Headlines
PM Trudeau pushes critical minerals, continental supply chain ahead of Three Amigos summit
DISTRICT OF COLUMBIA – There’s plenty of room and lots of good reasons for Canada and the United States to find common ground on tax credits for electric vehicles, Deputy Prime Minister Chrystia Freeland said Wednesday on the eve of a key meeting between Prime Minister Justin Trudeau and President Joe Biden.
Otherwise, it could well become “the dominant issue” in a Canada-U.S. relationship that’s already facing “real challenges,” Freeland warned during a rooftop news conference at a downtown D.C. hotel.
Both countries are pursuing fundamentally the same goal, Freeland said: encouraging the move away from gas-powered internal combustion engines in an effort to slow the impact of climate change around the world, while simultaneously encouraging post-pandemic economic growth.
But Biden’s proposed EV tax credit – which would effectively cut Canadian-made vehicles and parts out of a lucrative incentive worth up to $12,500 to a prospective U.S. car buyer – would work counter to their shared goals.
“Job 1 for us is just raising awareness,” Freeland said – something she’s confident the Canadian delegation accomplished Wednesday during meetings with senior congressional leaders on Capitol Hill.
“I think job 2 – and this is a very Canadian approach – is, we don’t want to just show up and say, ‘Here’s a problem.’ We’d like to show up and say, ‘Here’s the problem, and here are some ways that we can solve the problem.”’
Freeland didn’t elaborate on what some of those potential solutions might be, but her message was clear: there’s room for the U.S. to manoeuvre so that the objectives of the measure remain intact, but Canada doesn’t get left out in the cold.
She cited the newly forged North American trade deal, known south of the border as the U.S.-Mexico-Canada Agreement, or USMCA, as evidence that the two countries know how to work together.
“We sort of said, ‘Guys, like, we all spent a lot of time negotiating this agreement that had support – obviously from Republicans, it was a Republican administration – but it had support from Democrats too,”’ Freeland said.
“’Do you really want to violate it in such a significant way?”’
Electric vehicles will be a major part of Thursday’s discussions with Biden and Mexican President Andres Manuel Lopez Obrador – not just on tax incentives, but also where the U.S. auto sector is going to get the critical minerals and rare-earth elements so vital to the manufacture of EV batteries.
When global supply chains are under pressure, as they have been since the onset of COVID-19, the U.S. “could do worse” than relying on Canada to provide a reliable and affordable supply of raw materials, Trudeau said.
“It is a two-way street. We do well when we’re working together,” the prime minister told a question-and-answer session hosted by the Wilson Center.
China is the world’s leading supplier of those minerals and pandemic-induced bottlenecks have created major shortages – something Trudeau alluded to when he said some other countries have lower production costs because they “don’t care” about environmental or labour standards.
Conservative Leader Erin O’Toole called on the prime minister to deliver “tangible results” for Canadians at the summit, saying the relationship between Canada and the U.S. has been getting worse over the past year.
“Under Justin Trudeau’s watch, the United States has doubled tariffs on softwood lumber, put in place stringent Buy America policies threatening Canadian jobs, launched trade disputes against our agriculture sector, and cancelled pipeline projects,” O’Toole said in a statement.
He urged the prime minister to obtain guarantees that Biden will include Canadian-assembled cars in an electric-vehicle tax credit, carve out Canadian exemptions for Buy America policies and support the continuation of Enbridge Inc.’s cross-border Line 5 pipeline.
None of those things are likely to emerge from meetings with the president that are only scheduled to last a few hours.
O’Toole also called for a North American supply chain resilience strategy that includes Canada’s rare-earth minerals as a source for battery and electric-vehicle production.
Trudeau faces mounting pressure to address Canada’s misaligned COVID-19 border restrictions with his North American counterparts as well.
On Monday, four bipartisan U.S. senators wrote to Foreign Affairs Minister Melanie Joly to ask Canada to align border restrictions with its southern neighbours, especially when it comes to Canada’s requirement for a negative molecular COVID-19 test for incoming travellers.
“It is important for both of our nations’ economies that fully vaccinated individuals are able to travel between Canada and the U.S. with ease,” wrote senators Amy Klobuchar, Susan Collins, Chuck Schumer and Mike Crapo – three of whom were on hand Wednesday when Trudeau arrived for his Senate meeting.
The prime minister seemed at ease and relaxed as he worked the room upon his arrival, even eliciting a thin smile from Senate Minority Leader Mitch McConnell when the group lined up for a photograph.
“Mitch to my left,” Trudeau cracked. “Look at that.”
On the other side of the sprawling Capitol complex, Trudeau met with House Speaker Nancy Pelosi and members of Congress with a specific interest in Canadian matters, including New York Rep. Brian Higgins.
Higgins, a Democrat, has been championing the complete reopening of the Canada-U.S. border for months and said he remains frustrated that Canada still requires a PCR test to enter.
“The fractured approach to border management by both the U.S. and Canadian governments is contributing to public confusion, anger and frankly, it makes no sense,” Higgins said after the meeting.
“Testing is not only unnecessary, it is prohibiting a cross-border exchange critical to fostering economic recovery in both nations.”
Trudeau later promised news before the end of the week on the testing requirement but refused to confirm reports that Canada plans to exempt Canadian travellers returning from trips of less than 72 hours.
“We are looking at making steps to loosen up requirements while at the same time keeping Canadians safe,” Trudeau said, adding there’ll be “an announcement in the coming days.”
Trudeau capped the evening with a visit to an annual gala hosted by the Canadian American Business Association atop the ritzy Hay-Adams hotel, a stone’s throw from the White House.
His government’s climate change agenda is “not just about clean air and fresh water, although that’d be enough, but also about opportunities, good jobs, and a strong future for everyone,” Trudeau said.
“These are things on which, as countries and as friends, we are so deeply aligned. Canadians and Americans get – regardless of the various pushes and pulls of politics – that there is a clear direction forward that more and more people are seeing, more and more people know that they want to be part of.”
This report by The Canadian Press was first published Nov. 17, 2021.
– With files from Laura Osman in Ottawa
BHP sees need for battery metals more than doubling in 30 years
By Cecilia Jamasmie
Escondida is the world’s largest producer of copper concentrates and cathodes. (Image: BHP.)
As the pace and shape of the global transition to a greener economy has become a key issue globally, the need for battery metals will grow up to four times in the next 30 years, Vandita Pant, BHP’s chief commercial officer, said on Wednesday at the FT Commodities Asia Summit.
“Some of the modelling that we have done showed that in, let’s say a decarbonised world … the world will need almost double the copper in the next 30 years than in the past 30,” she told the audience at the inaugural session.
The world’s largest miner is also predicting that demand for nickel, another needed battery metal, will quadruple by 2050. “And all this will have to be done as sustainably as possible,” Pant added.
Her vision echoes those of most experts, from consultants such as Wood Mackenzie, ING Economics and BloombergNEF, to industry actors including top miners and electric vehicles makers lead by Tesla and Volkswagen.
Copper has long been a common component in most electrical wiring, power generation, transmission, distribution, and circuitry because of its high conductivity and durability.
New energy technologies, however, require even more copper and nickel. Output of both elements would have to rise exponentially over the next three decades to meet demand from renewable power generation, battery storage, electric vehicles, charging stations and related grid infrastructure, BHP estimates.
Boosting portfolio
Since Canadian Mike Henry took the top post at the company last year, the group has adopted an aggressive strategy to expand its footprint among what it calls “future-facing” commodities — copper, nickel and copper.
The miner is currently involved in talks with Australian billionaire Andrew Forrest’s Wyloo Metals concerning BHP’s imminent takeover of Noront Resources (TSX-V: NOT).
The two miners were in a bidding war over the Canadian miner, which owns the early-stage Eagle’s Nest nickel and copper deposit in the ‘Ring of Fire’ in northern Ontario.
The asset is believed to be the largest high-grade nickel discovery in Canada since the Voisey’s Bay nickel find in the eastern province of Newfoundland and Labrador.
BHP is also proceeding with the development of the Jansen potash project, in Canada, has merged its oil and gas assets with Australia’s Woodside Petroleum (ASX: WPL), and has sold a big portion of its coal business.
(With files from Reuters)
Countries, cities, carmakers commit to end fossil-fuel vehicles by 2040
By Simon Jessop and William James, Nick Carey
Summary
Volvo Cars, Ford, GM aim for 100% zero-emission vehicles
Volkswagen, Toyota, Stellantis not part of pledge
United States, China and Germany missing from pledge
GLASGOW, Nov 10 (Reuters) - (This November 10 story corrected to read Volvo Cars in bullet point, paragraphs 9 and 12)
A group of countries, companies and cities committed on Wednesday to phasing out fossil-fuel vehicles by 2040, as part of efforts to cut carbon emissions and curb global warming.
But the world's top two carmakers, Toyota Motor Corp (7203.T) and Volkswagen AG (VOWG_p.DE), as well as major car markets China, the United States and Germany, did not sign up, highlighting the challenges in shifting to zero emissions.
The Glasgow Declaration on Zero Emission Cars and Vans, unveiled at climate talks in the Scottish city, sees the groups pledge to "rapidly" accelerate the transition to low-carbon emission vehicles, aiming to green leading markets by 2035.
Headline signatories included Ford (F.N) and General Motors (GM.N), the world's second-most populous country India and major corporate purchasers of vehicles including Leaseplan, which rents 1.7 million cars in 30 countries.
Martin Kaiser, Executive Director of Greenpeace Germany, said the absence of the major economies and producers was "gravely concerning".
"To stop new fossil fuels, we need to cut off our dependency," he said. That means moving on from combustion engines towards electric vehicles and creating clean public transport networks without delay."
A German environment ministry spokesman said the country's government would not sign on Wednesday as it had not reached internal consensus on a "marginal aspect" of the pledge concerning whether fuels made from renewable energy but burned in a combustion engine could form part of the solution.
Cars, trucks, ships, buses and planes account for about a quarter of all global carbon emissions, data from the International Energy Agency showed, mostly from road vehicles.
Others who did sign up included Sweden's Volvo Cars (VOLCARb.ST), Daimler AG's (DAIGn.DE) Mercedes-Benz, China's BYD Co Ltd (002594.SZ) and Jaguar Land Rover, a unit of India's Tata Motors Ltd (TAMO.NS).
Other countries signing up included New Zealand and Poland, joining a number of nations already committed to ensuring all new cars and vans are zero emission by 2040 or earlier, including Britain, host of the COP26 summit.
Among other leading companies and cities on board are ride-hailing company Uber (UBER.N) and food retailer Sainsbury's (SBRY.L), the South Korean capital Seoul and Brazil's Sao Paolo.
As countries look to agree a way to price carbon globally, Volvo Cars, which has already committed to going fully electric by 2030, said separately it would assume a carbon price of 1,000 Swedish crowns on all future projects. read more
CHINA
The commitment comes on a day dedicated to transport at the conference, where policymakers are looking to accelerate efforts to cap global warming by mid-century.
But the apparent unwillingness of China, the world's largest car market, and the United States - the world's largest economy and second-largest car market - to join the pledge raises questions about its effectiveness.
While the United States is not on board, key car-buying states like California and New York are.
An industry source said some carmakers are wary of the pledge because it commits them to a costly shift in technology, but lacks a similar commitment from governments to ensure that the necessary charging and grid infrastructure would be built.
The European Commission has proposed an effective ban on fossil-fuel vehicles by 2035, accompanied by a commitment to a charging infrastructure demanded by carmakers. read more
The world's No. 4 carmaker, Stellantis (STLA.MI), was also missing from Wednesday's pledge, as were Japan's Honda Motor Co Ltd (7267.T) and Nissan Motor Co Ltd (7201.T); Germany's BMW (BMWG.DE) and South Korea's Hyundai Motor Co (005380.KS).
Reporting by Simon Jessop, William James and Nick Carey; Additional reporting by David Shepardson in Washington and Shadia Nasralla in Glasgow; Editing by Cynthia Osterman, Peter Cooney and Alexander Smith
Resource Revolution and a Green Paradox?
Mark Smith, Co-manager, TB Amati Strategic Metals Fund
An energy system powered by clean energy technologies needs significantly more minerals, notably:
Lithium, nickel, cobalt, manganese and anode graphite for batteries
Rare earth elements (mainly heavy REEs) for wind turbines and electric vehicles motors
Copper, silicon and silver for solar PV
Copper and aluminium for electricity networks
There is no shortage of mineral resources, but recent price rises for cobalt, copper, lithium and nickel highlight how supply could struggle to keep pace with the world’s climate ambitions.
An analysis of the projected share of clean energy technologies in total demand for selected minerals in a sustainable development scenario (1.5°C) – shows the above-mentioned metals could benefit strongly.
Mineral demand for clean energy technologies by scenario
Source: International Energy Agency
In the short term the supply-demand picture for the base metals and specialty metals is well matched, however if you project the committed mine production against primary metal demand an emerging deficit presents itself in the medium term.
Either the global climate ambitions will have to be tapered or we will have to adjust to an inflationary commodity environment under a sustainable development scenario (wrt climate change).
Supply and demand projections (under a sustainable development scenario)
Source: International Energy Agency
Put another way? The energy transition starts and ends with (strategic) metals and a primary supply response needs significant capital investment both for exploration and mine development.
According to Wood Mackenzie the challenge of scaling up primary base supply is massive:
Base case 2.5°C pathway = US$0.5 trillion capital investment over next 20yrs
Accelerated energy transition; net zero by 2050 and limits 1.5°C temperature rise = US$2.0 trillion over next 15 yrs
Source: Wood Mackenzie
ETO= Wood Mackenzie's Energy transition outlook scenario (1.5°C pathway)
A 5 X increase in base metal supply is needed by 2040. Worse case without significant scrap recycling:
11.3Mt aluminium deficit
19Mt copper deficit
3.5Mt zinc deficit
2.6Mt nickel deficit
2.2Mt lead deficit
Battery metals 7x to 42x current demand/supply???
Is the mining industry prepared? NO!
During the last ‘mining boom’ investors encouraged miners to grow at any cost, growth over margin was the investors choice. This led to over geared balance sheets and a peak (2012) in development capital to bring new mines on line. The metals cycle changed and mines closed, and the development capital shrunk. We entered a 10 year period of debt restructuring and financial discipline. In reality the industry should have been doing the opposite to prepare for this new metal demand wave.
Annual development capital has more than halved ($130bn to $60bn) and exploration expenditure over the same period fell from a peak of $21bn in 2012 to $8.7bn in 2020. With the lead time of 7-10 years to bring a new mine on stream, we could witness significant pinch points post 2025/2027.
Investors should now be demanding production and development growth NOT dividend yield, as our industry is entering a phase of ex growth, declining reserve life and lower mineral grades.
The next decade should be very interesting for the resource investor from a capital growth of mining investments and an aggressive M&A cycle as the majors mop up the mid-caps to maintain a growth profile.
Global (non-precious metal capital expenditure US$bn)
Source: Scotia Bank
Resource nationalism inevitable?
An evolving clean energy transition calls for an evolving approach to energy security; policy makers must expand their horizons and act to reduce the risks of price volatility and supply disruptions.
Production and processing of many minerals such as lithium, cobalt and some rare earth elements are geographically concentrated, with the top three producers accounting for more than 75% of global supplies.
Supply chain concentration (and control)
Source: International Energy Agency
Ironically, China is the largest single emitter of greenhouse gases, yet controls the majority of minerals and processing facilities to produce metals and chemicals key for the western world to decarbonize its energy supply. There lies the problem!
In summary:
1. The mining industry is not currently prepared to respond to the green ambitions of politicians.
2. Renewable energy technology will have to improve/adapt to thrift out some key metals to ensure a sustainable supply-demand balance.
3. Metal demand for decarbonisation will have to take precedent over other discretionary demand sectors
4. Policy makers globally (ex-China) will have to act quicker to ensure the extraction and processing of key metals are permitted outside China within the next 7-10yrs.
5. And we haven’t even addressed the role uranium will play in the green energy transition…
This article is a financial promotion issued by Amati Global Investors Limited, which is authorised and regulated by the Financial Conduct Authority. It is provided for informational purposes only and does not represent an offer or solicitation to buy or sell any securities. Nor does it provide you with all the facts that you need to make an informed decision about the merits or otherwise of this Fund. Please refer to the risk warning below.
Risk Warning
Past performance is not a reliable guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amount they originally invested. The investments associated with this fund are concentrated in natural resources companies, which are subject to greater risk and volatility than companies held in other funds with investments across a range of industries and sectors. The return on investments in overseas markets may increase or decrease as a result of exchange rate movements. Shares in some of the underlying companies associated with the fund may be difficult to sell in a timely manner and at a reasonable price. In extreme circumstances this may affect the ability of the fund to meet redemption requests on demand.