Supply chains and material matters with Ed Conway(Editor @ Sky News) & Richard Tite (CIO @ TechMet)

- So it feels like the whole world economy is being restructured.

- We're only going to get to net zero if the stuff that we're doing and the products that we're using and the technology we're deploying is superior to what is being used already because that's how markets work. That's how mass adoption works.

- A lot of these things are reminding people that physical materials and physical supply chains matter. You thought that you were living in this world where everything was dematerializing. Well, all you needed was a social media app, and that's all that mattered.

Well, guess what. It turns out that the internet is physical. It's based on cables. Guess what. It turns out that all these products, like smartphones and everything else, are physical, and they're based on getting them from one place to another and converting them from base materials into extraordinary things.

- Hello, everybody. Welcome back for another installment of Transmission. In today's episode, Quentin is joined by Ed Conway, author and economics and data editor at Sky News, and Richard Tite, chief investment officer at TechMet. The conversation is a deep dive into supply chains and the world of raw materials. As always, if you are enjoying the podcast, please consider hitting Subscribe and giving us a rating, and let's jump in.

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- Hello, Ed. Hello, Richard.

- Hello.

- Hi, there.

- We are very excited to have you both on. For--

if you're listening to this or watching this, this is a double header, so this is a special. And we've got a couple of people on to talk about supply chains, minerals, metals, and all that stuff. So firstly, we've got Richard Tite on, who is chief investment officer at TechMet. If you haven't heard of TechMet, what they do is very interesting.

They're backed by the US government, and they allocate capital just to get strategic control over the production of metals that will define and power the 21st century economy. And Richard really understands the whole macro picture as well as what's happening in each individual part of supply chains and where the squeezes and the bottlenecks are. So we're really excited to have Richard on.

But secondly, we've got Ed Conway on. You probably know Ed already as economics editor on Sky News. He's also a well esteemed author. You've probably seen his latest book.

It was shortlisted for Financial Times Business Book of the Year. And in that book, Ed talks a lot about natural resources, specifically sand, salt, iron, copper, oil, and lithium. And so if you haven't read that, please do. Check it out.

We'll put the link in the show notes.

So Ed, Richard, we are very, very excited to have you on. And just to set some rules about this discussion, I know you both cover very different things, and Ed, you're a journalist and probably have to be unbiased, although your book delves into some really big detail. And Richard, I wonder whether you have any rules. How should we do this conversation?

- Well, OK, well, I mean, so I am happy to just--

I can blather on about materials as much as you want. I'm a journalist, so as you say, I'm not--

I'm not an expert. And I'm sure that many of your listeners are going to be far more expert than I am on a lot of this stuff. But I think the fact that I'm here kind of talking about this stuff and the fact that I've written a book about it, I think, underlines that this--

what your business deals with, with what Richard does, it's become so mainstream. Everyone is now fixated, focused on the energy transition.

And kind of all my book attempts to do is to kind of put that into a bigger perspective to say, listen, there's a lot of catastrophism and a lot of fear but a lot of excitement as well about what we're going through. Actually, humanity has done this throughout its existence, and one of the exciting things is that what are humans--

we take stuff out of the ground, turn it into tools to make our lives better.

And that is what we're doing now with--

what the companies that Richard's involved with are doing, really exciting things to try and make the energy transition actually happen. And so it's exciting that this has now become a mainstream thing that I can talk about and that people won't just look at you blankly because that just means it's becoming real, doesn't it?

- And yeah, I absolutely agree with what Ed said when we started TechMet in 2017. We saw this big challenge ahead of us that if we're going to electrify the world and stop burning petrol and diesel to move around and put a battery in everything, we needed to start immediately on the challenge of scaling all the raw materials that we're going to need, so everyone can have a battery.

And back then, it wasn't mainstream. No one was talking about it.

I think what's really changed, certainly since the pandemic, has been how the challenge of how we scale this technology has certainly risen in the popular consciousness, and the fact that Ed has chosen to write a book on it just kind of demonstrates how it is passing from the kind of specialists to the generalists in terms of the awareness.

- So it feels like the whole world economy is being restructured rather than just sort of financial assets, rather than real things, right--

minerals and commodities. Is that just the--

is that just net zero that's causing this, or is there something bigger that's happening?

- I think the revolution that we're going through in mobility is really one that's driven ultimately by technology. And it's the superiority of the technology relative to the incumbent--

what we're using already. The fact that we also can cure the dreadful externality of producing carbon in order to go about our economic lives is obviously existentially important, but we're never going to get to net zero with goodwill.

We're only going to get to net zero if the stuff that we're doing and the products that we're using and the technology we're deploying is superior to what is being used already because that's how markets work. That's how mass adoption works. And that's the key that's driving all of this.

I think, also, the first 20 years of the 21st century were all about software, were all about the tech majors. The marginal cost of production of software is zero. You just--

at the stroke of a button, you can push out millions of copies of it into the world.

We now have to re-engage with the world of atoms and molecules, which are difficult and tricky and costly and don't scale in the same way. And I think we have to relearn a lot of the lessons we went through in the first great phase of industrialization. We are now on the cusp of a great new Industrial Revolution sort of 3.0.

- I would say totally kind of underlying that--

and when you kind of look--

when you look at the history of all of the different amazing things that we have discovered--

processes that go back to the Industrial Revolution--

you see--

well, there's a few things. First of all, it's kind of extraordinary.

Second of all, by the way, when a lot of this stuff happens, there were well understood challenges that people needed to resolve that had been laid down, whether it was turning salt into soda ash or creating something that could preserve your materials or actually being able to make iron out of--

using kind of coking coal rather--

or a form of coal rather than wood.

Everyone kind of knew--

or inventing concrete. Everyone kind of knew what needed to be done, and there were amazing advances there, but a lot of it was really kind of, like, carbon-intensive. The striking thing about what we're going through right now is you need to reimagine almost all of those processes. And it's just--

it's kind of amazing the breadth of processes we're talking about. I often think of, like, silicon chips and semiconductors.

--was to try to understand that supply chain not just a bit in the foundry, where there's been quite a lot of focus, but all the way back to the quarry, where the stuff comes out of the ground.

And so you need to take--

and it's the same--

as you know, it's the same supply chain pretty much up until the end for solar panels as well. And you need to mine stuff. You need to get the silicon out of the ground. You need to turn it into metallurgical silicon, which involves putting it into an electric arc furnace and heating it up to 1,500 degrees alongside woodchips and coal.

So there's chemical and there's physical energetic kind of carbon emissions at that point and all the way through to turning it into polysilicon, turning it into a silicon wafer, all of these different processes are seriously energy intensive. And I think when you see that across the piece, when you realize that almost everything we make, there are likely to be some carbon emissions, then I think you start to understand, as Richard is saying, the scale of this, the fact that it's an Industrial Revolution. It's not just about making wind turbines and batteries, that that's an important part of it. It is also about conceptually thinking about a whole new way of the world working.

So that's kind of exciting but also just desperately terrifying as well because I don't think people, when they signed up to the various net zero pledges--

in the UK, we made it law in 2019--

did anyone in the cabinet room understand the scale of it. No, not a bit of it, and I know that having talked to people who were in the cabinet room when they were signing up to it. They didn't understand what it actually entailed.

Well, we're now starting to understand it, and understanding it via, you know, actually kind of low down through these minerals and what you need to do with them, so you're first getting more out of the ground, but also what you need to do with them to turn them into amazing things, like batteries and solar panels--

then it starts to make sense. Golly, this is, like, an enormous thing we need to do.

The only thing I'd add, back to your question, what makes it different this time around, is we are doing this--

A, we're doing this at the same time as everyone else, and so there is definitely a rush. I don't know if it's a race, but certainly--

and Richard will kind be able to tell you more about that--

but a lot of people are rushing to get these things. A lot of governments are really focused on it. A lot of people are aware on that.

And secondly, and we are potentially in the beginning of a new cold war and that geopolitics is resurfacing in a massive way right now. And it's not just about the US and China. It's also about what we see in the Middle East at the moment--

the Red Sea--

people having trouble getting through the Red Sea, shippers saying they can't go through there.

A lot of these things are reminding people that physical materials and physical supply chains matter. And you thought--

like Richard said, you thought that you were living in this world where everything was dematerializing, where all you needed was a social media app, and that's all that mattered.

Well, guess what. It turns out that the internet is physical. It's based on cables. Guess what.

It turns out that all these products, like smartphones and everything else, are physical, and they're based on getting them from one place to another and converting them from base materials into extraordinary things. All of that never went away. It was always important, but now it's going into the stratosphere. And I think it's a bit of a wake-up call--

the last few years--

in various different guises. And golly, we really do need to wake up and try and work out how we're going to get there.

- OK, then. We've talked a little bit about--

well, we've talked a lot about how we're restructuring world trade and the world economy around this new world of physical things and physical assets. If we could, could you both just help our listeners--

let's build a bit of a map of what the current state of play is internationally. I know that this is so complicated that you've written a book on it, Ed, and Richard, you've been working on this for many years. So we're going to try and do it in a nutshell.

What's currently going on? And then where are the bottlenecks and where are the flashpoints? And I'm aware you're not going be able to touch on everything here about that, but yeah, what does the current state of play look like, and what's happening--

what changes are happening?

- I mean, in my field of technology, metals, and lithium ion batteries, the big story was that a couple of decades ago, China decided to not bother competing with the rest of the world in producing combustion vehicles and go flat out to dominate the next generation of technologies, which they saw coming, which was the lithium ion battery and its use in electric vehicles.

So the China--

the Chinese economy and the Chinese communist party have been prosecuting a very successful business plan, basically, to build the supply chains they need to massively scale lithium ion batteries and electric vehicles, which means they own a huge number of the upstream resources. But really, more than upstream resources, where the real bottleneck and where the real challenge is is turning the dirt or the brine that you flow out of the ground into the usable chemicals that you need to make the lithium ion battery. And that's where the real choke hold is in terms of Chinese dominance.

China also dominates the production of batteries themselves. They buy--

by many multiples, they produce more batteries than anyone else, and it's a scale game.

The bigger the scale, the lower the cost. The lower the cost, the cheaper the car. The cheaper the car, the more people buy it. China has just become the largest auto exporter on planet Earth.

They're now--

they now export more cars than Japan and Germany, and that's the direction of travel.

So there's been a very--

we've been kind of asleep at the wheel in the rest of the world focusing on our legacy businesses. And now you see auto makers in Europe and North America scrambling to catch up. The only exception to that rule, obviously, is Tesla, who dragged our industry forward by 10 years and has been fabulously successful. And I think we all owe Tesla a huge debt of gratitude for their trailblazing.

So it really is in the refining of these raw materials where China has a real advantage.

These minerals themselves are pretty distributed across the world. There's plenty of lithium in Australia and North America, in Latin America and Africa.

There's nickel all over the world. There's cobalt in--

well, cobalt is obviously a very DRC-dominated mineral, but we're using less and less cobalt in batteries these days.

So really, the challenge isn't in where these minerals are. The challenge is turning them into useful chemicals that you can make batteries out of, and then making the batteries themselves. And that's what we're focused on at TechMet. We're focused on building resilient, localized, high ESG standard supply chains for the US and its economic allies. The good news is that there there's a lot of opportunity and capacity for us to go and build. The challenge is, can we do it quickly enough to make a difference and make sure that we can build those supply chains to shore up Western manufacturing of electric vehicles?

- And I suppose the other--

it's--

the Chinese lead on batteries is extraordinary at the moment. And the Inflation Reduction Act in the US and also solar panels--

I mean, again, it's almost complete dominance. And as Richard is saying, if there's--

so if there's one country that has understood the exigencies of what I call the material world, which is basically just saying, you need--

it's helpful to think about where stuff comes from and what you do to get it into products.

If there's one country that has been thinking strategically about this for a long time, it's China, and they've been thinking in the terms of the decades. And we, the rest of us, are only kind of getting around to it now. And when you look at the Inflation Reduction Act, that is an incredibly bold attempt to try and rest some of this production back to the US. But it's still, I think, an open question as to whether it's going to work or, indeed, whether it's going to persevere. I mean, there's political risks coming up in the next year for the US in a big way.

And when you look at Europe, I mean, yeah, like Richard is saying, China--

when you see those charts of Chinese car imports into Europe, it's like a COVID chart. It's exponential. It's a line going up like that. And so far, in terms of revealed preferences, Europe is still moving relatively slowly, as far as I can make out, compared with the way that China has rattled up with the rest of the world.

So I just--

I question at the moment whether the incentives are there for Europe to be able to turn around and rebuild this industry that--

it never really had a battery industry. It certainly had a solar industry in the past. And I think the double challenge on top of it is that while the US has on its side the fact that you have these enormous incentives--

like I say, question marks over them--

but you also have the fact that they have incredibly much more plentiful and comparatively cheaper energy than in Europe.

Europe is de-industrializing right now. I think it's kind of terrifying. You look at some of these charts of energy consumption in Europe, and primarily because of industrial energy use, it's just gone--

it's gone through the floor. We're not making fertilizer anymore. At least the amount of fertilizer we're producing in Europe has gone down incredibly fast. We don't make fertilizer, so we used to have two big fertilizer plants.

And the reason I mention fertilizer is it's just another one of these basic building blocks. And actually, being able to make ammonia is quite helpful when you're making other things. So if you're making carbon fiber, you need acrylonitrile, which you make from ammonia. So this whole complex of different products actually has a bearing on whether we're able to make the stuff that goes into a wind turbine because you need carbon fiber to go into a wind turbine.

We're not making this stuff in Europe anymore. We just shut down--

in the UK, we've shut down our two fertilizer plants, which had the Haber-Bosch process--

taking natural gas and turning it into ammonia, so nitrogen, which you could then use for fertilizer and explosives, by the way. And we just don't make it anymore. We import it all from overseas. We import it from North Africa, and we import it from America.

And that--

you see that across Europe. The place that invented the Haber-Bosch process is no longer doing, is no longer carrying out the Haber-Bosch process for the manufacture of fertilizer--

BASF in Germany. This is kind of extraordinary, and it's obviously a consequence of enormous kind of political chaos that's happening right now with what's happening in Ukraine and what that does to gas prices. But that's the difficulty.

To go back to the point, Europe is trying to do this transition while also having really high energy costs, which are crippling its industrial base. And I find that a really difficult double-edged kind of challenge for it to have. And we'll probably hopefully get to a point, if we are in this kind of different universe, where you have blocs of nations, rather than a big, globalized world, which is something we all need to be thinking about because that is the world that we have for the last 20, 30, 40 years was a massive, untrammeled system of globalization.

If we're in this other world, then we do need to be thinking kind of strategically about who's going to be mining the stuff, where is it going to be made, are they a friend, are they a potential foe, and that's a weird world to be in. I've got to tell you, I mean, Richard's more familiar with what's going on in the kind of financial sphere. But as far as I can make out, very few people have been thinking in those kind of geostrategic terms over the last few decades. It's quite unfamiliar.

But you need to kind of engage with it because that's kind of where we are in your normal textbook about globalization 101. That's not relevant anymore. We're in a whole new--

I mean, have you have you encountered that, Richard, kind of unfamiliarity amongst people on this?

- Yeah, I mean there was--

I would describe it as a sort of naivety, which is gradually now kind of the scales are falling from people's eyes about the reality of how these supply chains work. And the--

I would guess it's the vulnerability and the interdependence that now kind of pervade the West in terms of our dependence on China for so much. I mean, the analogy is the dependency on oil and the Middle East and the oil shocks of the '70s. I mean, we're kind of heading towards potential kind of critical mineral shock with how reliant we are on China.

So my view is, though, that we're--

there's a lot to play for still, and there's a huge amount of potential in the West. One of the west's kind of trump cards is we do have vast mineral wealth across North America, across Australia, South Africa, and other parts of the world. And we also have fantastic innovation in the West.

So there are--

I can guarantee that the supply chains we have today won't be the supply chains we have in 10 years because there is enormous amounts of innovation going on in how we extract these minerals and how we actually are going to end up making batteries. There is technology out there that we've invested in, which is going to end up collapsing parts of the supply chain.

We have a company in America called Xerion Advanced Battery, which electroplates cathodes onto foils with impure feedstocks. We do not need 99.99%

pure lithium hydroxide and nickel and cobalt sulfates to make batteries. We can make them out of impure feedstocks.

So there are technologies out there, which are going to be able to circumvent some of the choke holds that China has on this industry. And so the West has to focus on what it can do well, which is innovate, rely on its brilliant universities and scientists, rely on its open free capital markets, and rely on the fact that we do have vast geological wealth at our disposal.

- Richard, just to ask you a couple of points about TechMet, what strikes me is so it's US government-backed, and it's looking to take strategic control over the production of metals, specifically around energy metals or battery metals, right? And is this a defensive move, or is this--

it feels like, with the Inflation Reduction Act and these kind of programs, the US at least has a strategy, is executing a strategy, which is to take back control of a lot of the production and refinement and, essentially, the supply chains we're talking about. And does Europe have that, or does the UK have that? Where are we on all those things?

- Yeah, I mean, just to talk about TechMet for a second, we're a private investment company that is partially backed by the United States government, but also, the majority of our capital actually comes from private investors. But we are very closely aligned with the US. And our strategy is to build resilient high environmental standard supply chains for the benefit of the US and its economic allies.

The US is the luckiest country in the world. It's blessed with incredible domestic resources, protected by two oceans with a great legal system, brilliant people, the deepest capital markets, and a government that can coordinate action on a scale, which, frankly, no one else can.

So your question about the kind of relative action of America versus Europe--

I mean, Europe is just starting out at a disadvantage relative to America. It's a much harder coordination problem for Europe, and it's certainly, I would say, in third place behind China and the US.

When it comes to the UK, we obviously decided to leave Europe, making that challenge even harder. So there are obviously--

the UK is trying to catch up. I mean, we, ourselves, we've invested in Cornish lithium down in Cornwall for the extraction of lithium from both hard rock sources and brine sources, and we want to make sure that lithium stays in the UK for the benefit of UK manufacturing. The UK government has been very helpful to develop that business. We announced a $30 million investment this summer from the UK infrastructure bank, which has been enormously helpful and constructive.

But it's harder for smaller countries to compete against the giant economic blocs of the US and China. And as Ed said, there are all sorts of challenges that Europe faces with political instability on its kind of Eastern borders--

high energy costs, et cetera. The fundamentals aren't the same in Europe as they are in the US.

I'm a big bull on the US. I believe the US is kind of a sleeping giant. When it decides to do something, it normally ends up doing it better than anyone else. Just look at the way it mobilized its industrial base during the Second World War to become the dominant world power. I think the US is on the cusp of another great Industrial Revolution. It's reshoring a huge amount of manufacturing. You're seeing the Inflation Reduction Act and other legislation lead to a Cambrian explosion in all parts of the battery supply chain across the US.

And so I think that the US is--

the rate of growth and the potential for the US to catch up is fantastic. And I think we're going to get there.

- What's interesting, actually, I should say about the UK--

so we--

again, I kind of talk quite a lot to politicians and policymakers about this kind of--

increasingly. And I've actually been into government to talk about my book. I don't know whether that's encouraging or whether that's terrifying that they would get a journalist in to talk about these things.

But nonetheless, what's kind of interesting here is that we went from a situation where you had various governments, like the Theresa May government, the Boris Johnson government, who were going on about industrial strategy, you know. And we've got a strategy, and it's going to be focused. And they produced lots of blueprints and have lots of grand plans about it.

But actually, kind of it amounted to next to nothing.

And now you've got a government where--

Rishi Sunak doesn't especially--

it's not his natural territory. He's slightly more, I think, at home with things like AI and that kind of soft tech, as it were. But he's--

I think he recognizes now that this is a big issue. Jeremy Hunt actually is becoming increasingly focused on this stuff.

So you're in this kind of strange place, actually, where the UK has probably more of an industrial strategy than it has done for years and years. It's focusing on this. It's putting a lot of money by UK standards into gigafactories, quite a lot of money by UK standards. We're trying to rebuild the entire kind of steel industry, so get rid of those blast furnaces because we had a very kind of carbon-intensive steel industry compared with most countries. And so now we're going to kind of go there.

In terms of the absolute scale, there's no way that the UK can compete. And in terms of leaving the political bloc that is the EU, we're not part of that bloc, so we don't have that power of being part of an enormous market for consumption. I don't know yet whether the UK can be a kind of a bridge between the US and the EU. I don't see any evidence of that being the case at the moment.

However, what I would say is we were talking a moment ago about, how do you--

how do you manage a world where it is genuinely multi-polar, where you do have kind of different blocs? And you should be trying to think about, OK, we need this supply chain for X and Y, whether it's batteries or solar panels or whatever it is. We kind of need to think about how we can actually work as collaboratively as possible, while also maintaining kind of economic incentives. And it's possible the UK could play a role there.

I've also just been up to one of the new clusters, so clusters--

we don't talk about clusters much. Have you had--

have you had an episode on clusters yet? Probably not. But clusters--

QUENTIN SCRIMSHIRE: We haven't yet.

- Industrial clusters like--

no, OK, well, maybe that's one for the future. Industrial clusters or not--

industrial clusters--

you've got all these areas, particularly in the UK, where you've got heavy industry kind of clustered in a certain area just because you have--

in the case of the Northwest, there's a lot of salt there.

So salt--

actually, it is the basis for a lot of our chemicals industry. Where the salt is is also where the chemicals factories are. But also, the salt then becomes soda ash, which then goes into the glass. So you've got glass factories there.

You've got places that are making fertilizer as well. At least they were until they shut them down recently. You've got oil refineries, all of these things together in a small spot.

They all--

they're all massively carbon-intensive. In order to try and crack some of those things, hopefully, you can do it with electricity, but actually, there are certain things like a massive glass furnace that you probably are going to need some sort of a flame or--

talk to anyone in the glass industry, and they're like, you still need a flame, like it or not. And so you're going to need hydrogen.

And it might well be that in the management of these clusters, the UK actually is more advanced than most other places around the world because we have plans for clusters that go beyond what you see in the US and beyond what you see in much of Europe. So in certain kind of small forensic areas, it might not necessarily be innovation, but it might be corralling different interested parties into something that actually works.

You know, and that is--

the UK might have a lead. And that is actually some of the toughest stuff in the energy transition--

you know, actually making carbon capture a going thing, a going concern. No one's worked out how to do that. Actually, turning hydrogen into something which is a functional part of a different set of industries--

no one's managed to do that yet so far. So there are little areas where the UK could actually have some interesting leadership.

But it's just--

it's the scale thing. We are still very small. We've got lots of smart people here. We're very good at inventing stuff.

We're terrible at turning inventions into something that can become a kind of commercial reality. We invented the lithium ion battery, and then obviously didn't make anything of it, although, actually, the interesting story on the lithium ion battery is we did--

the conventional story is we invented the lithium ion battery, or at least some of the biggest kind of advances in the cathode chemistry happened in Oxford. And then it was Japan--

it was Sony in Japan that managed to turn it into a going concern.

We did actually have a factory up in the very, very north of Scotland, which, at the time, was called AGM, which made--

took those lithium ion technology and turned it into C-sized batteries, some of the--

actually, the world's first big lithium ion batteries were made commercially in the UK. But rather than being made to go into nice little devices that everyone wanted to have, they went into nuclear submarines, and they went into army kind of radios because that was the market that we had. WE had a defense market rather than having a commercial electronic market.

And again, so you come back to these things. You could be as smart as you possibly you can. You can come up with all the best patents for whatever it is. But in the end, the market is so important.

And right now, it's the US where a lot of the market is, but frankly, it's where China is--

China is where the market is because China, as Richard was saying, has a massive electric car market, which is vast compared with what we see in Europe. And so that's--

once you get that kind of wheel rolling, the snowball going, it is very hard to resist it. And you see it at the moment in China, and you definitely don't see it here in the UK.

- I want to ask a question about supply chains that, Ed, you go into in great detail in your book. And Richard, I know, based on the investments that you guys make, you fully understand this too. And so for our listeners, I think a lot of--

if we just talk about battery mineral and battery metals and battery minerals for a second, a lot of folks could say where cobalt comes from, right, as in it comes--

it comes from the DRC, or they know where there's lithium mines.

And then there's a step between that to getting it into a battery cell manufacturer, which is the processing part. Could you just talk a little bit about that? Because it's a key part of the chain that is often missed out, that is fundamental to strategic capture by the US or Europe or anyone who has a vested interest in industrializing in this way.

- Yeah, absolutely. I mean, you can't put dirt in a battery, and you can't make batteries out of impure materials. At least that's how most people make them.

The--

I mean, as I was alluding to earlier, the majority of the world's refining capacity across the key battery metals, which are lithium, nickel, cobalt, all sits in China. There are the odd--

there is a cobalt refinery in Finland.

Canada is building nickel refineries. Tesla is building its own lithium hydroxide refining facility in Corpus Christi, Texas, so the West is trying to build its own capacity, but it's a fraction of what exists today in China.

And so if you're producing lithium spodumene in Australia, it's pretty much one home for it, and that's to put it on a ship and send it to China.

- And it's massively carbon-intensive, isn't it? So there's a lot of coal and stuff, isn't it, they're using to turn it into the chemicals?

- Exactly, and so you've got to turn these kind of raw ores and raw--

kind of the units of lithium, nickel, cobalt that come out of the ground. They need several intensive refining steps to be made into 99.9-plus

percent pure materials. They then have to be made into precursor materials that then get made into cathode materials that then eventually find their way to be glued onto these foils, which then get rolled up and made into batteries. And everything downstream of the mine is pretty much dominated by China in terms of capacity, so we've got a lot of catching up to do in the West.

But as I was alluding to earlier, there are technologies that we're developing here in the West, which might be able to cut out some of those steps. And the virtue of that is you're cutting out carbon, you're cutting out cost, and you're also opening the funnel of raw materials that are available to you to make--

to make batteries, including reprocessing old waste--

industrial waste piles, like tailings at mine sites, which might have cobalt credits in them that weren't extracted when that all was first mined, and we can reprocess them and get the cobalt out, get the lithium out, get the nickel out.

So there's a lot of innovation happening in the West, but we need to keep our foot on the gas. There's a huge amount of capital that has to go in to make that happen. And projects are slow. You've often got permitting issues. You've got infrastructure issues. It is not just like flicking a switch and turning these things on. These things take years to develop, and we're in a scramble in the West to build up our own capacity and create resilient supply chains that we can rely on.

- Do you see--

can I ask a question, Richard? Do you see, like--

because there's a lot of people talking about how there's going to be a shortage of X or Y.

But as you've said, like, it's not like there's a shortage of lithium in the ground. Do you see, as someone who's actually there on the front line of this, do you see bottlenecks to come, or actually, is there--

is that just a lot of hype and catastrophism?

- No, I absolutely see bottlenecks to come. You know, we need something like three million tons of lithium by the year 2030. We make about--

I think we made about 600 or 1,000 tons on a global basis in 2022.

So we need many multiples of today's production in lithium. And the number of battery factories that are being built around the world, not just in China, but especially in the US and Europe, the amount of lithium that those factories could absorb if they're running at full capacity runs far ahead of the amount of lithium that's in the pipeline to be produced, let alone refined.

So the shoe's going to drop somewhere, and I think that there's a very severe risk that some of these factories will have to shut down or just not operate or operate a fraction of their capacity because they won't be able to source the raw materials at any price. So we're in for a very fraught ride as we try and navigate the energy transition in the West.

And I think that we're going to see much higher prices across these core materials, and that price is sending a signal to the market. We've already seen very high lithium prices recently to spur new production, to crowd the new capital. So that price is sending a signal to the market. And I think we're going to see structurally higher prices across the rest of this decade and into the 2030s across all of these minerals.

- The discussion we've had today--

I can't help but think it actually feels a bit bleak, OK? So there's this mountain of work that we need to do and how unprepared we are and the politics and the geopolitics and the deglobalization and this non-unipolar world and all these--

breaking of the world order and all this stuff. It's all very, very scary. And so--

and the supply chains and the minerals and the metals--

are we doing enough? And if not, what can we do? What are the solutions to this?

- I mean, the short answer is, I don't think we're doing enough. I think there needed to be kind of 10 versions of TechMet five years ago doing what we're doing in order to meet the challenge that the West faces to scale the raw material challenge, to electrify the world. But having a pessimistic attitude and saying, it's all too late, is kind of just not in our DNA.

So we need to mobilize not just government. We need to mobilize capital markets, and we need to work much more closely with our brilliant scientists and engineers in universities to radically scale every technology available to us.

I mean, we just made an announcement--

one of our portfolio companies announced at the end of last week a major investment from one of the largest lithium producers on Earth has committed to using our DLE technology called ILiAD to scale lithium production from brines in Argentina, and this is the first major bet by a major lithium producer to deploy DLE technology, which is really the key to unlocking, massively scaling lithium from brine resources across the world with minimal environmental footprint.

We're talking no big holes in the ground. We're talking very low energy use, very low reagent use. And it really is the key to having low carbon footprint, higher environmental standard lithium that can be controlled and produced by the West.

So you've got low embodied lithium in your electric vehicles. The revolution is here. It's happening. And again, the pessimism comes from linear thinking, whereas progress is exponential. Exxon has just announced that it's targeting 100,000 tons of lithium production from Arkansas over the next few years. I mean, the big boys are here deploying their balance sheets and their know-how.

So I think the pessimism is unfounded. The concern is very well founded. I mean, we have to focus--

we have to have a collective focus on this in the West, and like I said, it needs to be a concerted effort across the private sector and the public sector. But don't underestimate human ability and our collective ability to affect change.

- So the way that I tackle that, I was talking to someone recently about my book--

actually, a book critic. And this person said, well, I was a bit frustrated that, at the end, you didn't kind of come out on one side or the other as being an optimist or a pessimist about this.

And it's kind of true. Like, I spent most of the book veering between depression and optimism because I think that's the rational place to be right now.

The world is kind of scary, but there's also hopeful as well. And I think if you're just--

if you don't acknowledge the scale of the challenge facing us, then I think you risk delusion. But by the same token, if you don't also acknowledge, as Richard says, our ability to turn this stuff around and our ability to do amazing things, then I think you're equally deluded.

And I mean, I feel the same thing also when you look at the scary situation with geopolitics. It is scary. There's no escaping it. It's one of the scariest times, I think, that any of us have lived through, certainly since the Cold War.

But by the same token, when you spend a bit of time kind of delving into how stuff is made, these supply chains that we spend--

we spent a lot of time talking about here, not just to make new products but to make anything, then you realize that we are more interlinked than ever before.

I went to a factory the other day where they make--

they press metal. It used to be an old pen nib manufacturer, and it's in Birmingham. So of all places, this is in Birmingham in the UK. And these days, they make--

because they're really good at making thin metals at very kind of micron precision, they also make certain little inputs, bits of metal inputs that go into other things. And I looked at this machine. It was turning out lots of little tiny pieces of metal, and it turns out they were electrodes. They're being shipped off to China.

And they--

and I said, what are they for? They're going--

they're going to be part of the rear view mirror in your car. And it's the bit that basically means that it dims when someone, you know, flashes their headlights behind you. It's the auto-dimming thing. This electrode allows that to happen.

And I said, how many of these things are you turning out, this factory in Birmingham? They said, hundreds of millions.

It turns out that more than 50% of all of the rear view mirrors in the world have electrodes from this tiny little factory in Birmingham. And what I thought when I encountered that was, first of all, blimey, it's coming from Birmingham of all places, you know. Cars on the other side of the world have a little bit of Birmingham in them.

But more to the point, these little nodes in the big global map of globalization, there are thousands, if not hundreds of thousands of these companies all over the place. We are all interlinked. The scale and the degree of globalization and our dependence on each other goes far further than trade statistics or, to some extent, even anecdote can even portray.

And I think the Chinese understand this better than we do. I don't think we in the UK understand it, and in the US and the eurozone as well understand it all as much as they do in China.

And given we understand that and given we understand how much of a rupture it would be or will be if we really do pull everything apart, my hope is that helps to keep us together. By the same token, it would mean that, like I say, it would be even more devastating, I think, than we appreciate if we are going to try and pull the whole thing apart.

And I think you only really kind of understand that when you start to look beneath--

down from bottom-up rather than top-down, which is kind of what I've tried to do in this book. Then, suddenly, everything is far more interesting, naughty, scary, but hopeful as well.

- So we do have reason to be optimistic, but rationally optimistic and also equal parts fearful, I think. And so we're almost at the end of our hour. And I want to give you the mic for our last question, which is our favorite question, which is, what is your contrarian view? What do you guys believe that not everybody else believes with your unique lens on the market?

- Yeah, no, I suppose my contrarian view is going to be that the supply chains of these critical minerals in 10 years will look nothing like the supply chains we've got today because they've got to change. And that means that we're going to be deploying new extraction technologies and new processing technologies and new manufacturing technologies at scale over the next 10 years, which means that the stories that we'll be telling on these kind of podcasts in the year, you know, 2034 will be very, very different from the ones we tell today.

There's an imperative around that too. If we don't innovate and deploy new technologies at scale, it's--

first of all, we're not going to hit the energy transition, and so we kind of have a moral imperative around this to decarbonize our economies.

But also, we have a geopolitical one here in the West. We--

otherwise, we're going to be completely beholden to a geopolitical rival, and I think that a total sort of unified effort across government and the private sector, we're not going to make it. So we have to innovate, and the supply chains are going to have to evolve radically in order to satisfy those goals.

- OK, so--

so I'm a journalist, so basically, everything I kind of say or do is quite contrarian, and I'm quite--

I'm a columnist, so I write columns. In the column, you kind of--

you have to be contrarian, or at least I like to be contrarian. So in a way that the book--

the book I've written and the whole thesis of that book, at least at the time that I was writing it, seemed pretty contrarian because a lot of people did kind of assume that we had dematerialized.

And the conventional wisdom within my world of economics is that's the way that we have gone. We are kind of eking ourselves--

eking ever more out of every little bit of resources that's coming our way, which is true in certain respects.

But my point has always been, no, this physical stuff still really matters. We've spent a long time ignoring it. It's incredibly important. I guess my kind of, like--

my subtitle kind of contrarian view is just that it's all--

particularly at moments like this where we've got an enormous challenge in front of us, the focus is often on the new stuff. So there is lots of--

you know, Richard's in the sexy stuff--

the lithium, the cobalt. This stuff is really sexy, and it's really important.

But we do have a tendency to focus, when monomaniacal, particularly in the world of the mainstream media. So there's loads of pieces about how important lithium is and how important cobalt is, and there's--

whatever the kind of sexy material of the day, you're not going to find a shortage of those pieces. But I guess my slightly contrarian point is we need everything.

We're going to need more of everything. We're going to need more steel. We're going to need more concrete. We're going to need more salt because the salt is the stuff that actually enables us to perform a lot of these transitions, these chemical transitions that help us turn things into a desired product.

We're going to need more copper, and copper, I know, is semi sexy, but it always comes lower down the line than things like lithium and cobalt. And so reminding ourselves that the important, seemingly boring stuff hasn't gone away and that you need sand, and you need aggregates, and you need physical things to make stuff, I think we still--

we still could do with being reminded of that a little bit.

So I just think we--

and OK, another--

sorry, another kind of slightly contrarian point is--

but along the same vein--

we often focus on the big, new innovation. So someone's just invented X or Y, and it's like, wow, that's amazing. You've got solid state batteries or whatever it might be or sodium ion batteries. If I give you a pound for every time--

I've been doing these talks recently about materials, and someone said, ah, yes, well, what about sodium ion batteries?

And that--

there is potentially going to be a place for sodium ion batteries. Don't get me wrong. I'm no great expert on the sodium ion battery market, and, you know, Richard might have some other thoughts on that.

- We need all--

we need all the energy storage we can get.

- Well, right, OK, and that's--

and that's kind of the point is there's this focus on the new, but actually, we need all of it, and we need the--

we're going to need a load of lithium ion batteries, a crazy amount of lithium ion batteries, like you were laying out. We're going to need an enormous amount of wind turbines. We're going to need an enormous amount of all of this stuff.

While people focus on this new, exciting invention, whatever it might be, for me, what's more exciting is the iterative gradual processes whereby we get better and better every year at making staple things like batteries. Batteries get cheaper. They get more effective. They get slightly more energy-dense. Wind turbines get bigger. They get able to produce more power.

You know, same thing with solar panels--

that's the kind of learning curve whereby every year, we get that little bit better. And it's not just those--

it's not just the sexy stuff. Motors--

motors get better every year, and they get more efficient at turning--

creating--

turning, turning that power into motion. And why? It's because we're better at making the plastics that go in there as separators. It's all these little tiny things that add up over time to an extraordinary improvement in human progress and our living standards.

And we forget about that boring stuff because it's not headline news. It's not the front page of the FT. But that is happening all the time. Engineers are making things better. They're making things that weeny bit better. And it just builds up. And so I think that's the sexy, exciting stuff that we don't focus on enough because it's not new, and it's not a big kind of Einsteinian eureka moment.

- And it's a real blind spot of human psychology that we tend to think in linear fashion. But actually, things develop and compound and the sort of microscopic advances and the way that we get better and better at doing more and more with less and less in this world--

that effect compounds over time. And we tend to overestimate the impact of technology in the short run and radically underestimate the impact of technology in the long run.

And so I think that the--

I mean, one of the there's so many criticisms today about electric vehicles--

you know, oh, well, you're charging them with electricity that's made with coal, and, you know, they've only got a range of 200 miles. We're in the first innings of this revolution. If you went back and looked at the first mass market car, the Model T Ford in the 1920s, and compare it today to a modern BMW, I mean, it's like the BMW looks like it's an alien spacecraft. Well, that's because there's been 100 years of incredible innovation around it.

And the same goes with electric vehicles. The electric vehicles that we're going to be driving in the 2030s will look nothing like the electric vehicles we're driving today--

the range, the performance. And also the supply chain behind it, the carbon footprint behind it, where it's made, how it's made--

it's going to look nothing like it is today. And so people tend to underestimate the compounding effect of engineering and human progress. And so I violently agree with that.

- Can I say one other thing we underestimate, OK, which is that there's always a conventional wisdom that something is just going to be too difficult. So you're like--

the thing these days is nuclear fusion. It's just going to be too difficult, and some people say similar things about solid state batteries and stuff.

One of the things I learned by going back and looking at all these materials and what we've done with them over time is there's always someone saying it's impossible. There was someone who was saying it was--

there were people who were saying it was impossible to have a solid state transistor, you know, semiconductors. There were people who said that was impossible. There were people who were saying it was impossible to generate EUV light and use it to do lithography. That's how we make transistors these days.

People said it was impossible. There were people who would say we would never rediscover the recipe for concrete, you know, which we'd lost for more than 1,000 years for heaven's sake. People always--

a lot of the time, when something is tough and when it takes a long time to come up with it, the conventional wisdom can increase and just say, well, we're never going to come up with it. But invariably, we do. It just takes a while sometimes to come up with it.

So I imagine, like Richard says, in years to come, we will look back at this time and say, how did we ever doubt that this or that was possible? And so that's why it's exciting right now to be going through this time. It's scary in certain ways, but it's also exciting because the scale of what we have set ourselves as a challenge is massive, and I think we are capable of doing it.

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- So Ed, Richard, I want to say a massive thank you for joining us on the podcast, a bit of an unusual one for us. And we talked a lot about metal stuff and battery stuff, which is great because that's where our listeners really care about in the energy transition but the bigger picture as well. Thank you for coming and joining us and sharing your thoughts.

Ed, good luck with the book. The book's absolutely fantastic, and it just seems like every critic review--

the list on Amazon just seems to get longer and longer and longer, which is great. And Richard--

and all good stuff, too--

and Richard, good luck to you and the team in getting strategic control over the metals that really matter to us.

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