result
of that, it is now undertaking this formal process of
selling off a bunch of assets and exploring options for
its nickel operations. And one thing that I hadn't realized
(01:21):
is just how much the nickel market has actually changed
in recent years. Like I sort of heard some rumblings
of it, but I read something recently that really crystallized
a lot of what's been happening in that market, and
it is phenomenal.
Speaker 2 (01:38):
I have to say, I have not given any thought
about how much the nickel market has changed, in part
because I never at and you point hit some conception
of what the nickel market was in the first place.
To your way ahead of.
Speaker 1 (01:50):
Me on this the one we're not thinking about the
nickel market on a like at least weekly basis.
Speaker 3 (01:54):
No.
Speaker 2 (01:55):
I know like two three things maybe about nickel, which
is that a lot of it's from Indonesia. I believe
it has some role in batteries or green energy, and
so it's kind of an important commodity. What's the third one, Oh,
it's also Indonesia. Could Indonesia move further downstream in the
process so that it's not just exporting the raw nickel
(02:16):
but also exporting some of the actual like or doing
some of.
Speaker 1 (02:19):
That pretty sophisticated factory. Those about the nickel market.
Speaker 2 (02:23):
These are the three facts I'm aware of about nickel.
But beyond that, nun like, I could definitely not tell
you the number two producing nickel country.
Speaker 1 (02:30):
Okay, well, I have a bunch of I definitely.
Speaker 2 (02:31):
Don't know why nichol is important in batteries either, so
maybe we'll learn that.
Speaker 1 (02:34):
Oh that's a good question. Well, I have a bunch
of interesting stats that I think will sort of hit
home stuff that has happened recently. But you mentioned the
role of Indonesia in this market, and this is something
that's relatively new. So I think they became the world's
top supplier of nickel just in twenty nineteen they overtook
I think it was the Philippines and they now supply
(02:57):
more than fifty five percent of the world's nickel. So
just insane dominance of that market. And in addition to
that dominance in terms of market share, there's also lots
of geopolitical intrigue with China. China, by the way, is
about to become a net refined nickel exporter, and I think,
(03:18):
like just a few years ago it imports, so not exports.
It's imports accounted for like fourteen percent of global supply.
So it's gone from being like a net importer potentially
to a net exporter in just a few years. Crazy, right,
So these are crazy stats, and I feel like we
really need to dig into what has happened here. Because
(03:40):
there are all these sort of thematic, odd lots ideas
embedded in the nickel market. So one is just the
idea of structural long term demand for battery related materials
that will be important in the clean energy transition. I
think nickel is used in hydrogen production. Two, I'm not sure.
But in addition to that, you also have the difficulty
(04:03):
of actually building out sustainable business models for getting these
strategically important minerals that we need for the transition. And
we've seen Indonesia there are a lot of accusations that
it's been flooding the market with cheap and low grade nickel,
and so that makes it harder for everyone else, like
Anglo American to make money on this specificlar nickel. We'll
(04:25):
get into that, we'll talk about all the different types
of nickel. So anyway, I just think it's such an
interesting story, and it's one that's sort of flown under
the radar, at least for me recently, and so I
am very pleased to say that we do, in fact
have the perfect guests to discuss this. We're going to
be speaking with Michael Vidmer. He is the Bank of
America head of Metals Research and it was his report
(04:48):
that really put this on my radar, and he just
laid out some of the numbers that I cited to
you a couple months ago, and I'm so glad we
could get him on the show to further discuss this. So, Michael,
thank you so much for coming on our box.
Speaker 3 (05:01):
Thank you very much for having me.
Speaker 1 (05:02):
Should we start with the basic question the Joe already
sort of alluded to, what is What is nickel? Because
it's not a singular commodity in some respects, It's sort
of like oil. There are all these different grades and
production uses for it. So what exactly when we say
nickel or the nickel market, what are we talking about?
Speaker 3 (05:22):
Yeah, so nickel is an element I think that's the
first thing I would say. It comes in elementary form
out of the Earth. But what normally happens is that
consumers use a nickel in processed form. So you have
got the refined nickel that you can use, for instance,
in your in your buckles, in your belt buckles to
make them nice and shiny. You can then use it
(05:43):
or another form of nickeline former. It's more like a
chemical in ev batteries. And then there's still another type
of nickel is more called nickel pick or ferro nickel
that you can then use in a stainless steel mil
so it comes in very different forms. What all of
those have in common is they have some form of
nickel in them.
Speaker 2 (06:02):
The batteries is probably the one. You know, belt buckles
have been around for a while. Stainless steel has been
around for a while. Obviously a lot of interest, particularly
now strategically with the energy transition, etcetera, related to batteries.
What is the role of nickel in batteries and how
crucial is it as one of the you know, we
talk about copper, we talk about lithium. How important is nickel?
Speaker 3 (06:23):
So we can we can break down the battery sector.
When you're looking at China and when you're looking at
the world outside China. It's different type of EV batteries
that common effactors can use. In China, the EV manufacturers
have gone down the route of using what is called
a lithium r and phosphate battery. It used to be
a very simple chemistry, didn't have the same kind of
(06:45):
energy density, didn't give you the same kind of driving
ranges that you would get these other types of batteries,
but it was cheap, and I think that's one reason
why the Chinese evs are not as expensive as the
VEST and evs. The world outside China has relied on
a different type of EV battery chemistry, and these batteries
contain nickel. They give you more energy density, they give
(07:08):
you a higher driving range as well. And when you're
then breaking down the battery, you have got three elements effectively.
So you have got an anode and a cathode and
between those that's where the electricity flows. And it's the
cuthode specifically where you then have the nickel in them.
Speaker 1 (07:25):
So where does nicol actually come from? So we mentioned
Indonesia already, I think I mentioned the Philippines. But who
are the big players in this market? And how is
it actually extracted from? Presumably the ground?
Speaker 3 (07:36):
Again, very different, very different methods of extracting the nickel. Again,
if you're breaking it down a little bit, you tend
to have two types of deposits out there. The wond
deposit is more in the cola regions, and then you've
got another set of deposits that's more in the warmer
and wetter regions that you have got a lot of
oxidized locks of oxidized or some weather ors a little
(07:58):
bit more difficult to treat the former. So the nickel
ores that are in the colder regions like Russia, for instance,
are relatively easy to extract. You take them all over
the ground, send them through a smellter, refine them, and boom,
you have got your your refined nickel. The nickel ores
that are in the warmer and wetter regions, because they're
oxidized and weathered, they are a little bit more difficult
(08:18):
to process. So the different technologies that you can use
as one technology again where you're using fire refining, and
then there's another technology where you are using sulfuric acid
effectively to lead the nickel out of the out of
the oars. When you're looking at the biggest players in
the space, it has actually changed a lot. And you
(08:39):
mentioned it already in the at the outset. Historically, when
you're looking at it, you had Russia as a big
nickel producer, Australia as a big nickel producer, the Philippines
were in the fold as well, Canada to some extent too.
But what's happened recently is as the energy transition started
to take off market participants. We're really focused on increasing
(09:02):
nickel supply quickly. And there's one country that's just summed
at the industry in that country is Indonesia. It has
the weather type of war, but it has that in abundance,
so it's very easy to actually take it out of
the ground. And the Chinese went into Indonesia innovative also
in the production technologies and managed to take the nickel
(09:23):
out that they then needed to drive the EVE battery industry.
Speaker 2 (09:27):
So I definitely want to get into Indonesia what they've
done to sort of rapidly expand their domestic nickel industry
so fast. But just one more question before we get
to some of these policy questions and supply. When looking
at a total demand global demand for nickel, how much
is batteries and how much has the rise of the
(09:49):
so called energy transition, how much has that changed demand
curves relative to say where we were ten years ago,
Like how important is it as a buyer of nickel?
Speaker 3 (09:58):
Name massive massively has changed massively? Ten years ago, the
battery sector had literally no share in nickel demand. When
you're looking at it now, literally all of the demand growths, Like.
Speaker 2 (10:10):
How many tons of nicol do we produce? And how
many tons would we be producing every year if it
weren't for that battery.
Speaker 3 (10:17):
So look a few years back, the nickel market was
around two million tons. By twenty thirty, it's potentially twice
as much, and literally all of the demand rules is
then coming through from the EBI battery side. Okay.
Speaker 1 (10:45):
So going back to Indonesia, so it seems like they
made a strategic decision that this was an industry that
they wanted to build out. And I think it started
under the former president of Indonesia whose name I am
sure I'm going to mispronounce, but Sisilo Bambang you doing?
Is that right?
Speaker 3 (11:05):
Yes? Okay?
Speaker 1 (11:06):
But it's been continued under Djokovidodo. Why did they decide
this was an area of strategic or financial interest?
Speaker 3 (11:16):
So it was the Indonesians which opened up the country,
but ultimately was actually China which drove that development. And
I think you see that a lot in the public
discussion at the moment. I think the tariffs that President Biden,
for instance, imposed on Chinese EV's, I think there is
this undercurrent or the concern that the Chinese government very
(11:38):
strategically over the past twenty years built its EV industry.
And when we're talking EV industry, it's not just the
EV side of things that the Chinese government has focused on.
It's literally the entire supply chain. So they looked at initially, well,
let's build some cars as a combustion engine, but then
they read the China realized it's actually hard because the
US and Europe actually have quite strong industries. And then
(12:00):
they looked, well, if it's hard to compete in cars
with a combustion engine, why don't we do evs. And
that's exactly what they did. And then they set up
a long term strategic industry policy and looked at what
they need to accomplish becoming the dominant producer of evs.
And one of the things that the Chinese government realized
(12:21):
very early on is if you have a strong demand
growth for evs, you also need the roma tiers and
particularly the battery romatires. Without batteries, TVs don't go very fond.
So the Chinese government looked at where some of those
battery romatials are. They did it in lithium, another battery
romat heal, they lived in cobalt, and they did also
(12:43):
in nickel, and in twenty thirteen, the two presidents of
China and Indonesia effectively set together and the discussion pretty
much went like that. The Chinese said, look, we need
the nickel. The Innetian said, well, we have the nickel.
The Chinese said, well, can be invested, and then he said, yeah,
do Let's develop that industry together. And so the Indonesian
government then, together with the Chinese, set up industrial parks,
(13:04):
and through that industrial park, supported by Chinese money, the
nickel industry and then developed very very quickly. It's remarkable
at the pace with which Indonesia and China in conjunction
have been building that industry.
Speaker 2 (13:19):
Let's talk a little bit about how fast that happened.
So I think Tracy, did you say it was like
twenty nineteen. Even it was the Indonesia wasn't that big
of a player.
Speaker 1 (13:27):
I'm citing Michael here, but in twenty nineteen it became
the biggest producer of nicolas.
Speaker 2 (13:33):
And now it's overwhelmingly Yeah, what were the nature of
those early relationships, What did China get, what did they
have to offer from a technological transfer? And then what
is Indonesia ge I guess in terms of royalties and jobs,
like how what was the economics of those So but.
Speaker 3 (13:48):
In Dntia realized Nidia always was an exporter of nickel wars,
which is unprocessed stuff. You basically put it on the ship,
send it off the Chinese to China. The Chinese then
processed it. And then the Indonesian government realized at some
stage that it's actually another a lot of value added
in that. And they also saw that demand potentially increases
very strongly, and so they wanted to build more of
(14:10):
a value added downstream industry. Indonesia wanted to build a
downstream processing industry invited and then was looking at how
to actually accomplish that. So in the first instance, what
they did is they stopped the exports of unprocessed nickel oars.
So in twenty fourteen you could no longer ship unprocessed
was In that year, Indonesia had a global nickel market
(14:33):
share of less than ten percent, like five or six percent,
very low. And then I think various countries and operators
were looking at the Indonesians or and Indonesian was and
I set before the Indonesian oars are weathered, was oxidized,
was very difficult to process and the Chinese then went
into Indonesia. It's one comedy in particular who then looked
(14:56):
at innovative productive production technologies and started experimenting with different
methods of extracting the nickel from the nickel oars and
were actually quite successful and once they had distemplate in place,
the nickel industry then expanded quite quickly.
Speaker 1 (15:12):
Has anyone else been able to replicate what that Chinese
processing technology that you just mentioned, Like, is this something
that other people are doing that has also increased supply
elsewhere in the world aside from Indonesia or is it
sort of a China Indonesia exclusive thing.
Speaker 3 (15:29):
So there's two two technologies. One called pressure as a
leading that has been tried before, but literally when you're
looking at all the projects that have been brought online
in Australia over the lifetime of those projects, those projects
feel not pay for the initial investment because it's just
a very difficult technology. The Chinese have been very good
in bringing that online. The other technology, which is more paramatology,
which is fire smelting and refining, that is also a
(15:52):
dominated by the Chinese, so they already had a very
strong wall.
Speaker 2 (15:56):
It used to be clear Australia has basically tried to
do the exact thing thing and internally have not been
able to do it economically.
Speaker 3 (16:03):
Yeah, So there was a discussion it was about ten
fifteen years ago on the type of ores that are
available in Indonesia, and I think the undertone always was, look,
the oars are there, but they're just very difficult to process,
and therefore it's going to it might be hard to
see a very big production increases coming through. And that
was through up to the point where the Chinese actually
then went into Indonesia and started developing those assets.
Speaker 1 (16:26):
So talk to us more about the sort of virtuous
cycle of the supply chain that this is creating. So
China now has access to this cheap and abundant nickel
that feeds into their ev industry. How crucial has that
nickel been in sort of building out the electric car
(16:48):
business in China.
Speaker 3 (16:49):
I think nickel on its own probably wouldn't have made
much of a difference, but I think where China was
very strategic in making sure that all of the raw
materiers that I needed it are available. So it's not
just the nicer side, it is the lithium side as well.
It is the cobal side as well. That's everything that
goes into the cassos. And when you look at the
(17:10):
unknote the graphite side of things, again China is dominating.
So when you're looking at all of those critical raw materials,
a lot of that is being dominated by China. And look,
you can take a slightly different view on that. Take
the last twenty years during the period of globalization. I
bet around twenty ten twenty eleven, the guests that you
would have heard that would have had here, there was
(17:30):
a lot of talk about I don't know, Netflix, the
services industry and the cool stuff basically now, but no
one realized that actually, you can't run an economy without
having the basic the basic Roman here. So the vest
effectively created a vacuum in those supply chains that China
effectively filled. And that's the issue that that governments now
(17:51):
have to grapple with.
Speaker 2 (17:53):
How much of the Chinese edge when it comes to
refining or processing or I guess even acquire raw commodities.
How much of the edge is just a sheer scale question.
There is a gigantic market in China period. There are
a lot of workers in China period, and so setting
(18:13):
even setting aside whether different groups of engineers and scientists
could replicate these processes on paper. How much is the
just the pure scale edge part of the story here.
Speaker 3 (18:24):
I mean, having a big domestic market certainly helps, but
again what also helps is having a strategic industrial policy
to actually being able to capitalize on that on that
domestic market. And it's I think the conjunction of those
two that wrote about that dominance in the supply to
a Now the problem that we're having increasingly is and
(18:47):
this always happens in China. We had it in steel,
and we had it in aluminimum. When the Chinese government starts
developing industries. There's actually inherently a lot of competition also
within China, but you always get over investment, you have
got overcome. So take the last study from the European Union,
firms and the European Union estimates that last year the
Chinese could have produced twice as many cars than they
(19:09):
did through the over capacities that they've had. And so
what you're seeing now is that some of those over
capacities is or there's a threat that some of that
overcapacity is actually now being exploded to the Western markets.
And again that takes us back to the whole discussion
about terrorists and trade protectionism, But it is that entire
approach I think that we've seen the last twenty fifty
years that that brought kind of those supply chains together.
Speaker 1 (19:32):
Okay, speaking of over capacity, I mentioned in the intro
that there have been these accusations of Indonesia essentially flooding
the market with low grade and low price nickel. What
impact has the dominance of Indonesia on the nickel market
actually had on other businesses?
Speaker 3 (19:50):
So, if I put it very simply, I think for
China it's almost always about quantity, not about value, about volume,
but not about value. And so coming back to preventing
bottlenecks through the supply chain, when you're looking at the
industrial policy, I think what China wants to prevent is
(20:10):
constraints and bottlenecks and therefore higher prices that would effectively
make it difficult for the strategic industry likely V manufacturers
to produce those evs. And so what we see in
Indonesia at the moment is a lot of discussions about
where the production costs are Indonesia, what is a marginal cost?
Because ultimately, if you're prioritizing value volume over value, then
(20:36):
you're producing at costs. Now, the problem for the producers
outside China is if that is the name of the game,
there is not a lot of fat in producing nickel,
and that's why we've seen the Western producers like BHP
and Anglo actually taking a relatively bare review on their
nickel assets. PHP actually is probably the one data what
(21:00):
you mentioned Ungler before, but BHP is the one that
would highlight potentially even more so. They have one operation
in Australia called Nickel West. It's a really significant side
big side actually, and a few years back we thought
that that could actually be the supplier of choice to
the Western or to the ev industry. But that's actually
one of the one of the assets that BHP doesn't
(21:20):
assign a lot of value to anymore these things.
Speaker 2 (21:22):
So prices have just come down so much that this
big project in Australia just can't make much more.
Speaker 3 (21:28):
Yeah, it's effective that.
Speaker 2 (21:45):
I want to go back to something you said in
the beginning about the two different types of chemistries. So
on some basic level, the nickel based batteries are not
as efficient as the sort of the chemistry that's in
the West, but the Chinese battery are like the best
in the world.
Speaker 3 (22:01):
Right. Yeah, So again this is when you would have
to go back, because it's the second base evolving is
evolving a lot at the moment. So initially, I think
when we started talking about the ev industry, the idea was,
and that's seven eight years ago, that nickel based batteries
are the battery of choice in China and potentially outside China.
(22:21):
The Chinese always had that lithium iron phosphate battery which
doesn't contain any nickel, but initially because it's a much
lower energy density, was never thought to be kind of
the lap choice. But there was a lot of again
innovation in that space, and those batteries have become much
much better. They are folded differently, they are put together differently,
so the energy density has actually increased as well. And
(22:44):
so now you almost have this second lissim and phosphate
market that is becoming another mainstay of the industry.
Speaker 2 (22:50):
So it is it just to understand this better in
theory or the you know, in the sort of the
chemistry lab so to speak. The nickel based bader batteries
due to the lower energy density.
Speaker 3 (23:03):
Higher energy, higher and higher energy density.
Speaker 2 (23:05):
The nickel base batteries of higher and higher enginety.
Speaker 3 (23:07):
They're the better, but they're normally the better. But the
least on phosphate batteries that the Chinese produced historically had
the lower energy density. And that's fight. Oh, confused by
the idea always was value. You need to have those
nickel based batteries if you wanted to have a thousand
kilometera driving range in the in the EV side of things.
Speaker 2 (23:24):
And so in the US we have nickel based batteries
in the Yeah, okay, sorry, thank you for clarifying.
Speaker 1 (23:28):
Well, okay, on this note, I think the US and
Europe would agree that evs are a strategically important thing
that we want to have more of if we're serious
about the clean energy transition. And yet there seems to
be this tension where mining a component or a material
that is actually quite important for these things, viz. The
(23:51):
batteries is just not that profitable in the current situation.
So what do they do about it? How do we
resolve that attention.
Speaker 3 (24:01):
That's the focus at the moment, Yes, how do you
resolve that? I think tariffs forez better words, I think
that's one thing that is clearly being discussed at the moment.
So if you don't allow any Chinese evs onto the
US market, which is seemingly the direction we want to take,
(24:21):
then by definition you're giving your domestic car manufacturers a
bit of breathing space to develop your own industry. The
DOE is also looking at different ways to boost nith
nickel supply, so there's a lot of focus, for instance,
on the recycling side of things. There's also a lot
(24:42):
of focus now on assets outside the Chinese supply chain.
I think there were envoys from the US government in
Indonesia to discuss a limited free trade agreement with Indonesia too,
So there's a lot of movement, but it's not impossible,
and I think there will be solutions to the shortfall
of critical materials that we do face to some extent
(25:03):
on the way to a net zero But both Yes
and Europe do have a fair bit of catching up
to do in the coming years.
Speaker 2 (25:11):
Right now, so obviously with the Inflation Reduction Act, but
also the rise of Tesla and others. You know, there's
more of a domestic battery industry. In fact, I think
we talked to the CEO of one of the companies
several months no VANX. We're US based battery companies, startups
or various stages in development. Where are we right now
(25:33):
sourcing most of our sort of critical components for them,
or critical minerals or critical elements for batteries.
Speaker 3 (25:39):
Look, there is an existing NICO market. Actually, yeah, there's
an existing NICO market.
Speaker 2 (25:43):
Actually, but where do we get where do we import
it from? What are the big export or exporters to
the US.
Speaker 3 (25:49):
So when you're looking at the key NICA producing countries
outside Indonesia and China, Brazil, that's Canada, Australia as well,
the letter two actually have got a green and with
US in place, I think it's the question really comes
more pressing when you're looking five, six, seven, eight years out.
(26:09):
The less cars of the combustion engine you're putting on
the road, the more pressing it then becomes to actually
make sure that you have got the raw materials available.
And again taking a step back, what we're seeing actually
at the moment is in the Western world that the evs,
the pure battery electric vehicles are actually downgraded a little bit,
so we actually have to take down our penetration rates.
(26:31):
What we're seeing more is kind of that intermediate solution
where you're putting hybrid or plug in hybrid electric vehicles
onto the road, and for those, for instance, you do
need less of the critical raw materials, so that buys
you effectively time potentially to build up more of a
supply chain. That building up a supply chain, I think
is right now the key focus that we have in
both US and in Europe.
Speaker 1 (26:53):
So just broadening out the metals discussion. You are, of
course the head of metals research for BOAS, so we
should ask you about some other things going on as well.
But it seems to me like one of the major
stories in this market has to be volatility recently, and
perhaps copper is the best example of that. So we
(27:14):
had Jeff Curry on a few weeks ago talking about
how long copper was the trade of a lifetime, and
since then I think it's down what like ten percent.
Speaker 2 (27:23):
Something like that.
Speaker 1 (27:24):
I would say like a few weeks is probably not
the timescale he was thinking of in terms of trade
of a lifetime. But there's definitely been a lot of volatility,
and it feels like there's a weird dynamic going on
where like part of the thing causing volatility is the
restriction in is the type physical market basically, so we're
(27:45):
seeing these big swings up and down, partly because we
need more of this stuff. What's going on there.
Speaker 3 (27:53):
So Coppa is really really different to Nika. On Nica,
we had the reserves and the resources, the deposits in Indonesia.
On copper, you don't. It's a very mature market. Some
of the best assets or mines that we actually have
in the world have been running for decades and it's
(28:13):
very hard to find really good new assets. In fact,
when you're looking at some of the projects that are
currently in the pipeline, just to highlight the difficulty and
bring those on lines, some of those weird discovered almost
thirty years ago, so it took you almost two generations
to bring them to the market, and so we now
(28:34):
facing an almost empty project pipeline. But doesn't help either
on the copper side, is that during the past ten years,
in the past decade, we had a bear market. Effectively,
I bet you in twenty fifteen I would not have
been sitting here. It was because there was not a
lot of interest in the metals in the metal site.
And so think about it, shortly after that or doing that.
(28:55):
During this ten years, Glenco almost went bankrupt. How did
the miners react to that cut? Kapex and their equation
there is very simple. You don't spend, you don't produce
further down the line, and that's not even something that
the Chinese government through a strategy industrial policy can resolve.
If you don't have the assets, you just cannot produce.
(29:15):
And so you're now effectively in a situation their copper
supply growth is really tailing off. It's coming down, but
structurally you have got much higher copper de mincros. Over
the last two decades, potential copper demandross was maybe two
percent out until twenty fifty, we can justify annual copper
(29:36):
demand rows of four percent, So twice twice is high,
and you don't have the supply grows, and that's I
think where then the volatility then effectively comes in because
if you don't have the safety buffer, so the inventories
that can help even out shortfalls here and there, that's
what ultimately creates grades at volatility. The one point I
would make about some of the calls that we've seen
(29:58):
in the copper market, like I've seen fifteen thousand I've
seen forty thousand dollars. That's all fine, I think if
it's a long term you, but it also is a
little bit of a disservice to the industry. To your point,
sim I'll give you a very simple if it's a
very simple example of say over the last two to
three weeks, for instance, so we've had it's more on
(30:19):
the option space, but we've had an explosion in interest
on the call side, or calls got really really expensive.
But then we also saw how the buying started to
subside a little bit. And so what has been a
very popular position recently in the last few days is
actually selling copper upside through those calls. Now, if you
(30:42):
believe in copper hitting forty thousand dollars per ton, immanutely
you're not taking that position. So I think with all
of those bullish calls, it is important that we write
size them and that we cavey at them, because if
you're just saying, oh, we're bullish copper and it's going
to the moon, you're missing an awful lot of profit
along the way. And the point that you just make, yes,
it looks good copper for a while, but right now
(31:04):
we're digesting that gains. It's those periods I think where
you see this location to the market that you actually
want to trade. So I think we need to take
a little bit of a more nuanced view on the
market then just saying oh, look, coppa is going through
the moment.
Speaker 2 (31:18):
I think the tricky thing with trying to understand where
copper is going is just the sort of sheer physical
reality of there's a lot of demand. As you said,
the demand growth is going to basically effectively double, and
there's this sort of empty project pipeline, and so you're like, well, yeah,
of course copper has got to go to the moon.
(31:39):
How does that get resolved? Is there a price which
new projects start to like, all right, we got to
start putting shovels on the ground, or to your point,
is it a matter of we just need less price
volatility rather than a specific price signal itself, and then
we can start to figure out So it sounds like
something has to resolve.
Speaker 3 (31:56):
That it would be good if you had both, But
the problem is I think more than rather than having
less price volatilely we're going to get more price volatility
going forward. The price I think that that we're hearing
a lot from the miners that we need to justify
investment in new minds is minimum twelve thousand dollars per ton,
but then Glencore is talking more towards like thirteen fourteen
(32:16):
thousand dollars per ton. Then just to put a reference
to that, right now, we're trading at ten thousand dollars
per ton, and then the whole problem becomes, well, if
the miners really eight for prices, hit twelve or thirteen
or fourteen dollars fourteen thousand dollars per ton and then
start investing, you have a lead time, so you're not
going to resolve those shortfalls imminently. And so did The
(32:37):
question on what resolves the potential shortfalls on the copper
market is a very tricky one. We've seen during the
doing the energy crisis around the Ukraine War. What happened,
so we had in the run up to the Ukraine War,
we had a very strong copper price rally and that
made many renewable projects loss making basically, so we've actually
(32:57):
seen how the deployment of green energy slowed down meaningfully,
and that's what I would call demand destruction ultimately, So
and we said we've been saying that for a while.
With the current technology that we have, with the current
investment that we see in the Mind Project pipeline, it's
very very hard. It's almost impossible to get to net
(33:17):
zero by twenty by twenty fifty. So something has to give,
I think ultimately, and you see that in the New
Slow almost daily now. As I think when we put
the initial estimates out, we basically said that it was
a few years back that limiting global warming to one
point five degrees celsius is going to be very hard.
The best you can do is potentially one point eight
(33:38):
one point nine degrees, and look like it very much.
Speaker 2 (33:40):
Lead point three is a big and that copper is
a big part of that story.
Speaker 1 (33:44):
Copper.
Speaker 3 (33:44):
You need copper in virtually every technology when you're looking
at a kind of what the energy transition means. So
the decarbonization story, we're effectively talking about electrifying the global economy.
So we need power generation, transmission, distribution, and then all consumption.
All of that is in the elect in the form
of electricity, and you can't do those technologies without copper.
(34:06):
Copper is effectively ground zero of the energy transition.
Speaker 1 (34:09):
Yes, so I mentioned in the intro that the Indonesian
nickel story is something that kind of flew under the
radar for me. Copper, not so much. We've done a
few episodes. You see the headlines every day now, as
you mentioned, But what other things should we be aware
of in the metals market right now? Like what could
we possibly be missing or what do you get the
(34:30):
sense that other people are missing?
Speaker 2 (34:31):
You better give us a good answer, especially after having
especially after having shamed us for not talking about So okay,
we better, you better give us something.
Speaker 3 (34:39):
An you're in good company. Then let me let me
tell you that I think that was that that was
a global theme. But I think what what really needs
to happen. I think we can go into the policice
policy sphere, but we can also go into the end
of the commodity fundamental sphere of fences. When you're looking
at E S T for instance, E s T is
very important, clearly, I think the energy transition is e
(35:00):
actively all about EESG. But there is a little bit
of a market failure there as well at the moment,
because we just discuss it. You can't have the energy
transition without actually taking the metals out of the ground.
But from an ESG perspective, it is still hard for
a lot of investors to actually invest in mining assets.
So you want to have the energy transition, but you
(35:21):
don't want to have the mining. Well, something has to
give give here, So that's that discussion is actually evolving.
I think the UPO, the US in the U actually
putting more effort into developing mining assets is certainly helping
helping that discussion. That's one thing. The other thing that
I would say is the energy transition clearly is a
game change for the metals. In my view. There are
(35:43):
some metters we talked about them at the outset, like
the battery romantials, so lithium, cobalt, innicate that look a
little bit better supplied that might not really quite as much.
But then there are others like copper and aluminum for instance,
that really look much that really look much stronger one
a fundamental perspective, so you do get actually relative value
there as well. And I think the third point that
(36:04):
I would make is innovation. I think we need to
see or evolution. We need to see different approaches to
making sure that we mitigate the shortfall in those commodities
that are actually under supplied. Recycling scrap that is fin
into something that is becoming likely much more important going
forward as well, and is one of the least transparent
(36:28):
segments of sectors of the metals industry at the moment.
Speaker 1 (36:30):
Yeah, isn't it one of those industries where people still
like have to call up the junk yards and ask
for the latest pricing.
Speaker 3 (36:38):
Yeah, I can, I can. I should tell you a
funny story about a funny story about there was a
few years back we went to visit a scrap yard
and there was a whole pile of metal lying somewhere
in the corner, and so we asked the master guy
in the scraplut what that is, and he said, well,
it's a dowry for my daughter. I'm saving that for
my daughter. So it is a very arcane industry to
(36:58):
some extent, still a lot of smaller and mid sized
companies operating in there, and certainly scope to evoive the
way the industry the industry works. I think the other
thing I think that that would certainly help there beyond
just that is and be seeing that increasingly as well,
is that governments focus really on recycling rates. How do
you make sure that you're actually getting recycling rates up.
(37:19):
Do you have designed products differently to make it easier
to recycle them. Do you have to compel manufacturers to
actually take spend products back and recycle them. So there's
a whole lot of development on that front as well.
I think that would certainly have the recycling space too.
Speaker 2 (37:34):
I just have one more question, and you mentioned the
sort of I don't know, market failure, maybe market harmonization problem,
in which in order to have the energy transition you
actually have to invest in a lot of dirty businesses.
And we've done some episodes in the past, or at
least one that I recall about the amount of water
consumption of copper minds in Chile and some of the
(37:56):
backlash there is there a growing issue. And I'm curious
also in Indonesia and the local environmental impacts of all
this nickel production. Is there any sort of backlash happening
there in the vicinity of these and like what sort
of the general state of play on that stuff.
Speaker 3 (38:13):
Yeah, I think that's certainly when when I said before
that from an easy standpoint, it's still hard to understand
investing in mining assets. I think mining historically has not
been the cleanest of our industries. But I think the
miners are trying are trying very hard to mitigate that.
So when you're looking at water being used in the mines,
I think there's an effort, for instance, to actually have
more of a run around system, so the water that
(38:34):
is once in the mind to produce a copper, you're
effectively cleaning up and then and then putting back into
the industry. Some operators that are better than others. What
we're seeing increasingly is that the better the operators are,
the better the better the miners are in engaging this
local communities, on the environment, on social on the social compound,
(38:58):
the more likely it is to get an interrupted supply.
So I think the industry over the last ten to
fifteen years has certainly gone a little bit through a
learning curve and has been trying to become a better
corporate citizen.
Speaker 1 (39:10):
All Right, Michael Vidmer, thank you so much for coming
on odd lots and making sense of what's been going
on in the nickel market. Five cents exactly. No, thank
you so much. That was so much fun.
Speaker 3 (39:22):
Thank you very much, Joe.
Speaker 1 (39:36):
I've really enjoyed that conversation. That was such anclear explanation
of what's been going on.
Speaker 2 (39:41):
It was so fun. I love Michael.
Speaker 3 (39:42):
We have to have a Yeah.
Speaker 2 (39:43):
I could have talked to him for like four hours.
Speaker 3 (39:45):
Yeah.
Speaker 1 (39:46):
I thought his point about the market failure of ESG
was a good one and probably one that is becoming
more common now than it was a few years ago.
But I think one of the problems with ESG in
its early the conceptualization is that no one ever really
figured out like do you want to engage with the
(40:06):
dirty industries and make them better or do you want
to stay away from them completely and thereby cut off
their access to financing and make them go away in
their totality. And I think, you know, a few years
on from all of this, we're kind of seeing the
result and the idea that you can get this tension
where you need to actually engage in a dirty industry
(40:29):
in order to promote the clean energy transition, and so
stranding that particular asset is problematic in some ways, let's
put it that way.
Speaker 2 (40:38):
Yeah, I mean it's always seemed to me like this
term ESG means different things to different people. Some people
just don't want to invest in energy in industries that
they perceive as problematic. In some point. Others from a
more policy oriented standpoint, have these set of goals. Sometimes
those goals and the interests of investors are aligned, well,
(41:00):
sometimes not so much. I'm just astounded how fast I
guess I, like I said in the beginning, one of
the few things I knew about the nickel market.
Speaker 1 (41:09):
I love that you have three factoids about the nickel market.
And one of them is actually a very sophisticated point
about the episode that we just had.
Speaker 2 (41:17):
Well, I remember like twenty twenty one, twenty twenty two,
you know, like there was all those like polychrisis stuff
and like Adam Two's and all those guys, and like
one of them at some I probably clicked on an
article about like Indonesia aiming to capture more downstream value,
and I like, choke, you know, stroke my chin as.
That's very smart. Just really capture more of the value
(41:39):
coming out of the ground.
Speaker 1 (41:40):
And so like just one of those things that were
at my next cocktail party, all talking about Indonesia's attempts
to capture the downsta.
Speaker 2 (41:48):
Indonesian nickel markets at are real crossroads, and now they're
trying to capture more of the value add rather than
just below margin export But then the other thing is
I just did not realize how recent Indonesia's rise was
at all. If I would have guessed so Indonesia's always
made the big nickel exporter and now they're shifting, I
did not realize that this is basically a story of
(42:09):
the last decade.
Speaker 1 (42:10):
It is phenomenal. The other thing that sort of hit
home in that discussion with Michael just then was the
technology aspect of it, by which I don't mean EVS,
but I mean like the actual processing technology of nickel
and the fact that that's been driving a lot of
the increase in production that China like kind of cracked
this new model for doing it and then just invested
(42:32):
a ton in it.
Speaker 2 (42:33):
Well, you know, one of the conversations we did a
couple months ago or I guess a month and a
half ago or whatever, we did that trip to North
Carolina and one of the companies that we talked to
is part of our trip with Tom Bark and that company, Unify,
And like one point that has been very lodged in
my brain was just the CEO of Unified talking about
(42:54):
the huge edge that accrues to Chinese producers of things
like advanced textiles due to the sheer scale of the
domestic petrochemical industry that exists in China. And I realize
that's not that's petrochemicals, not metals, but it does feel
like the sheer scale of refining capacity for petrochemicals, for
(43:16):
critical minerals, et cetera in China is just a huge
part of the story here. And whoever is access to
that cheaper supply is obviously in a good position.
Speaker 1 (43:24):
Well, it certainly seems to be a big advantage in
something like ev manufacturing, that's for sure. All right, shall
we leave it there.
Speaker 2 (43:31):
Let's leave it there.
Speaker 1 (43:32):
This has been another episode of the Odlots podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (43:38):
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our producers Kerman Rodriguez at Carman Arman dash Ol
Bennett at Dashbot and Keilbrooks at Keilbrooks. And thank you
to our producer Moses Ondam. From our Oddlogs content, go
to bloomberg dot com slash odd Lots, where we have transcripts,
a blog, and a weekly newsletter and you can chat
about all of these topics twenty four to seven in
(43:59):
our discord with fellow listeners discord dot gg slash outline.
Speaker 1 (44:04):
And if you enjoy all thoughts, If you like it
when we mine the latest developments in the nickel market,
then please leave us a positive review on your favorite
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(44:27):
the Bloomberg channel on Apple Podcasts and follow the directions there.
Thanks for listening.
Hello, and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 2 (00:24):
And I'm Joe. Why isn'tal Joe?
Speaker 1 (00:26):
I have a joke for you, A very special joke.
Speaker 2 (00:29):
Go on.
Speaker 1 (00:30):
Why did Anglo American write down it's nickel.
Speaker 2 (00:32):
Business because it was only worth five cents?
Speaker 1 (00:36):
That's so good. That's actually okay. My line was because
it was a few cents short of a viable return.
But yeah, same thing. That's really good.
Speaker 2 (00:45):
But you know what the thing is is my daughter
has gotten really into reading me jokes, and I like,
she has all these joke books. Like my brain is
you can anticipate and like see where these all are going?
Speaker 3 (00:56):
All right?
Speaker 1 (00:57):
Well, on a serious note, Anglo American rejected that bid
from BHP Bulletin, which is something that came up in
our conversation with Jeff Curry recently, and as a result
of that, it is now undertaking this formal process of
selling off a bunch of assets and exploring options for
its nickel operations. And one thing that I hadn't realized
(01:21):
is just how much the nickel market has actually changed
in recent years. Like I sort of heard some rumblings
of it, but I read something recently that really crystallized
a lot of what's been happening in that market, and
it is phenomenal.
Speaker 2 (01:38):
I have to say, I have not given any thought
about how much the nickel market has changed, in part
because I never at and you point hit some conception
of what the nickel market was in the first place.
To your way ahead of.
Speaker 1 (01:50):
Me on this the one we're not thinking about the
nickel market on a like at least weekly basis.
Speaker 3 (01:54):
No.
Speaker 2 (01:55):
I know like two three things maybe about nickel, which
is that a lot of it's from Indonesia. I believe
it has some role in batteries or green energy, and
so it's kind of an important commodity. What's the third one, Oh,
it's also Indonesia. Could Indonesia move further downstream in the
process so that it's not just exporting the raw nickel
(02:16):
but also exporting some of the actual like or doing
some of.
Speaker 1 (02:19):
That pretty sophisticated factory. Those about the nickel market.
Speaker 2 (02:23):
These are the three facts I'm aware of about nickel.
But beyond that, nun like, I could definitely not tell
you the number two producing nickel country.
Speaker 1 (02:30):
Okay, well, I have a bunch of I definitely.
Speaker 2 (02:31):
Don't know why nichol is important in batteries either, so
maybe we'll learn that.
Speaker 1 (02:34):
Oh that's a good question. Well, I have a bunch
of interesting stats that I think will sort of hit
home stuff that has happened recently. But you mentioned the
role of Indonesia in this market, and this is something
that's relatively new. So I think they became the world's
top supplier of nickel just in twenty nineteen they overtook
I think it was the Philippines and they now supply
(02:57):
more than fifty five percent of the world's nickel. So
just insane dominance of that market. And in addition to
that dominance in terms of market share, there's also lots
of geopolitical intrigue with China. China, by the way, is
about to become a net refined nickel exporter, and I think,
(03:18):
like just a few years ago it imports, so not exports.
It's imports accounted for like fourteen percent of global supply.
So it's gone from being like a net importer potentially
to a net exporter in just a few years. Crazy, right,
So these are crazy stats, and I feel like we
really need to dig into what has happened here. Because
(03:40):
there are all these sort of thematic, odd lots ideas
embedded in the nickel market. So one is just the
idea of structural long term demand for battery related materials
that will be important in the clean energy transition. I
think nickel is used in hydrogen production. Two, I'm not sure.
But in addition to that, you also have the difficulty
(04:03):
of actually building out sustainable business models for getting these
strategically important minerals that we need for the transition. And
we've seen Indonesia there are a lot of accusations that
it's been flooding the market with cheap and low grade nickel,
and so that makes it harder for everyone else, like
Anglo American to make money on this specificlar nickel. We'll
(04:25):
get into that, we'll talk about all the different types
of nickel. So anyway, I just think it's such an
interesting story, and it's one that's sort of flown under
the radar, at least for me recently, and so I
am very pleased to say that we do, in fact
have the perfect guests to discuss this. We're going to
be speaking with Michael Vidmer. He is the Bank of
America head of Metals Research and it was his report
(04:48):
that really put this on my radar, and he just
laid out some of the numbers that I cited to
you a couple months ago, and I'm so glad we
could get him on the show to further discuss this. So, Michael,
thank you so much for coming on our box.
Speaker 3 (05:01):
Thank you very much for having me.
Speaker 1 (05:02):
Should we start with the basic question the Joe already
sort of alluded to, what is What is nickel? Because
it's not a singular commodity in some respects, It's sort
of like oil. There are all these different grades and
production uses for it. So what exactly when we say
nickel or the nickel market, what are we talking about?
Speaker 3 (05:22):
Yeah, so nickel is an element I think that's the
first thing I would say. It comes in elementary form
out of the Earth. But what normally happens is that
consumers use a nickel in processed form. So you have
got the refined nickel that you can use, for instance,
in your in your buckles, in your belt buckles to
make them nice and shiny. You can then use it
(05:43):
or another form of nickeline former. It's more like a
chemical in ev batteries. And then there's still another type
of nickel is more called nickel pick or ferro nickel
that you can then use in a stainless steel mil
so it comes in very different forms. What all of
those have in common is they have some form of
nickel in them.
Speaker 2 (06:02):
The batteries is probably the one. You know, belt buckles
have been around for a while. Stainless steel has been
around for a while. Obviously a lot of interest, particularly
now strategically with the energy transition, etcetera, related to batteries.
What is the role of nickel in batteries and how
crucial is it as one of the you know, we
talk about copper, we talk about lithium. How important is nickel?
Speaker 3 (06:23):
So we can we can break down the battery sector.
When you're looking at China and when you're looking at
the world outside China. It's different type of EV batteries
that common effactors can use. In China, the EV manufacturers
have gone down the route of using what is called
a lithium r and phosphate battery. It used to be
a very simple chemistry, didn't have the same kind of
(06:45):
energy density, didn't give you the same kind of driving
ranges that you would get these other types of batteries,
but it was cheap, and I think that's one reason
why the Chinese evs are not as expensive as the
VEST and evs. The world outside China has relied on
a different type of EV battery chemistry, and these batteries
contain nickel. They give you more energy density, they give
(07:08):
you a higher driving range as well. And when you're
then breaking down the battery, you have got three elements effectively.
So you have got an anode and a cathode and
between those that's where the electricity flows. And it's the
cuthode specifically where you then have the nickel in them.
Speaker 1 (07:25):
So where does nicol actually come from? So we mentioned
Indonesia already, I think I mentioned the Philippines. But who
are the big players in this market? And how is
it actually extracted from? Presumably the ground?
Speaker 3 (07:36):
Again, very different, very different methods of extracting the nickel. Again,
if you're breaking it down a little bit, you tend
to have two types of deposits out there. The wond
deposit is more in the cola regions, and then you've
got another set of deposits that's more in the warmer
and wetter regions that you have got a lot of
oxidized locks of oxidized or some weather ors a little
(07:58):
bit more difficult to treat the former. So the nickel
ores that are in the colder regions like Russia, for instance,
are relatively easy to extract. You take them all over
the ground, send them through a smellter, refine them, and boom,
you have got your your refined nickel. The nickel ores
that are in the warmer and wetter regions, because they're
oxidized and weathered, they are a little bit more difficult
(08:18):
to process. So the different technologies that you can use
as one technology again where you're using fire refining, and
then there's another technology where you are using sulfuric acid
effectively to lead the nickel out of the out of
the oars. When you're looking at the biggest players in
the space, it has actually changed a lot. And you
(08:39):
mentioned it already in the at the outset. Historically, when
you're looking at it, you had Russia as a big
nickel producer, Australia as a big nickel producer, the Philippines
were in the fold as well, Canada to some extent too.
But what's happened recently is as the energy transition started
to take off market participants. We're really focused on increasing
(09:02):
nickel supply quickly. And there's one country that's just summed
at the industry in that country is Indonesia. It has
the weather type of war, but it has that in abundance,
so it's very easy to actually take it out of
the ground. And the Chinese went into Indonesia innovative also
in the production technologies and managed to take the nickel
(09:23):
out that they then needed to drive the EVE battery industry.
Speaker 2 (09:27):
So I definitely want to get into Indonesia what they've
done to sort of rapidly expand their domestic nickel industry
so fast. But just one more question before we get
to some of these policy questions and supply. When looking
at a total demand global demand for nickel, how much
is batteries and how much has the rise of the
(09:49):
so called energy transition, how much has that changed demand
curves relative to say where we were ten years ago,
Like how important is it as a buyer of nickel?
Speaker 3 (09:58):
Name massive massively has changed massively? Ten years ago, the
battery sector had literally no share in nickel demand. When
you're looking at it now, literally all of the demand growths, Like.
Speaker 2 (10:10):
How many tons of nicol do we produce? And how
many tons would we be producing every year if it
weren't for that battery.
Speaker 3 (10:17):
So look a few years back, the nickel market was
around two million tons. By twenty thirty, it's potentially twice
as much, and literally all of the demand rules is
then coming through from the EBI battery side. Okay.
Speaker 1 (10:45):
So going back to Indonesia, so it seems like they
made a strategic decision that this was an industry that
they wanted to build out. And I think it started
under the former president of Indonesia whose name I am
sure I'm going to mispronounce, but Sisilo Bambang you doing?
Is that right?
Speaker 3 (11:05):
Yes? Okay?
Speaker 1 (11:06):
But it's been continued under Djokovidodo. Why did they decide
this was an area of strategic or financial interest?
Speaker 3 (11:16):
So it was the Indonesians which opened up the country,
but ultimately was actually China which drove that development. And
I think you see that a lot in the public
discussion at the moment. I think the tariffs that President Biden,
for instance, imposed on Chinese EV's, I think there is
this undercurrent or the concern that the Chinese government very
(11:38):
strategically over the past twenty years built its EV industry.
And when we're talking EV industry, it's not just the
EV side of things that the Chinese government has focused on.
It's literally the entire supply chain. So they looked at initially, well,
let's build some cars as a combustion engine, but then
they read the China realized it's actually hard because the
US and Europe actually have quite strong industries. And then
(12:00):
they looked, well, if it's hard to compete in cars
with a combustion engine, why don't we do evs. And
that's exactly what they did. And then they set up
a long term strategic industry policy and looked at what
they need to accomplish becoming the dominant producer of evs.
And one of the things that the Chinese government realized
(12:21):
very early on is if you have a strong demand
growth for evs, you also need the roma tiers and
particularly the battery romatires. Without batteries, TVs don't go very fond.
So the Chinese government looked at where some of those
battery romatials are. They did it in lithium, another battery
romat heal, they lived in cobalt, and they did also
(12:43):
in nickel, and in twenty thirteen, the two presidents of
China and Indonesia effectively set together and the discussion pretty
much went like that. The Chinese said, look, we need
the nickel. The Innetian said, well, we have the nickel.
The Chinese said, well, can be invested, and then he said, yeah,
do Let's develop that industry together. And so the Indonesian
government then, together with the Chinese, set up industrial parks,
(13:04):
and through that industrial park, supported by Chinese money, the
nickel industry and then developed very very quickly. It's remarkable
at the pace with which Indonesia and China in conjunction
have been building that industry.
Speaker 2 (13:19):
Let's talk a little bit about how fast that happened.
So I think Tracy, did you say it was like
twenty nineteen. Even it was the Indonesia wasn't that big
of a player.
Speaker 1 (13:27):
I'm citing Michael here, but in twenty nineteen it became
the biggest producer of nicolas.
Speaker 2 (13:33):
And now it's overwhelmingly Yeah, what were the nature of
those early relationships, What did China get, what did they
have to offer from a technological transfer? And then what
is Indonesia ge I guess in terms of royalties and jobs,
like how what was the economics of those So but.
Speaker 3 (13:48):
In Dntia realized Nidia always was an exporter of nickel wars,
which is unprocessed stuff. You basically put it on the ship,
send it off the Chinese to China. The Chinese then
processed it. And then the Indonesian government realized at some
stage that it's actually another a lot of value added
in that. And they also saw that demand potentially increases
very strongly, and so they wanted to build more of
(14:10):
a value added downstream industry. Indonesia wanted to build a
downstream processing industry invited and then was looking at how
to actually accomplish that. So in the first instance, what
they did is they stopped the exports of unprocessed nickel oars.
So in twenty fourteen you could no longer ship unprocessed
was In that year, Indonesia had a global nickel market
(14:33):
share of less than ten percent, like five or six percent,
very low. And then I think various countries and operators
were looking at the Indonesians or and Indonesian was and
I set before the Indonesian oars are weathered, was oxidized,
was very difficult to process and the Chinese then went
into Indonesia. It's one comedy in particular who then looked
(14:56):
at innovative productive production technologies and started experimenting with different
methods of extracting the nickel from the nickel oars and
were actually quite successful and once they had distemplate in place,
the nickel industry then expanded quite quickly.
Speaker 1 (15:12):
Has anyone else been able to replicate what that Chinese
processing technology that you just mentioned, Like, is this something
that other people are doing that has also increased supply
elsewhere in the world aside from Indonesia or is it
sort of a China Indonesia exclusive thing.
Speaker 3 (15:29):
So there's two two technologies. One called pressure as a
leading that has been tried before, but literally when you're
looking at all the projects that have been brought online
in Australia over the lifetime of those projects, those projects
feel not pay for the initial investment because it's just
a very difficult technology. The Chinese have been very good
in bringing that online. The other technology, which is more paramatology,
which is fire smelting and refining, that is also a
(15:52):
dominated by the Chinese, so they already had a very
strong wall.
Speaker 2 (15:56):
It used to be clear Australia has basically tried to
do the exact thing thing and internally have not been
able to do it economically.
Speaker 3 (16:03):
Yeah, So there was a discussion it was about ten
fifteen years ago on the type of ores that are
available in Indonesia, and I think the undertone always was, look,
the oars are there, but they're just very difficult to process,
and therefore it's going to it might be hard to
see a very big production increases coming through. And that
was through up to the point where the Chinese actually
then went into Indonesia and started developing those assets.
Speaker 1 (16:26):
So talk to us more about the sort of virtuous
cycle of the supply chain that this is creating. So
China now has access to this cheap and abundant nickel
that feeds into their ev industry. How crucial has that
nickel been in sort of building out the electric car
(16:48):
business in China.
Speaker 3 (16:49):
I think nickel on its own probably wouldn't have made
much of a difference, but I think where China was
very strategic in making sure that all of the raw
materiers that I needed it are available. So it's not
just the nicer side, it is the lithium side as well.
It is the cobal side as well. That's everything that
goes into the cassos. And when you look at the
(17:10):
unknote the graphite side of things, again China is dominating.
So when you're looking at all of those critical raw materials,
a lot of that is being dominated by China. And look,
you can take a slightly different view on that. Take
the last twenty years during the period of globalization. I
bet around twenty ten twenty eleven, the guests that you
would have heard that would have had here, there was
(17:30):
a lot of talk about I don't know, Netflix, the
services industry and the cool stuff basically now, but no
one realized that actually, you can't run an economy without
having the basic the basic Roman here. So the vest
effectively created a vacuum in those supply chains that China
effectively filled. And that's the issue that that governments now
(17:51):
have to grapple with.
Speaker 2 (17:53):
How much of the Chinese edge when it comes to
refining or processing or I guess even acquire raw commodities.
How much of the edge is just a sheer scale question.
There is a gigantic market in China period. There are
a lot of workers in China period, and so setting
(18:13):
even setting aside whether different groups of engineers and scientists
could replicate these processes on paper. How much is the
just the pure scale edge part of the story here.
Speaker 3 (18:24):
I mean, having a big domestic market certainly helps, but
again what also helps is having a strategic industrial policy
to actually being able to capitalize on that on that
domestic market. And it's I think the conjunction of those
two that wrote about that dominance in the supply to
a Now the problem that we're having increasingly is and
(18:47):
this always happens in China. We had it in steel,
and we had it in aluminimum. When the Chinese government starts
developing industries. There's actually inherently a lot of competition also
within China, but you always get over investment, you have
got overcome. So take the last study from the European Union,
firms and the European Union estimates that last year the
Chinese could have produced twice as many cars than they
(19:09):
did through the over capacities that they've had. And so
what you're seeing now is that some of those over
capacities is or there's a threat that some of that
overcapacity is actually now being exploded to the Western markets.
And again that takes us back to the whole discussion
about terrorists and trade protectionism, But it is that entire
approach I think that we've seen the last twenty fifty
years that that brought kind of those supply chains together.
Speaker 1 (19:32):
Okay, speaking of over capacity, I mentioned in the intro
that there have been these accusations of Indonesia essentially flooding
the market with low grade and low price nickel. What
impact has the dominance of Indonesia on the nickel market
actually had on other businesses?
Speaker 3 (19:50):
So, if I put it very simply, I think for
China it's almost always about quantity, not about value, about volume,
but not about value. And so coming back to preventing
bottlenecks through the supply chain, when you're looking at the
industrial policy, I think what China wants to prevent is
(20:10):
constraints and bottlenecks and therefore higher prices that would effectively
make it difficult for the strategic industry likely V manufacturers
to produce those evs. And so what we see in
Indonesia at the moment is a lot of discussions about
where the production costs are Indonesia, what is a marginal cost?
Because ultimately, if you're prioritizing value volume over value, then
(20:36):
you're producing at costs. Now, the problem for the producers
outside China is if that is the name of the game,
there is not a lot of fat in producing nickel,
and that's why we've seen the Western producers like BHP
and Anglo actually taking a relatively bare review on their
nickel assets. PHP actually is probably the one data what
(21:00):
you mentioned Ungler before, but BHP is the one that
would highlight potentially even more so. They have one operation
in Australia called Nickel West. It's a really significant side
big side actually, and a few years back we thought
that that could actually be the supplier of choice to
the Western or to the ev industry. But that's actually
one of the one of the assets that BHP doesn't
(21:20):
assign a lot of value to anymore these things.
Speaker 2 (21:22):
So prices have just come down so much that this
big project in Australia just can't make much more.
Speaker 3 (21:28):
Yeah, it's effective that.
Speaker 2 (21:45):
I want to go back to something you said in
the beginning about the two different types of chemistries. So
on some basic level, the nickel based batteries are not
as efficient as the sort of the chemistry that's in
the West, but the Chinese battery are like the best
in the world.
Speaker 3 (22:01):
Right. Yeah, So again this is when you would have
to go back, because it's the second base evolving is
evolving a lot at the moment. So initially, I think
when we started talking about the ev industry, the idea was,
and that's seven eight years ago, that nickel based batteries
are the battery of choice in China and potentially outside China.
(22:21):
The Chinese always had that lithium iron phosphate battery which
doesn't contain any nickel, but initially because it's a much
lower energy density, was never thought to be kind of
the lap choice. But there was a lot of again
innovation in that space, and those batteries have become much
much better. They are folded differently, they are put together differently,
so the energy density has actually increased as well. And
(22:44):
so now you almost have this second lissim and phosphate
market that is becoming another mainstay of the industry.
Speaker 2 (22:50):
So it is it just to understand this better in
theory or the you know, in the sort of the
chemistry lab so to speak. The nickel based bader batteries
due to the lower energy density.
Speaker 3 (23:03):
Higher energy, higher and higher energy density.
Speaker 2 (23:05):
The nickel base batteries of higher and higher enginety.
Speaker 3 (23:07):
They're the better, but they're normally the better. But the
least on phosphate batteries that the Chinese produced historically had
the lower energy density. And that's fight. Oh, confused by
the idea always was value. You need to have those
nickel based batteries if you wanted to have a thousand
kilometera driving range in the in the EV side of things.
Speaker 2 (23:24):
And so in the US we have nickel based batteries
in the Yeah, okay, sorry, thank you for clarifying.
Speaker 1 (23:28):
Well, okay, on this note, I think the US and
Europe would agree that evs are a strategically important thing
that we want to have more of if we're serious
about the clean energy transition. And yet there seems to
be this tension where mining a component or a material
that is actually quite important for these things, viz. The
(23:51):
batteries is just not that profitable in the current situation.
So what do they do about it? How do we
resolve that attention.
Speaker 3 (24:01):
That's the focus at the moment, Yes, how do you
resolve that? I think tariffs forez better words, I think
that's one thing that is clearly being discussed at the moment.
So if you don't allow any Chinese evs onto the
US market, which is seemingly the direction we want to take,
(24:21):
then by definition you're giving your domestic car manufacturers a
bit of breathing space to develop your own industry. The
DOE is also looking at different ways to boost nith
nickel supply, so there's a lot of focus, for instance,
on the recycling side of things. There's also a lot
(24:42):
of focus now on assets outside the Chinese supply chain.
I think there were envoys from the US government in
Indonesia to discuss a limited free trade agreement with Indonesia too,
So there's a lot of movement, but it's not impossible,
and I think there will be solutions to the shortfall
of critical materials that we do face to some extent
(25:03):
on the way to a net zero But both Yes
and Europe do have a fair bit of catching up
to do in the coming years.
Speaker 2 (25:11):
Right now, so obviously with the Inflation Reduction Act, but
also the rise of Tesla and others. You know, there's
more of a domestic battery industry. In fact, I think
we talked to the CEO of one of the companies
several months no VANX. We're US based battery companies, startups
or various stages in development. Where are we right now
(25:33):
sourcing most of our sort of critical components for them,
or critical minerals or critical elements for batteries.
Speaker 3 (25:39):
Look, there is an existing NICO market. Actually, yeah, there's
an existing NICO market.
Speaker 2 (25:43):
Actually, but where do we get where do we import
it from? What are the big export or exporters to
the US.
Speaker 3 (25:49):
So when you're looking at the key NICA producing countries
outside Indonesia and China, Brazil, that's Canada, Australia as well,
the letter two actually have got a green and with
US in place, I think it's the question really comes
more pressing when you're looking five, six, seven, eight years out.
(26:09):
The less cars of the combustion engine you're putting on
the road, the more pressing it then becomes to actually
make sure that you have got the raw materials available.
And again taking a step back, what we're seeing actually
at the moment is in the Western world that the evs,
the pure battery electric vehicles are actually downgraded a little bit,
so we actually have to take down our penetration rates.
(26:31):
What we're seeing more is kind of that intermediate solution
where you're putting hybrid or plug in hybrid electric vehicles
onto the road, and for those, for instance, you do
need less of the critical raw materials, so that buys
you effectively time potentially to build up more of a
supply chain. That building up a supply chain, I think
is right now the key focus that we have in
both US and in Europe.
Speaker 1 (26:53):
So just broadening out the metals discussion. You are, of
course the head of metals research for BOAS, so we
should ask you about some other things going on as well.
But it seems to me like one of the major
stories in this market has to be volatility recently, and
perhaps copper is the best example of that. So we
(27:14):
had Jeff Curry on a few weeks ago talking about
how long copper was the trade of a lifetime, and
since then I think it's down what like ten percent.
Speaker 2 (27:23):
Something like that.
Speaker 1 (27:24):
I would say like a few weeks is probably not
the timescale he was thinking of in terms of trade
of a lifetime. But there's definitely been a lot of volatility,
and it feels like there's a weird dynamic going on
where like part of the thing causing volatility is the
restriction in is the type physical market basically, so we're
(27:45):
seeing these big swings up and down, partly because we
need more of this stuff. What's going on there.
Speaker 3 (27:53):
So Coppa is really really different to Nika. On Nica,
we had the reserves and the resources, the deposits in Indonesia.
On copper, you don't. It's a very mature market. Some
of the best assets or mines that we actually have
in the world have been running for decades and it's
(28:13):
very hard to find really good new assets. In fact,
when you're looking at some of the projects that are
currently in the pipeline, just to highlight the difficulty and
bring those on lines, some of those weird discovered almost
thirty years ago, so it took you almost two generations
to bring them to the market, and so we now
(28:34):
facing an almost empty project pipeline. But doesn't help either
on the copper side, is that during the past ten years,
in the past decade, we had a bear market. Effectively,
I bet you in twenty fifteen I would not have
been sitting here. It was because there was not a
lot of interest in the metals in the metal site.
And so think about it, shortly after that or doing that.
(28:55):
During this ten years, Glenco almost went bankrupt. How did
the miners react to that cut? Kapex and their equation
there is very simple. You don't spend, you don't produce
further down the line, and that's not even something that
the Chinese government through a strategy industrial policy can resolve.
If you don't have the assets, you just cannot produce.
(29:15):
And so you're now effectively in a situation their copper
supply growth is really tailing off. It's coming down, but
structurally you have got much higher copper de mincros. Over
the last two decades, potential copper demandross was maybe two
percent out until twenty fifty, we can justify annual copper
(29:36):
demand rows of four percent, So twice twice is high,
and you don't have the supply grows, and that's I
think where then the volatility then effectively comes in because
if you don't have the safety buffer, so the inventories
that can help even out shortfalls here and there, that's
what ultimately creates grades at volatility. The one point I
would make about some of the calls that we've seen
(29:58):
in the copper market, like I've seen fifteen thousand I've
seen forty thousand dollars. That's all fine, I think if
it's a long term you, but it also is a
little bit of a disservice to the industry. To your point,
sim I'll give you a very simple if it's a
very simple example of say over the last two to
three weeks, for instance, so we've had it's more on
(30:19):
the option space, but we've had an explosion in interest
on the call side, or calls got really really expensive.
But then we also saw how the buying started to
subside a little bit. And so what has been a
very popular position recently in the last few days is
actually selling copper upside through those calls. Now, if you
(30:42):
believe in copper hitting forty thousand dollars per ton, immanutely
you're not taking that position. So I think with all
of those bullish calls, it is important that we write
size them and that we cavey at them, because if
you're just saying, oh, we're bullish copper and it's going
to the moon, you're missing an awful lot of profit
along the way. And the point that you just make, yes,
it looks good copper for a while, but right now
(31:04):
we're digesting that gains. It's those periods I think where
you see this location to the market that you actually
want to trade. So I think we need to take
a little bit of a more nuanced view on the
market then just saying oh, look, coppa is going through
the moment.
Speaker 2 (31:18):
I think the tricky thing with trying to understand where
copper is going is just the sort of sheer physical
reality of there's a lot of demand. As you said,
the demand growth is going to basically effectively double, and
there's this sort of empty project pipeline, and so you're like, well, yeah,
of course copper has got to go to the moon.
(31:39):
How does that get resolved? Is there a price which
new projects start to like, all right, we got to
start putting shovels on the ground, or to your point,
is it a matter of we just need less price
volatility rather than a specific price signal itself, and then
we can start to figure out So it sounds like
something has to resolve.
Speaker 3 (31:56):
That it would be good if you had both, But
the problem is I think more than rather than having
less price volatilely we're going to get more price volatility
going forward. The price I think that that we're hearing
a lot from the miners that we need to justify
investment in new minds is minimum twelve thousand dollars per ton,
but then Glencore is talking more towards like thirteen fourteen
(32:16):
thousand dollars per ton. Then just to put a reference
to that, right now, we're trading at ten thousand dollars
per ton, and then the whole problem becomes, well, if
the miners really eight for prices, hit twelve or thirteen
or fourteen dollars fourteen thousand dollars per ton and then
start investing, you have a lead time, so you're not
going to resolve those shortfalls imminently. And so did The
(32:37):
question on what resolves the potential shortfalls on the copper
market is a very tricky one. We've seen during the
doing the energy crisis around the Ukraine War. What happened,
so we had in the run up to the Ukraine War,
we had a very strong copper price rally and that
made many renewable projects loss making basically, so we've actually
(32:57):
seen how the deployment of green energy slowed down meaningfully,
and that's what I would call demand destruction ultimately, So
and we said we've been saying that for a while.
With the current technology that we have, with the current
investment that we see in the Mind Project pipeline, it's
very very hard. It's almost impossible to get to net
(33:17):
zero by twenty by twenty fifty. So something has to give,
I think ultimately, and you see that in the New
Slow almost daily now. As I think when we put
the initial estimates out, we basically said that it was
a few years back that limiting global warming to one
point five degrees celsius is going to be very hard.
The best you can do is potentially one point eight
(33:38):
one point nine degrees, and look like it very much.
Speaker 2 (33:40):
Lead point three is a big and that copper is
a big part of that story.
Speaker 1 (33:44):
Copper.
Speaker 3 (33:44):
You need copper in virtually every technology when you're looking
at a kind of what the energy transition means. So
the decarbonization story, we're effectively talking about electrifying the global economy.
So we need power generation, transmission, distribution, and then all consumption.
All of that is in the elect in the form
of electricity, and you can't do those technologies without copper.
(34:06):
Copper is effectively ground zero of the energy transition.
Speaker 1 (34:09):
Yes, so I mentioned in the intro that the Indonesian
nickel story is something that kind of flew under the
radar for me. Copper, not so much. We've done a
few episodes. You see the headlines every day now, as
you mentioned, But what other things should we be aware
of in the metals market right now? Like what could
we possibly be missing or what do you get the
(34:30):
sense that other people are missing?
Speaker 2 (34:31):
You better give us a good answer, especially after having
especially after having shamed us for not talking about So okay,
we better, you better give us something.
Speaker 3 (34:39):
An you're in good company. Then let me let me
tell you that I think that was that that was
a global theme. But I think what what really needs
to happen. I think we can go into the policice
policy sphere, but we can also go into the end
of the commodity fundamental sphere of fences. When you're looking
at E S T for instance, E s T is
very important, clearly, I think the energy transition is e
(35:00):
actively all about EESG. But there is a little bit
of a market failure there as well at the moment,
because we just discuss it. You can't have the energy
transition without actually taking the metals out of the ground.
But from an ESG perspective, it is still hard for
a lot of investors to actually invest in mining assets.
So you want to have the energy transition, but you
(35:21):
don't want to have the mining. Well, something has to
give give here, So that's that discussion is actually evolving.
I think the UPO, the US in the U actually
putting more effort into developing mining assets is certainly helping
helping that discussion. That's one thing. The other thing that
I would say is the energy transition clearly is a
game change for the metals. In my view. There are
(35:43):
some metters we talked about them at the outset, like
the battery romantials, so lithium, cobalt, innicate that look a
little bit better supplied that might not really quite as much.
But then there are others like copper and aluminum for instance,
that really look much that really look much stronger one
a fundamental perspective, so you do get actually relative value
there as well. And I think the third point that
(36:04):
I would make is innovation. I think we need to
see or evolution. We need to see different approaches to
making sure that we mitigate the shortfall in those commodities
that are actually under supplied. Recycling scrap that is fin
into something that is becoming likely much more important going
forward as well, and is one of the least transparent
(36:28):
segments of sectors of the metals industry at the moment.
Speaker 1 (36:30):
Yeah, isn't it one of those industries where people still
like have to call up the junk yards and ask
for the latest pricing.
Speaker 3 (36:38):
Yeah, I can, I can. I should tell you a
funny story about a funny story about there was a
few years back we went to visit a scrap yard
and there was a whole pile of metal lying somewhere
in the corner, and so we asked the master guy
in the scraplut what that is, and he said, well,
it's a dowry for my daughter. I'm saving that for
my daughter. So it is a very arcane industry to
(36:58):
some extent, still a lot of smaller and mid sized
companies operating in there, and certainly scope to evoive the
way the industry the industry works. I think the other
thing I think that that would certainly help there beyond
just that is and be seeing that increasingly as well,
is that governments focus really on recycling rates. How do
you make sure that you're actually getting recycling rates up.
(37:19):
Do you have designed products differently to make it easier
to recycle them. Do you have to compel manufacturers to
actually take spend products back and recycle them. So there's
a whole lot of development on that front as well.
I think that would certainly have the recycling space too.
Speaker 2 (37:34):
I just have one more question, and you mentioned the
sort of I don't know, market failure, maybe market harmonization problem,
in which in order to have the energy transition you
actually have to invest in a lot of dirty businesses.
And we've done some episodes in the past, or at
least one that I recall about the amount of water
consumption of copper minds in Chile and some of the
(37:56):
backlash there is there a growing issue. And I'm curious
also in Indonesia and the local environmental impacts of all
this nickel production. Is there any sort of backlash happening
there in the vicinity of these and like what sort
of the general state of play on that stuff.
Speaker 3 (38:13):
Yeah, I think that's certainly when when I said before
that from an easy standpoint, it's still hard to understand
investing in mining assets. I think mining historically has not
been the cleanest of our industries. But I think the
miners are trying are trying very hard to mitigate that.
So when you're looking at water being used in the mines,
I think there's an effort, for instance, to actually have
more of a run around system, so the water that
(38:34):
is once in the mind to produce a copper, you're
effectively cleaning up and then and then putting back into
the industry. Some operators that are better than others. What
we're seeing increasingly is that the better the operators are,
the better the better the miners are in engaging this
local communities, on the environment, on social on the social compound,
(38:58):
the more likely it is to get an interrupted supply.
So I think the industry over the last ten to
fifteen years has certainly gone a little bit through a
learning curve and has been trying to become a better
corporate citizen.
Speaker 1 (39:10):
All Right, Michael Vidmer, thank you so much for coming
on odd lots and making sense of what's been going
on in the nickel market. Five cents exactly. No, thank
you so much. That was so much fun.
Speaker 3 (39:22):
Thank you very much, Joe.
Speaker 1 (39:36):
I've really enjoyed that conversation. That was such anclear explanation
of what's been going on.
Speaker 2 (39:41):
It was so fun. I love Michael.
Speaker 3 (39:42):
We have to have a Yeah.
Speaker 2 (39:43):
I could have talked to him for like four hours.
Speaker 3 (39:45):
Yeah.
Speaker 1 (39:46):
I thought his point about the market failure of ESG
was a good one and probably one that is becoming
more common now than it was a few years ago.
But I think one of the problems with ESG in
its early the conceptualization is that no one ever really
figured out like do you want to engage with the
(40:06):
dirty industries and make them better or do you want
to stay away from them completely and thereby cut off
their access to financing and make them go away in
their totality. And I think, you know, a few years
on from all of this, we're kind of seeing the
result and the idea that you can get this tension
where you need to actually engage in a dirty industry
(40:29):
in order to promote the clean energy transition, and so
stranding that particular asset is problematic in some ways, let's
put it that way.
Speaker 2 (40:38):
Yeah, I mean it's always seemed to me like this
term ESG means different things to different people. Some people
just don't want to invest in energy in industries that
they perceive as problematic. In some point. Others from a
more policy oriented standpoint, have these set of goals. Sometimes
those goals and the interests of investors are aligned, well,
(41:00):
sometimes not so much. I'm just astounded how fast I
guess I, like I said in the beginning, one of
the few things I knew about the nickel market.
Speaker 1 (41:09):
I love that you have three factoids about the nickel market.
And one of them is actually a very sophisticated point
about the episode that we just had.
Speaker 2 (41:17):
Well, I remember like twenty twenty one, twenty twenty two,
you know, like there was all those like polychrisis stuff
and like Adam Two's and all those guys, and like
one of them at some I probably clicked on an
article about like Indonesia aiming to capture more downstream value,
and I like, choke, you know, stroke my chin as.
That's very smart. Just really capture more of the value
(41:39):
coming out of the ground.
Speaker 1 (41:40):
And so like just one of those things that were
at my next cocktail party, all talking about Indonesia's attempts
to capture the downsta.
Speaker 2 (41:48):
Indonesian nickel markets at are real crossroads, and now they're
trying to capture more of the value add rather than
just below margin export But then the other thing is
I just did not realize how recent Indonesia's rise was
at all. If I would have guessed so Indonesia's always
made the big nickel exporter and now they're shifting, I
did not realize that this is basically a story of
(42:09):
the last decade.
Speaker 1 (42:10):
It is phenomenal. The other thing that sort of hit
home in that discussion with Michael just then was the
technology aspect of it, by which I don't mean EVS,
but I mean like the actual processing technology of nickel
and the fact that that's been driving a lot of
the increase in production that China like kind of cracked
this new model for doing it and then just invested
(42:32):
a ton in it.
Speaker 2 (42:33):
Well, you know, one of the conversations we did a
couple months ago or I guess a month and a
half ago or whatever, we did that trip to North
Carolina and one of the companies that we talked to
is part of our trip with Tom Bark and that company, Unify,
And like one point that has been very lodged in
my brain was just the CEO of Unified talking about
(42:54):
the huge edge that accrues to Chinese producers of things
like advanced textiles due to the sheer scale of the
domestic petrochemical industry that exists in China. And I realize
that's not that's petrochemicals, not metals, but it does feel
like the sheer scale of refining capacity for petrochemicals, for
(43:16):
critical minerals, et cetera in China is just a huge
part of the story here. And whoever is access to
that cheaper supply is obviously in a good position.
Speaker 1 (43:24):
Well, it certainly seems to be a big advantage in
something like ev manufacturing, that's for sure. All right, shall
we leave it there.
Speaker 2 (43:31):
Let's leave it there.
Speaker 1 (43:32):
This has been another episode of the Odlots podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (43:38):
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our producers Kerman Rodriguez at Carman Arman dash Ol
Bennett at Dashbot and Keilbrooks at Keilbrooks. And thank you
to our producer Moses Ondam. From our Oddlogs content, go
to bloomberg dot com slash odd Lots, where we have transcripts,
a blog, and a weekly newsletter and you can chat
about all of these topics twenty four to seven in
(43:59):
our discord with fellow listeners discord dot gg slash outline.
Speaker 1 (44:04):
And if you enjoy all thoughts, If you like it
when we mine the latest developments in the nickel market,
then please leave us a positive review on your favorite
podcast platform. And remember, if you are a Bloomberg subscriber,
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(44:27):
the Bloomberg channel on Apple Podcasts and follow the directions there.
Thanks for listening.
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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