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fresh for everyone. Hello,

1:21

and welcome to another episode of the

1:23

All Thoughts podcast. I'm Tracey Allaway. And

1:25

I'm Joe Weisenthal. Joe, I have

1:27

a joke for you. A very special joke. Go

1:29

on. Why did Anglo-American write

1:31

down its nickel business? Because

1:34

it was only worth five cents. That's

1:36

so good. That's actually... Okay, my line was

1:38

because it was a few cents short of

1:40

a viable return, but yeah. Same

1:44

thing. That's really good. Thank you.

1:46

But you know what the thing is, my daughter

1:48

has gotten really into reading me jokes. So

1:51

she has all these joke books. My

1:53

brain is very... You can anticipate them. Yeah, and see

1:55

where these all are going. All right,

1:57

well, on a serious note, Anglo-American

20:00

even acquiring raw commodities, how much

20:02

of the edge is just a

20:04

sheer scale question? There

20:06

is a gigantic market in

20:09

China, period. There are

20:11

a lot of workers in China, period.

20:14

And so even setting aside

20:16

whether different groups of engineers

20:18

and scientists could replicate these

20:20

processes on paper, how

20:22

much is just the pure scale edge part

20:24

of the story here? I mean, having a

20:27

big domestic market certainly helps. But again, what

20:29

also helps is having a strategic

20:32

industrial policy to actually being

20:34

able to capitalize on that

20:36

domestic market. And it's, I

20:39

think, the conjunction of those

20:41

two that brought about that

20:43

dominance in the supply chain. Now, the

20:45

problem that we're having increasingly is,

20:47

and this always happens in China, we had it in steel and

20:49

we had it in aluminum. When the

20:52

Chinese government starts developing industries, there's

20:54

actually inherently a lot of competition

20:56

also within China. But

20:58

you always get over investment, you have

21:00

got over capacity. So take the last

21:02

study from the European Union, for instance.

21:04

The European Union estimates that last year,

21:07

the Chinese could have produced twice as many

21:09

cars than they did through the over capacities

21:11

that they've had. And so what you're seeing

21:13

now is that some of those over capacities

21:16

is, or there's a threat that some of

21:18

that over capacity is actually now being exported

21:20

to the Western markets. And again, that takes

21:22

us back to the whole discussion about terrorists

21:24

and threat protectionism. But it

21:26

is that entire approach, I think, that we've

21:29

seen the last 10 to 15 years that

21:31

brought those supply chains together. Okay,

21:33

speaking of over capacity, I mentioned

21:35

in the intro that there have

21:37

been these accusations of Indonesia essentially

21:40

flooding the market with low grade

21:42

and low price nickel. What

21:45

impact has the dominance of Indonesia

21:47

on the nickel market actually had

21:49

on other businesses? So if

21:51

I put it very simply, I think for

21:53

China, it's almost always

21:55

about quantity, not

21:58

about value, about volume but

22:01

not about value. Coming

22:04

back to preventing bottlenecks through the supply

22:06

chain, when you're looking at the industrial

22:09

policy, I think what China wants to

22:11

prevent is constraints and bottlenecks and

22:13

therefore higher prices that would

22:16

effectively make it difficult

22:18

for the strategic industry like EV

22:20

manufacturers to produce those EVs. What

22:23

we see in Indonesia at the moment

22:25

is a lot of discussions

22:27

about where the production costs are

22:29

in Indonesia. What is the marginal

22:31

cost? Because ultimately if you're prioritizing

22:34

volume over value, then

22:36

you're producing at costs. Now,

22:39

the problem for the producers outside China

22:41

is if that is the name of

22:43

the game, there is not

22:45

a lot of fat in producing nickel

22:48

and that's why we've seen the

22:50

western producers like BHP and

22:52

Anglo actually taking a

22:54

relatively bear review on their nickel

22:56

assets. BHP actually is

22:59

probably the one that I would... You mentioned Anglo

23:01

before, but BHP is the one that I would

23:03

highlight potentially even more. They

23:05

have one operation in Australia called Nickel West.

23:07

It's a really significant side, big side actually.

23:11

A few years back, we thought that that could

23:13

actually be the supplier of choice to

23:15

the western or to the EV industry, but

23:17

that's actually one of the assets that BHP

23:19

doesn't assign a

23:21

lot of value to anymore these days.

23:24

This has just come down so much

23:26

that this big project in Australia just

23:28

can't make much money. Yeah, it's effective.

23:32

From 7 Days of

23:34

the Week to the 7

23:37

Wonders of the

23:39

World, culture

23:42

is shaped by 7s and

23:44

the BMW

23:52

7 Series is no exception. Be

23:54

welcomed in with automatic opening doors.

23:57

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23:59

curved display. or recline in the

24:01

backseat and escape into the 31-inch theater screen.

24:04

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24:06

7 Series. BMW,

24:08

the ultimate driving machine. See your

24:10

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24:13

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an Einstein with Salesforce. On

24:52

some basic level, the nickel-based batteries

24:55

are not as efficient as the

24:57

sort of the chemistry that's

24:59

in the West. But the Chinese batteries are like

25:01

the best in the world, right? Yeah, so

25:03

again, you would have to go

25:05

back because the sector is evolving

25:07

a lot at the moment. So

25:09

initially, I think when we started

25:11

talking about the EV industry, the

25:13

idea was, and that's seven,

25:15

eight years ago, that nickel-based

25:17

batteries are the battery

25:20

of choice in China and potentially outside

25:22

China. The Chinese always had that lithium-ion

25:24

phosphate battery, which doesn't contain any

25:27

nickel. But initially, because it has a

25:29

much lower energy density, it was never thought to be kind

25:31

of the disablaive choice. But there was a

25:33

lot of, again, innovation in that

25:36

space, and those batteries have become much,

25:38

much better. They are folded differently. They

25:40

are put together differently. So the energy

25:43

density has actually increased as well. And

25:45

so now you almost have the second

25:47

lithium-ion phosphate market that is becoming another

25:50

mainstay of the industry. So is it

25:52

just to understand this better, in theory

25:54

or the chemistry lab, so to speak?

28:00

solutions to the shortfall of critical materials

28:02

that we do face to some extent

28:04

on the way to net zero. But

28:07

both US and Europe do have

28:09

a fair bit of catching up to do

28:11

in the coming years. Right now, so obviously

28:14

with the Inflation Reduction Act, but

28:16

also the rise of Tesla and

28:18

others, you know, there's more of

28:20

a domestic battery industry. In

28:22

fact, I think we talked to the CEO

28:24

of one of the companies. Oh, yeah. Several

28:26

months, Novonix. We're US-based battery

28:29

companies, startups, or various stages

28:31

in development. Where are

28:33

we right now sourcing most of our

28:35

sort of critical components for them or

28:37

critical minerals or critical elements for batteries?

28:39

I look, there is an existing nickel

28:41

market actually. Yeah. There's an existing nickel

28:44

market actually. But where do

28:46

we import it from? What is

28:48

a big export or exporters to

28:50

the US? So when you're looking

28:52

at the key nickel producing countries

28:54

outside Indonesia and China, there's Brazil,

28:56

there's Canada, Australia as well. The

28:58

latter two actually have got agreements

29:01

with the US in place. I

29:03

think the question really comes

29:06

more pressing when you're looking five, six,

29:08

seven, eight years out. The less cars

29:10

with a combustion engine you're putting on

29:12

the road, the more pressing it

29:15

then becomes to actually make sure that you

29:17

have got the raw materials available. And again,

29:19

taking a step back, what we're seeing

29:22

actually at the moment is in the

29:24

Western world that the EVs, the pure

29:26

battery electric vehicles are actually downgraded a

29:28

little bit. So we actually have to

29:30

take down our penetration rates. What we're

29:33

seeing more is kind of

29:35

that intermediate solution where you're putting hybrid

29:37

or plug-in hybrid electric vehicles onto the

29:39

road. And for those, for instance, you

29:41

do need less of the critical raw

29:43

materials. So that buys you effectively time

29:45

potentially to build up more of a

29:47

supply chain. That building up of a

29:49

supply chain I think is right now

29:51

the key focus that we have in

29:53

both US and in Europe. So just

29:55

broadening out the Metals discussion, you are

29:57

of course the head of Metals Research.

29:59

for BOA so we should ask you

30:01

about some other things going on as

30:03

well but it seems to me like

30:05

one of the major stories in this

30:07

market has to be volatility

30:10

recently and perhaps copper is the best

30:13

example of that so we had Jeff

30:15

Curry on a few weeks ago talking

30:17

about how long copper was the trade

30:19

of a lifetime and since

30:21

then I think it's down what like

30:23

10% I would

30:26

say like a few weeks is probably not

30:28

the time scale he was thinking of in

30:30

terms of trade of a lifetime but there's

30:32

definitely been a lot of volatility and it

30:34

feels like there's a

30:36

weird dynamic going on where like part

30:39

of the thing causing volatility is

30:41

the restriction in is the

30:43

tight physical market basically so

30:45

we're seeing these big swings

30:48

up and down partly

30:50

because we need more of this

30:52

stuff what's going on there so

30:55

copper is really really different to

30:57

nickel on nickel we had the

31:00

reserves and the resources the deposits in Indonesia

31:02

on copper you

31:04

don't it's a very mature market some

31:07

of the best assets or mines that we

31:09

actually have in the world have

31:12

been running for decades and

31:14

it's very hard to find really

31:17

good new assets in

31:20

fact when you're looking at some of the projects

31:22

that are currently in the pipeline just to highlight

31:24

the difficulty in bringing those lines some of those

31:27

were discovered almost 30 years ago

31:29

so it took you it took you almost two

31:32

generations to bring them to the market and

31:34

so we now facing an

31:37

almost empty project pipeline but doesn't have either

31:39

on the copper side is that

31:42

during the past 10 years to the past

31:44

decade we had a bear

31:46

market effectively I bet you in

31:48

2015 I would not have been sitting here it

31:50

was because there was not a lot of interest

31:53

in the metals in the metal side and so

31:55

think about it shortly after that or doing that

31:57

doing this ten years Glencore almost went bankrupt how

31:59

did how did