Latest / Trumponomics / ‘Cursed’ Nations Want to Turn Green Minerals Boom Into a Blessing

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‘Cursed’ Nations Want to Turn Green Minerals Boom Into a Blessing · Trumponomics

• 0:04
  Speaker 1: Those antimony, arsenic, aluminum, selenium and hydrogen and nyxogen and
• 0:07
  Speaker 1: hydrogen and urenium and nicoliodinium, naponium, germanium and.
• 0:10
  Speaker 2: Iron amoricia Hellostephonomics Here the podcast that brings you the
• 0:13
  Speaker 2: global economy, and we're visiting some of the forgot hument
• 0:16
  Speaker 2: corners of the periodic. Take in we these days and iodine,
• 0:20
  Speaker 2: andium and thulium and thallia as the world struggles to
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  Speaker 2: get its hands on the critical minerals will need to
• 0:25
  Speaker 2: power electric car batteries and all those other green machines.
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  Speaker 2: Good news for green tech companies maybe, But will it
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  Speaker 2: also spell new riches for the countries that currently have
• 0:36
  Speaker 2: these much sought after materials. Historians would say, don't bet
• 0:41
  Speaker 2: on it. As a long and deeply depressing tradition of
• 0:45
  Speaker 2: commodity rich economies failing to benefit from their natural wealth.
• 0:51
  Speaker 2: With a handful of notable exceptions, such countries all too
• 0:54
  Speaker 2: often end up worse off than neighbours that weren't blessed
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  Speaker 2: with all those natural assets in the first place. Could
• 1:01
  Speaker 2: this time finally be different? I'm going to debate that
• 1:04
  Speaker 2: in a few minutes with Bloomberg commodity reporter and author
• 1:07
  Speaker 2: Jack Farcie well backed senior economist Jim Cust But first,
• 1:12
  Speaker 2: Bloomberg's Indonesia economy reporter Claire Joo and metals and mining
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  Speaker 2: reporter Annie Lee have an encouraging story to tell you
• 1:20
  Speaker 2: from Indonesia. The reporting was done by both of them,
• 1:23
  Speaker 2: but it's Claire's voice you'll hear doing the narration.
• 1:27
  Speaker 1: When you think of elements like nickel and aluminum, they're
• 1:30
  Speaker 1: probably just boxes on the periodic table. But these minerals
• 1:34
  Speaker 1: are essential components that go into making batteries for electric vehicles.
• 1:41
  Speaker 1: This is a four hundred billion dollar industry, and no
• 1:45
  Speaker 1: one knows it's better than Indonesia. Made up of over
• 1:50
  Speaker 1: seventeen thousand islands and lush rainforests, Indonesia sits a top
• 1:55
  Speaker 1: an abundant reserve of native metal copper, gold, and nickel,
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  Speaker 1: the raw material used in evy batteries. For decades, Indonesia
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  Speaker 1: has been content with digging up the minerals and sending
• 2:08
  Speaker 1: them to places like China, where skilled workers and factories
• 2:12
  Speaker 1: turn them into higher value products like batteries or electric cars.
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  Speaker 1: But now the biggest economy in Southeast Asia has other ideas.
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  Speaker 1: Why should Indonesia stop at exporting role or when it
• 2:26
  Speaker 1: can export the batteries that are made from them and
• 2:29
  Speaker 1: even the cars powered by those batteries. Indonesia's ban on
• 2:36
  Speaker 1: rule box site exports began over the weekend. The ban
• 2:40
  Speaker 1: is meant to encourage more investment into.
• 2:43
  Speaker 3: Higher value added activities on shore Indonesia.
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  Speaker 1: The bottom line, if you want our minerals, you have
• 2:50
  Speaker 1: to process them here. For President Jokowidodo, Indonesia's natural wealth
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  Speaker 1: is the key for it to become a high income country.
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  Speaker 3: It is sassy in Dose three.
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  Speaker 1: Industrial downstreaming is very important. We will leap forwards if
• 3:07
  Speaker 1: downstreaming is successful.
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  Speaker 3: Thistochi The Golden Indonesia of twenty forty five, smart execution
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  Speaker 3: is needed.
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  Speaker 1: It's estimated to add more than seven hundred billion dollars
• 3:22
  Speaker 1: to the economy and create nearly ten million jobs. To
• 3:27
  Speaker 1: push this strategy forward, Indonesia uses a carrot and stick approach.
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  Speaker 1: On one hand, it's clapped down on exports of some
• 3:35
  Speaker 1: raw mineral ores. On the other, it's offered tax for
• 3:39
  Speaker 1: certain incentives, viewering companies to build smelters and battery plants
• 3:43
  Speaker 1: within its borders, and it's already working, but is it
• 3:48
  Speaker 1: good to go to get a better idea of how
• 3:50
  Speaker 1: the carrot and stick approach materialized. I spoke with Mohammad
• 3:54
  Speaker 1: Faiz Naguza as an economist at Bank of America.
• 3:58
  Speaker 4: We saw about eleven billion dollars of being realized into
• 4:01
  Speaker 4: that sector.
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  Speaker 1: By that sector, he means nickel downstreaming.
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  Speaker 4: But that is just that sector. Beyond that, we're also
• 4:09
  Speaker 4: seeing more investments likely coming into other smelters copper smelters
• 4:14
  Speaker 4: for example, as well as battery grade nickel and even
• 4:18
  Speaker 4: producing IV batteries themselves. So the investment inflows Intodonesia is
• 4:24
  Speaker 4: getting beefed up because of this success in downstreaming.
• 4:28
  Speaker 1: Nowhere is that boom more apparent than in Morowali. It's
• 4:32
  Speaker 1: a nickel ridge district in Indonesia, Sulawesi island east of Borneo.
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  Speaker 1: Once a quiet fishing town, it now houses the bustling
• 4:41
  Speaker 1: Morowali Industrial Park, which just celebrated its tenure anniversary this month.
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  Speaker 1: Trucks are busy transporting or from mines to smelters, Buses
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  Speaker 1: full of workers shuttling across the area. The park even
• 4:56
  Speaker 1: has its own private airport and port facilities. It employs
• 5:01
  Speaker 1: more than eighty thousand Indonesian and Chinese workers here. For
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  Speaker 1: the first five months this year, this park has already
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  Speaker 1: registered twenty two billion US dollars of investment. That's compared
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  Speaker 1: with a record of twenty one billion dollars for the
• 5:17
  Speaker 1: whole twenty twenty two.
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  Speaker 3: To be clear, such success is quite rare. Indonesia holds
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  Speaker 3: the world's largest deposit of nickel, a mineral in short supply.
• 5:29
  Speaker 3: The same goes for Botswana when it comes to diamonds.
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  Speaker 3: The global diamond manufacturer the Beers relies on Botswana's mines,
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  Speaker 3: leveraging that the Botswana government struck a deal that set
• 5:44
  Speaker 3: aside a portion of rough diamonds to local cutting and
• 5:47
  Speaker 3: polishing companies. Historically, polishing usually happened in places like Antwerp, Belgium.
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  Speaker 3: Other countries, though, face more basic challenges.
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  Speaker 5: And here's important to maybe use the example of the
• 6:03
  Speaker 5: Democratic Republic of Congo.
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  Speaker 1: Rahi dash Dawa, head of the International Council on Mining
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  Speaker 1: and Minerals.
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  Speaker 5: In DRC, A decision was taken to process copper concentrate
• 6:15
  Speaker 5: in the DRC itself, but that had to be delayed
• 6:18
  Speaker 5: because copper producers simply didn't have enough electricity in order
• 6:22
  Speaker 5: to be able to process the copper. So you can't
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  Speaker 5: do copper smelting without electricity. And the DRC was not
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  Speaker 5: producing enough of the electricity in order to keep that
• 6:32
  Speaker 5: plant going. And so you might think why don't companies
• 6:37
  Speaker 5: set up more processing plants. Well, actually, if you don't
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  Speaker 5: have enough of the energy you need and increasingly low
• 6:42
  Speaker 5: carbon and low cost energy you need, it's very difficult
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  Speaker 5: to process.
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  Speaker 1: This success doesn't come free either. For one, there's the
• 6:50
  Speaker 1: environmental price given the tons of waste generated and the
• 6:55
  Speaker 1: coal to provide electricity for factories. Because Lane Calling, Annie
• 7:00
  Speaker 1: Lee listed a residential building outside of the Indonesian Park
• 7:04
  Speaker 1: where she met Ricky Ardiansha. Ricky rends rooms to Indonesian
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  Speaker 1: workers and owns a construction.
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  Speaker 4: The water, the rain rink is color is black?
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  Speaker 3: Oh really yes?
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  Speaker 1: Because the air the think.
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  Speaker 4: Us and in air maybe and then the dust here.
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  Speaker 1: Ricky told us when it rains, the rain drops turned
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  Speaker 1: black from the dust in the air. Just outside this building,
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  Speaker 1: there's a river that runs across the neighborhood. It looks
• 7:38
  Speaker 1: like a canal of tomato soup. Now, President Jacobi also
• 7:44
  Speaker 1: wants to apply the same strategy not only to other metals,
• 7:48
  Speaker 1: but into agriculture, farming, and fisheries, every sector that Indonesia
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  Speaker 1: has clouds but not dominance. With the twenty twenty four
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  Speaker 1: elections booming a trace questions will his successor repeat the
• 8:03
  Speaker 1: same trick. Here's economist Nagusa. Again.
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  Speaker 4: Success is so evident that I think most investors assume
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  Speaker 4: that it will be unlikely for any future governments to say,
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  Speaker 4: you know, we need to revert this policy. The success
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  Speaker 4: in terms of exports and the investments are very visible.
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  Speaker 4: So the assumption is that there will be pretty much
• 8:25
  Speaker 4: a good degree of policy continuity on this downstreaming. So
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  Speaker 4: if something were to change, I think that will come
• 8:30
  Speaker 4: as a negative and nasty surprise for investors.
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  Speaker 1: Whatever the outcome, other countries will be closely watching. If
• 8:38
  Speaker 1: they want a bigger role in the supply chain, they're minerals,
• 8:41
  Speaker 1: maybe their fastest way to get there in Jakarta Clari
• 8:47
  Speaker 1: out for Bloomberg News.
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  Speaker 2: So I would step back to consider now how this
• 9:02
  Speaker 2: has gone in the past, and whether there's any prospect
• 9:05
  Speaker 2: for countries elsewhere in the world, especially Africa, to benefit
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  Speaker 2: from the rush to acquire the minerals that will be
• 9:11
  Speaker 2: needed to wean the planet off fossil fuels and to
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  Speaker 2: help us do that. I'm joined by Jim Cust, senior
• 9:17
  Speaker 2: economist in the Africa Department at the World Bank, who's
• 9:20
  Speaker 2: written extensively on this subject, and Bloomberg's Energy and Commodities
• 9:24
  Speaker 2: reporter Jack Faci, who co authored with Javier Blass, The
• 9:27
  Speaker 2: World for Sale, which is a cracking book on global
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  Speaker 2: commodity trading. Jim Cust, Jack, thank you very much for this. Jim,
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  Speaker 2: let me start with you. Let's go back in time
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  Speaker 2: first and think what's the traditional story of a commodity
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  Speaker 2: boom for developing country before we get onto how this
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  Speaker 2: time might be drifferent. What has traditionally been the problem
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  Speaker 2: for developing countries looking to get full advantage from these
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  Speaker 2: kind of booms.
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  Speaker 6: Sure, many countries have found it very challenging to move
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  Speaker 6: from being a major resource dependent economy, so whether that's
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  Speaker 6: mining or in other cases it's been oil and gas,
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  Speaker 6: and turn that below ground wealth into above ground prosperity.
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  Speaker 6: So we've all heard of the resource curse, and this
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  Speaker 6: is sort of the classical case of countries that have
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  Speaker 6: commodity booms, followed by busts, and if they haven't saved
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  Speaker 6: and invested enough of their revenues, then the busts can
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  Speaker 6: hit them even harder than the boom in the first place.
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  Speaker 6: And so countries have got into these kind of cyclical
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  Speaker 6: challenges that ultimately has added up to many of them
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  Speaker 6: stagnating and growing a lot slower than their neighbors that
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  Speaker 6: didn't have the resources. And that's what economists think of
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  Speaker 6: as the resource curse, that you end up growing slower
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  Speaker 6: than you might have done otherwise.
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  Speaker 2: It's always striking how few there are, but there are
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  Speaker 2: a few countries that have managed to get round this.
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  Speaker 6: Yeah, absolutely, so the result curse is certainly not universal.
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  Speaker 6: So we can think of countries like Chile and Indonesia, Australia,
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  Speaker 6: of course, but in Africa, countries like Botswana have done
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  Speaker 6: very well from their resources and have really succeeded in
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  Speaker 6: taking something that is a sort of primary commodity dependence
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  Speaker 6: and then turning those revenues into something you can invest
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  Speaker 6: in the rest of the economy and have done well
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  Speaker 6: out of it.
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  Speaker 2: What of what would you advise countries who are trying
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  Speaker 2: to repeat the Botswana example or is it just impossible
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  Speaker 2: it's not impossible.
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  Speaker 6: So the way that we think about it is it's
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  Speaker 6: like a chain of decisions, and the chain of decisions
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  Speaker 6: is only as strong as the weakest link. So there
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  Speaker 6: are many places where the chain of decisions can go wrong.
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  Speaker 6: But governments have to make a series of decisions. So
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  Speaker 6: everything from negotiating a good deal in the first place
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  Speaker 6: with the private sector companies that you're typically working with,
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  Speaker 6: all the way through to making sure you get those
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  Speaker 6: revenues and then you use those revenues effectively that you
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  Speaker 6: avoid corruption and you avoid mismanagement and the boombus price
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  Speaker 6: cycle and so on. So there's a series of decisions
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  Speaker 6: and each step in that decision chain, there are examples
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  Speaker 6: from countries like Botswana that you can emulate. And actually
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  Speaker 6: Botswana has just been in the news very recently because
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  Speaker 6: they've renegotiated their deal with the Beers and they have
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  Speaker 6: a reputation for negotiating a very tough deal when they
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  Speaker 6: work with the private sector.
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  Speaker 2: And we actually heard a little bit about de Beers
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  Speaker 2: in the earlier piece. So Jack, when you think about
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  Speaker 2: the move to net zero, of course lots of people
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  Speaker 2: wonder whether we really make them move to net zero
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  Speaker 2: but there's certainly a massive rush for the materials that
• 12:47
  Speaker 2: we need to build all of those batteries for electric
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  Speaker 2: cars and generally sort of power the transit transition away
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  Speaker 2: from carbon. What does that mean in practical terms? What
• 12:58
  Speaker 2: kind of commodities are we talking about and where are
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  Speaker 2: they currently?
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  Speaker 7: I think the big one where markets are being totally
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  Speaker 7: transformed as a result of even the steps that we're
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  Speaker 7: taking at the moment towards net zero, even if together
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  Speaker 7: they're not enough necessarily to get us in at zero
• 13:13
  Speaker 7: by twenty fifty. But the big ones where markets being
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  Speaker 7: totally transformed is the commodities that go into batteries for
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  Speaker 7: electric vehicles, and the key ones are things like lithium, nickel, cobalt,
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  Speaker 7: perhaps to a slightly lesser extent, manganese, graphite, and then
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  Speaker 7: things like copper and aluminium that are used in electrical
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  Speaker 7: wiring and therefore important both for the batteries but also
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  Speaker 7: the power cables, the charging stations, et cetera, et cetera,
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  Speaker 7: et cetera. Some of those markets are already quite large
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  Speaker 7: and well established, so things like manganese and nickel already
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  Speaker 7: have a large use in the steel sector. They're used
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  Speaker 7: as alloys in things like stainless steel and other steel alloys,
• 13:52
  Speaker 7: and so there's already quite a large market, but something
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  Speaker 7: like lithium and cobalt were really quite small markets only
• 13:58
  Speaker 7: a couple of years ago, and already they have increased,
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  Speaker 7: i think, probably doubled in size over the past five
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  Speaker 7: years or so, and the projections are that they would double,
• 14:10
  Speaker 7: triple or even more in size over the coming decades.
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  Speaker 7: So those are markets where we're going from a relatively
• 14:17
  Speaker 7: small market to suddenly a much larger market, and we're
• 14:20
  Speaker 7: going to need to find lots more supply. In most cases,
• 14:24
  Speaker 7: the supply or that the resources are there. So lithium,
• 14:27
  Speaker 7: for example, there's a lot of lithium in South America,
• 14:31
  Speaker 7: also in Australia. Nickel, as I think we just heard
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  Speaker 7: and we'll probably talk about quite a lot more. Indonesia
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  Speaker 7: has increased its supply of nickel enormously in the last
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  Speaker 7: few years, and it's projected to do so even more
• 14:43
  Speaker 7: so in the coming years. So the resources are out there,
• 14:46
  Speaker 7: but nonetheless it's a big challenge for the global mining
• 14:49
  Speaker 7: industry to increase supply by a huge amount of some
• 14:53
  Speaker 7: of these commodities.
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  Speaker 2: So I guess there's a nickel rush as opposed to
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  Speaker 2: a gold rush, as you say, but it's been transformative. Now,
• 14:59
  Speaker 2: we heard about Indonesia, and a lot of people listening
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  Speaker 2: to that story would think, Okay, if you're a country
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  Speaker 2: that does is lucky enough to have these critical minerals,
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  Speaker 2: the government announcers it's going to ban the unprocessed form
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  Speaker 2: of those minerals, and lots of investment comes in and
• 15:18
  Speaker 2: you get the downstream industry, which helps you perhaps avoid
• 15:22
  Speaker 2: some of the issues that Jim was talking about earlier.
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  Speaker 2: Should we be encouraged by the Indonesia an example?
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  Speaker 7: I think the Indonesian example is a very impressive example
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  Speaker 7: of a government pursuing a policy here to encourage investment
• 15:36
  Speaker 7: into its nickel industry and also to develop some more
• 15:39
  Speaker 7: of the processing of the downstream and being successful. I
• 15:43
  Speaker 7: also think it's a very rare, I'm hesitant to say unique,
• 15:49
  Speaker 7: but it's a very rare example of a number of
• 15:51
  Speaker 7: factors that Indonesia had in its favor. The number one
• 15:55
  Speaker 7: being is today a vast share of the world's nickel supply,
• 16:00
  Speaker 7: a significant share of the world's nickel reserves. But even
• 16:04
  Speaker 7: when they started this policy direction nearly a decade ago.
• 16:08
  Speaker 7: So Indonesia first actually banned exports of nickel or in
• 16:11
  Speaker 7: twenty fourteen, and they were much smaller player in the
• 16:13
  Speaker 7: global nickel market at that point, but they were still
• 16:16
  Speaker 7: the key supplier of nickel or to China and to
• 16:19
  Speaker 7: the Chinese industry that was turning it into nickel pigeye
• 16:22
  Speaker 7: in which then was an input into the Chinese stainless
• 16:25
  Speaker 7: steel industry. And so when they did that, the Chinese
• 16:27
  Speaker 7: stain and the steel industry had little alternative but to
• 16:30
  Speaker 7: come to Indonesia and build nickel pigeye and plants there
• 16:34
  Speaker 7: because there wasn't an alternative it. So, I think if
• 16:36
  Speaker 7: we're talking about how countries can capture the most rents
• 16:40
  Speaker 7: from these industries, Indonesia is a rare example because they
• 16:43
  Speaker 7: have such a dominant position in a particular market. Botswana
• 16:47
  Speaker 7: is a good example in diamonds. They also have a
• 16:49
  Speaker 7: very large share of the global diamond market, and so
• 16:52
  Speaker 7: that puts them in a very obviously puts them in
• 16:54
  Speaker 7: a much stronger position, give them much more leverage if
• 16:57
  Speaker 7: they're negotiating with companies country to try and extract more
• 17:02
  Speaker 7: rent from their natural resources industry.
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  Speaker 2: And jet you also had said that perhaps there were
• 17:07
  Speaker 2: quite a lot of attractions to going to Indonesia anyway,
• 17:09
  Speaker 2: and even without the policy, you might have seen this
• 17:12
  Speaker 2: kind of inward investment.
• 17:13
  Speaker 7: Yeah. Absolutely, so they were really kind of pushing water downhill.
• 17:16
  Speaker 7: The origin of this was the nickel pig iron industry,
• 17:19
  Speaker 7: which is a kind of low grade nickel that was
• 17:20
  Speaker 7: used in stainless steel built and rose up originally in
• 17:25
  Speaker 7: China after about two thousand and six when nickel prices
• 17:28
  Speaker 7: shot up a lot, and that made this process of
• 17:30
  Speaker 7: making nickel pig iron economic. And at the time when
• 17:33
  Speaker 7: Indonesia started this process of restricting exports, it was way
• 17:38
  Speaker 7: cheaper to make nickel pig iron in Indonesia than it
• 17:42
  Speaker 7: was in China, both because of the shipping cost because
• 17:44
  Speaker 7: you weren't having to ship lots and lots and lots
• 17:46
  Speaker 7: of very low grade ore, but also because Indonesia was
• 17:49
  Speaker 7: very rich in coal, Coal powered energy was very cheap.
• 17:52
  Speaker 7: It's an energy intensive process, so the kind of costs
• 17:55
  Speaker 7: we're talking about, it was costing about six to eight
• 17:58
  Speaker 7: thousand dollars a ton to make nickel and in Indonesia
• 18:00
  Speaker 7: versus ten to twelve thousand dollars in China, So there
• 18:02
  Speaker 7: was a really clear economic incentive behind it, and in fact,
• 18:06
  Speaker 7: some of the Chinese companies that have invested now and
• 18:10
  Speaker 7: build lots of I think say privately at least that
• 18:13
  Speaker 7: they might have done it anyway even if the government
• 18:15
  Speaker 7: hadn't banned exports. The other point I would make is,
• 18:19
  Speaker 7: and it's a really interesting case study for lots of
• 18:22
  Speaker 7: reasons that there's been this really close partnership and alliance
• 18:27
  Speaker 7: between the Indonesian government and China, and in particular a
• 18:31
  Speaker 7: couple of a few Chinese companies, prime among them Singshan,
• 18:35
  Speaker 7: which is the world's biggest nickel and Staler's steel producer,
• 18:38
  Speaker 7: and maybe familiar to listeners because it was at the
• 18:41
  Speaker 7: center of a huge short squeeze on in the nickel
• 18:44
  Speaker 7: market last year.
• 18:45
  Speaker 2: Those who avidly look at the short squeens.
• 18:47
  Speaker 7: Those who avidly follow the metals markets. But even if not,
• 18:50
  Speaker 7: it's a fascinating company. It's one of the great innovators
• 18:53
  Speaker 7: of the global metals industry, and they really bet the
• 18:57
  Speaker 7: house on Indonesia a number of years ago, forged this
• 19:00
  Speaker 7: very close partnership with the Indonesian government, and in exchange,
• 19:03
  Speaker 7: the Indonesian government has really opened the doors to them,
• 19:07
  Speaker 7: allowed them to make the investments and build the projects
• 19:09
  Speaker 7: that they were building the way that they wanted to, so,
• 19:12
  Speaker 7: you know, using Chinese workers, giving them tax breaks, all
• 19:17
  Speaker 7: of these kind of things to really encourage them and
• 19:20
  Speaker 7: to make it as cheap as possible for them to
• 19:22
  Speaker 7: come and make those investments in a way that lots
• 19:25
  Speaker 7: of other countries with nickel resources hadn't done. And so
• 19:28
  Speaker 7: as a result, you've seen this kind of huge investment
• 19:31
  Speaker 7: from China, principally into Indonesia, and as a result, this
• 19:34
  Speaker 7: massive boom in the Indonesian nickel industry.
• 19:37
  Speaker 2: Well for those listening who woke up this morning not
• 19:39
  Speaker 2: realizing they were going to be much better informed about
• 19:42
  Speaker 2: nickel pig iron by the end of the day. But
• 19:46
  Speaker 2: really going back thinking now about Africa, Jim, we have
• 19:50
  Speaker 2: this quite encouraging example in Indonesia. We do have a
• 19:55
  Speaker 2: palpable boom in materials that, as we've already mentioned, are
• 20:00
  Speaker 2: pretty are present in large amounts in certain African countries.
• 20:05
  Speaker 2: What's the prospect for African countries announcing that they're not
• 20:10
  Speaker 2: going to export unprocessed versions of these materials. I was
• 20:14
  Speaker 2: one of the reasons we were doing. This story was
• 20:16
  Speaker 2: that one of a recent Bloomberg conference in Morocco, the
• 20:19
  Speaker 2: New Economy Gateway, we heard a Ghanaian minister say that
• 20:23
  Speaker 2: they weren't going to export unprocessed lithium as they developed
• 20:27
  Speaker 2: that industry. How feasible is that.
• 20:32
  Speaker 6: Well, I think the first thing to say is that
• 20:33
  Speaker 6: the overall opportunity is pretty exciting for African countries. So
• 20:39
  Speaker 6: we do see a boom ahead in a whole range
• 20:42
  Speaker 6: of different metals and minerals. Jack mentioned some of them already,
• 20:45
  Speaker 6: the earliest around the battery minerals, but there are many others,
• 20:49
  Speaker 6: including rare earths, that are found all over Africa in abundance,
• 20:53
  Speaker 6: so there's a big opportunity here. Africa has been the
• 20:58
  Speaker 6: most under explored region in the world, so it's not
• 21:01
  Speaker 6: only that we know there's a lot there already, but
• 21:03
  Speaker 6: there's probably even more to be found as well. On
• 21:07
  Speaker 6: top of that, I think there's a recent growing recognition
• 21:11
  Speaker 6: that supply chains for some of these metals are fragile
• 21:17
  Speaker 6: but also quite concentrated. So of course a lot of
• 21:20
  Speaker 6: the processing gets done in China, but also in places
• 21:23
  Speaker 6: that are far from say, US markets, and so as
• 21:27
  Speaker 6: the US tries to increase its capacity in electric vehicles,
• 21:32
  Speaker 6: in batteries and things like that. There's a kind of
• 21:35
  Speaker 6: a new sort of interest in figuring out how can
• 21:39
  Speaker 6: Africa build out some of these supply chain themselves, which
• 21:43
  Speaker 6: could help bring resilience not just in the interests of
• 21:45
  Speaker 6: African countries, but in the interests of others in the
• 21:48
  Speaker 6: global market. So there's this kind of alignment of interest
• 21:51
  Speaker 6: that is quite new and quite unique that we hope
• 21:54
  Speaker 6: will work in the favor of African countries. As Jack
• 21:58
  Speaker 6: rightly points out that there are challenges to this. It's
• 22:01
  Speaker 6: not as simple as oh, you just announced an export
• 22:04
  Speaker 6: ban and everything will sort of follow suit. It's worth
• 22:07
  Speaker 6: noting that even in Indonesia they had to give away
• 22:11
  Speaker 6: some pretty pretty serious tax concessions to some of the
• 22:15
  Speaker 6: mining companies to make this kind of work for them,
• 22:18
  Speaker 6: and when they'd first tried this in around twenty fourteen,
• 22:22
  Speaker 6: it wasn't a universal success. They did run into challenges.
• 22:25
  Speaker 6: There wasn't enough smelting capacity, and actually they lost a
• 22:29
  Speaker 6: lot of their market share in baulk side production to
• 22:32
  Speaker 6: the baux side demand. Some of it got driven to Africa,
• 22:34
  Speaker 6: to Guinea, and the share of Indonesia's bulk side supply
• 22:39
  Speaker 6: fell and I don't think it's recovered since, so there's
• 22:42
  Speaker 6: sort of cautionary tails here as well. But the ambition
• 22:46
  Speaker 6: of governments like Ghana is to be applauded and to
• 22:50
  Speaker 6: see if they can sort of seize the moment. Right
• 22:53
  Speaker 6: you've got the increased bargaining power that some of these
• 22:56
  Speaker 6: countries have. DRC, of course, is a great example of this,
• 23:00
  Speaker 6: with a huge share of the world's cobalt supply in DRC,
• 23:06
  Speaker 6: combine with the rising demand for these metals, combined with
• 23:10
  Speaker 6: the fact that there's interest from other actors. But it's
• 23:14
  Speaker 6: a window of opportunity and it's one that can close easily.
• 23:16
  Speaker 6: So you may see headlines around this idea that is
• 23:23
  Speaker 6: lithium the new oil, and I think we need to
• 23:26
  Speaker 6: have a touch of realism to go with this, that
• 23:29
  Speaker 6: lithium is not going to be the next oil for
• 23:31
  Speaker 6: various reasons. The size of the market is a fraction
• 23:34
  Speaker 6: of what oil is. It's the dominant battery technology of today,
• 23:38
  Speaker 6: but it doesn't mean it remains to be the dominant
• 23:41
  Speaker 6: battery technology of twenty fifty. For example, And actually, if
• 23:44
  Speaker 6: prices were high and sustained between now and twenty fifty,
• 23:48
  Speaker 6: the incentive for people to come up with alternative battery
• 23:51
  Speaker 6: technologies would be even greater. So African countries need to
• 23:55
  Speaker 6: see themselves in this global game where there's innovation puting
• 24:00
  Speaker 6: at a very fast pace. And so while they might
• 24:03
  Speaker 6: have some bargaining power, it's not a blank check. It's
• 24:08
  Speaker 6: not a blank check to say we're going to ban
• 24:10
  Speaker 6: exports and everything else will follow. You might actually inadvertently
• 24:14
  Speaker 6: drive investment elsewhere and it could backfire, as we've seen
• 24:18
  Speaker 6: in some countries.
• 24:20
  Speaker 5: Well.
• 24:20
  Speaker 2: And also, I mean we're speaking in the week where
• 24:23
  Speaker 2: the British government has had to extend enormous inducements to
• 24:28
  Speaker 2: persuade a Tata Industries to put their big battery factory
• 24:33
  Speaker 2: in the UK, hundreds of millions of pounds supposedly, we
• 24:36
  Speaker 2: don't know the exect number. I mean, this is a
• 24:38
  Speaker 2: very competitive market and there's lots of subsidies flying around.
• 24:42
  Speaker 2: There is a risk that you're just adding costs and
• 24:44
  Speaker 2: adding reasons for companies not to go there.
• 24:48
  Speaker 6: Yes, that's right. So I mean the first thing is
• 24:51
  Speaker 6: to note that not every country that has an abundance
• 24:55
  Speaker 6: of minerals has the processing supply chain, so huge amount
• 25:00
  Speaker 6: of iron ore comes out of Western Australia. They're the
• 25:02
  Speaker 6: biggest iron ore producer in the world. They're not even
• 25:06
  Speaker 6: in the top twenty five of steel producers in the world.
• 25:10
  Speaker 6: All of that iron ore for Western Australia goes to China,
• 25:12
  Speaker 6: goes to the steel mills in China. Similarly, Chile is
• 25:17
  Speaker 6: famous for being a successful copper producer, but more than
• 25:20
  Speaker 6: half of Chile's copper is exported raw and that proportion
• 25:25
  Speaker 6: is actually rising rather than falling. And so it's not
• 25:28
  Speaker 6: the case that to be a successful mineral producing, affluent
• 25:34
  Speaker 6: economy that you have to go down the supply chain
• 25:38
  Speaker 6: of the minerals that you have in abundance. Actually, a
• 25:40
  Speaker 6: lot of the processing makes sense to take place closer
• 25:42
  Speaker 6: to the markets, closer to the manufacturing centers and so on.
• 25:46
  Speaker 6: So this is not the This is not the recipe
• 25:51
  Speaker 6: for success that is necessary. Right, This is not the
• 25:55
  Speaker 6: path that countries like Australia and Chile have followed. It
• 25:58
  Speaker 6: doesn't mean it can't be successful, as the Indonesian case
• 26:02
  Speaker 6: is starting to demonstrate, but nor is it necessary for success.
• 26:07
  Speaker 2: Both of you have spent a long time looking at
• 26:09
  Speaker 2: this and Jack, you've reported on many commodity booms and
• 26:13
  Speaker 2: busts over the years. Does this feel different? I mean,
• 26:15
  Speaker 2: either in terms of the incentives facing the big industries
• 26:20
  Speaker 2: involved and the governments that are pushing for those climate targets,
• 26:24
  Speaker 2: or in the sort of underlying conditions in Africa and
• 26:29
  Speaker 2: other commodity commodity producing countries.
• 26:32
  Speaker 7: I don't know. I think you know this time is
• 26:34
  Speaker 7: different is obviously the most dangerous phrase to utter in
• 26:38
  Speaker 7: in finance and markets. No, I don't think so. I
• 26:41
  Speaker 7: think you know. It's obviously a fascinating moment and a
• 26:44
  Speaker 7: very exciting one if you are in the batteries or
• 26:48
  Speaker 7: the battery metals industry. But fundamentally, these are commodity markets
• 26:52
  Speaker 7: and they will and indeed are going through booms and busts. So,
• 26:56
  Speaker 7: you know, Jim was talking about the differentistries going into
• 27:01
  Speaker 7: different types of batteries, and already we've seen in the
• 27:04
  Speaker 7: last few years as electric vehicles have grown and grown,
• 27:08
  Speaker 7: and this has become a front page story that shifts
• 27:12
  Speaker 7: in the battery chemical battery makeup, in part in response
• 27:16
  Speaker 7: to things like concerns about the concentration of supply of
• 27:20
  Speaker 7: cobalts ay from congo are making meaningful impacts. So, for example,
• 27:28
  Speaker 7: the cobalt market at the moment is in a bit
• 27:31
  Speaker 7: of a slump. That the price of cobalt is at
• 27:33
  Speaker 7: the lowest in quite a number of years, in spite
• 27:35
  Speaker 7: of the fact that the market is growing very rapidly
• 27:37
  Speaker 7: and demand is growing very rapidly. That's absolutely true, but
• 27:40
  Speaker 7: nonetheless the price is at a multi year low. One
• 27:44
  Speaker 7: of the reasons is a big increasing supply. Another reason
• 27:47
  Speaker 7: is actually the chemistry of batteries has been changing, so
• 27:53
  Speaker 7: car makers, particularly in China, are using lower cobalt batteries
• 27:57
  Speaker 7: and batteries have no cobalt at all in them. Lithiumyin
• 28:01
  Speaker 7: phosphate batteries are rising very quickly in popularity. So if
• 28:05
  Speaker 7: you look at some of the forecasts for demand for
• 28:08
  Speaker 7: cobalt in twenty thirty, say from last year to this year,
• 28:12
  Speaker 7: those forecasts have been cut pretty substantially. So for example,
• 28:15
  Speaker 7: I was looking at earlier today at a company called
• 28:18
  Speaker 7: Dartan Commodities, which is one of the key forecasters on cobalt,
• 28:22
  Speaker 7: and they've cut their demand from electric vehicles for cobalt
• 28:26
  Speaker 7: in twenty thirty by about twenty percent. As a result,
• 28:28
  Speaker 7: of that shift. So these markets can absolutely still go
• 28:32
  Speaker 7: through booms and bus and that does make it a
• 28:34
  Speaker 7: competitive environment unless you're in a position like Indonesia in
• 28:38
  Speaker 7: nickel or Botswana in diamonds. If you're not in that
• 28:43
  Speaker 7: rare position of being a very dominant supplier of a market,
• 28:46
  Speaker 7: it's much harder to have that negotiating leverage. It's not
• 28:50
  Speaker 7: to say it's totally impossible, and I think one of
• 28:52
  Speaker 7: the there's a couple of interesting things of the current
• 28:56
  Speaker 7: moment that I would just point out. One is, you know,
• 29:00
  Speaker 7: a lot of processing goes where energy is cheap, it
• 29:03
  Speaker 7: tends to be quite energy intensive, and so you have
• 29:05
  Speaker 7: big metal processing industries in places like Scandinavia with hydroelectric power,
• 29:10
  Speaker 7: Iceland with geothermal power, the Middle East with cheap natural gas.
• 29:14
  Speaker 7: Increasingly now as solar and wind become very cheap sources
• 29:19
  Speaker 7: of power possibly and potentially you have hydrogen as well
• 29:22
  Speaker 7: coming as a way of storing that renewable power at
• 29:25
  Speaker 7: some point in the future. That can really democratize access
• 29:29
  Speaker 7: to cheap power and make that availability of cheap electricity
• 29:34
  Speaker 7: no longer such a stumbling block for countries that want
• 29:37
  Speaker 7: to build processing industries and The other, of course, is
• 29:40
  Speaker 7: what's happening in global geopolitics, where suddenly the US and
• 29:45
  Speaker 7: EU in particular are saying are looking at the dominance
• 29:49
  Speaker 7: of China in the processing of all of these metals
• 29:52
  Speaker 7: and saying strategically that's not great for US, and willing
• 29:55
  Speaker 7: to spend large amounts of tax payer money to try
• 29:59
  Speaker 7: and change that situation, As the example of the UK
• 30:02
  Speaker 7: is showing, probably they want to change that situation by
• 30:05
  Speaker 7: building capacity in their own countries rather than in Africa, say,
• 30:10
  Speaker 7: but potentially there's a possibility there for some kind of
• 30:15
  Speaker 7: joint venture where you see countries in Africa or South
• 30:19
  Speaker 7: America or Asia, or whether it might be being able to
• 30:22
  Speaker 7: get some kind of government funding from the US or
• 30:26
  Speaker 7: Europe or or other countries that want to try and
• 30:28
  Speaker 7: diversify their battery supply chains.
• 30:31
  Speaker 2: One of the most evocative examples of some of these
• 30:34
  Speaker 2: issues from back in history was the Calico Acts, when
• 30:38
  Speaker 2: Britain actively banned Indian cotton from the British market in
• 30:43
  Speaker 2: the seventeen twenties to protect and help kickstart the British
• 30:48
  Speaker 2: cotton industry and I think set back the textile industry
• 30:51
  Speaker 2: in India for hundreds of years, so I guess we
• 30:53
  Speaker 2: would hope that what is different now is that our
• 30:57
  Speaker 2: industrial countries are not actively trying to thwart or openly
• 31:00
  Speaker 2: trying to thwart the development of developing countries. Jack Farci,
• 31:05
  Speaker 2: Jim Cust, thank you very.
• 31:06
  Speaker 6: Much, thank you, thank you.
• 31:11
  Speaker 2: Well, that's it for this episode of Stephanomics. Next week
• 31:14
  Speaker 2: we'll have more, in fact the last in the current series.
• 31:18
  Speaker 2: In the meantime, you can get a lot more economic
• 31:20
  Speaker 2: insight and news from the Bloomberg Terminal website or app.
• 31:23
  Speaker 2: This episode was produced by Magnus Hendrickson, Yang Yang and
• 31:27
  Speaker 2: Summer Sudden. Special thanks to Claire Joo, Annie Lee, Chandra Asmara,
• 31:32
  Speaker 2: Norman Hassano, Jack Farci and James Cust, and of course
• 31:37
  Speaker 2: the brilliant Tom Lehra for the elements you heard at
• 31:40
  Speaker 2: the start. Molly Smith is the executive producer of Stephanomics
• 31:43
  Speaker 2: and the head of Bloomberg Podcast is Sage Bowman.