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The New Energy Era: The Lithium-Ion Supply Chain

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The world is rapidly shifting to renewable energy technologies.

Battery minerals are set to become the new oil, with lithium-ion battery supply chains becoming the new pipelines.

China is currently leading this lithium-ion battery revolution—leaving the U.S. dependent on its economic rival. However, the harsh lessons of the 1970-80s oil crises have increased pressure on the U.S. to develop its own domestic energy supply chain and gain access to key battery metals.

Introducing the New Energy Era

Today’s infographic from Standard Lithium explores the current energy landscape and America’s position in the new energy era.

lithium ion supply chain us china

An Energy Dependence Problem

Energy dependence is the degree of a nation’s reliance on imported energy, resulting from an insufficient domestic supply. Oil crises in the 1970-80s revealed America’s reliance on foreign produced oil, especially from the Middle East.

The U.S. economy ground to a halt when gas prices soared during the 1973 oil crisis—altering consumer behavior and energy policy for generations. In the aftermath of the crisis, the government imposed national speed limits to conserve oil, and also demanded cheaper, smaller, and more fuel-efficient cars.

U.S. administrations set an objective to wean America off foreign oil through “energy independence”—the ability to meet the country’s fuel needs using domestic resources.

Lessons Learned?

Spurred by technological breakthroughs such as hydraulic fracking, the U.S. now has the capacity to respond to high oil prices by ramping up domestic production.

By the end of 2019, total U.S. oil production could rise to 17.4 million barrels a day. At that level, American net imports of petroleum could fall in December 2019 to 320,000 barrels a day, the lowest since 1949.

In fact, the successful development of America’s shale fields is a key reason why the Organization of the Petroleum Exporting Countries (OPEC) has lost the majority of its influence over the supply and price of oil.

A Renewable Future: Turning the Ship

The increasing scarcity of economic oil and gas fields, combined with the negative environmental impacts of oil and the declining costs of renewable power, are creating a new energy supply and demand dynamic.

Oil demand could drop by 16.5 million barrels per day. Oil producers could face significant losses, with $380 billion of above-ground investments becoming worthless if the oil industry and oil-rich nations are not prepared for a surge in green energy by 2030.

Energy companies are hedging their risk with increased investment in renewables. The world’s top 24 publicly-listed oil companies spent on average 1.3% of their total budgets on low carbon technology in 2018, amounting to $260 billion. That is double the 0.68% the same group had invested on average through the period of 2010 and 2017.

The New Geopolitics of Energy: Battery Minerals

Low carbon technologies for the new energy era are also creating a demand for specific materials and new supply chains that can procure them.

Renewable and low carbon technology will be mineral intensive, requiring many metals such as lithium, cobalt, graphite and nickel. These are key raw materials, and demand will only grow.

Material201820282018-2028 % Growth
Graphite anode in Batteries170,000 tonnes2.05M tonnes1,106%
Lithium in batteries150,000 tonnes1.89M tonnes1,160%
Nickel in batteries82,000 tonnes1.09M tonnes1,229%
Cobalt in batteries58,000 tonnes320,000 tonnes452%
(Source: Benchmark Minerals)

The cost of these materials is the largest factor in battery technology, and will determine whether battery supply chains succeed or fail.

China currently dominates the lithium-ion battery supply chain, and could continue to do so. This leaves the U.S. dependent on China as we venture into this new era.

Could history repeat itself?

The Battery Metals Race

There are five stages in a lithium-ion battery supply chain—and the U.S. holds a smaller percentage of the global supply chain than China at nearly every stage.

Lithium-Ion Supply Chain

China’s dominance of the global battery supply chain creates a competitive advantage that the U.S. has no choice but to rely on.

However, this can still be prevented if the United States moves fast. From natural resources, human capital and the technology, the U.S. can build its own domestic supply.

Building the U.S. Battery Supply Chain

The U.S. relies heavily on imports of several keys materials necessary for a lithium-ion battery supply chain.

U.S. Net Import Dependence
Lithum50%
Cobalt72%
Graphite100%
(Source: U.S. Department of the Interior, Bureau of Land Management)

But the U.S. is making strides to secure its place in the new energy era. The American Minerals Security Act seeks to identify the resources necessary to secure America’s mineral independence.

The government has also released a list of 35 minerals it deems critical to the national interest.

Declaring U.S. Battery Independence

A supply chain starts with raw materials, and the U.S. has the resources necessary to build its own battery supply chain. This would help the country avoid supply disruptions like those seen during the oil crises in the 1970s.

Battery metals are becoming the new oil and supply chains the new pipelines. It is still early in this new energy era, and the victors are yet to be determined in the battery arms race.

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Mining

Visualizing 50 Years of Global Steel Production

Global steel production has tripled over the past 50 years, with China’s steel production eclipsing the rest of the world.

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Visualizing 50 Years of Global Steel Production

This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.

From the bronze age to the iron age, metals have defined eras of human history. If our current era had to be defined similarly, it would undoubtedly be known as the steel age.

Steel is the foundation of our buildings, vehicles, and industries, with its rates of production and consumption often seen as markers for a nation’s development. Today, it is the world’s most commonly used metal and most recycled material, with 1,864 million metric tons of crude steel produced in 2020.

This infographic uses data from the World Steel Association to visualize 50 years of crude steel production, showcasing our world’s unrelenting creation of this essential material.

The State of Steel Production

Global steel production has more than tripled over the past 50 years, despite nations like the U.S. and Russia scaling down their domestic production and relying more on imports. Meanwhile, China and India have consistently grown their production to become the top two steel producing nations.

Below are the world’s current top crude steel producing nations by 2020 production.

RankCountrySteel Production (2020, Mt)
#1🇨🇳 China1,053.0
#2🇮🇳 India99.6
#3🇯🇵 Japan83.2
#4🇷🇺 Russia*73.4
#5🇺🇸 United States72.7
#6🇰🇷 South Korea67.1
#7🇹🇷 Turkey35.8
#8🇩🇪 Germany35.7
#9🇧🇷 Brazil31.0
#10🇮🇷 Iran*29.0

Source: World Steel Association. *Estimates.

Despite its current dominance, China could be preparing to scale back domestic steel production to curb overproduction risks and ensure it can reach carbon neutrality by 2060.

As iron ore and steel prices have skyrocketed in the last year, U.S. demand could soon lessen depending on the Biden administration’s actions. A potential infrastructure bill would bring investment into America’s steel mills to build supply for the future, and any walkbalk on the Trump administration’s 2018 tariffs on imported steel could further soften supply constraints.

Steel’s Secret: Infinite Recyclability

Made up primarily of iron ore, steel is an alloy which also contains less than 2% carbon and 1% manganese and other trace elements. While the defining difference might seem small, steel can be 1,000x stronger than iron.

However, steel’s true strength lies in its infinite recyclability with no loss of quality. No matter the grade or application, steel can always be recycled, with new steel products containing 30% recycled steel on average.

The alloy’s magnetic properties make it easy to recover from waste streams, and nearly 100% of the steel industry’s co-products can be used in other manufacturing or electricity generation.

It’s fitting then that steel makes up essential parts of various sustainable energy technologies:

  • The average wind turbine is made of 80% steel on average (140 metric tons).
  • Steel is used in the base, pumps, tanks, and heat exchangers of solar power installations.
  • Electrical steel is at the heart of the generators and motors of electric and hybrid vehicles.

The Steel Industry’s Future Sustainability

Considering the crucial role steel plays in just about every industry, it’s no wonder that prices are surging to record highs. However, steel producers are thinking about long-term sustainability, and are working to make fossil-fuel-free steel a reality by completely removing coal from the metallurgical process.

While the industry has already cut down the average energy intensity per metric ton produced from 50 gigajoules to 20 gigajoules since the 1960s, steel-producing giants like ArcelorMittal are going further and laying out their plans for carbon-neutral steel production by 2050.

Steel consumption and demand is only set to continue rising as the world’s economy gradually reopens, especially as Rio Tinto’s new development of atomized steel powder could bring about the next evolution in 3D printing.

As the industry continues to innovate in both sustainability and usability, steel will continue to be a vital material across industries that we can infinitely recycle and rely on.

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Mining

How to Avoid Common Mistakes With Mining Stocks (Part 5: Funding Strength)

A mining company’s past projects and funding strength are interlinked. This infographic outlines how a company’s ability to raise capital can determine the fate of a mining stock.

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Funding Strength

A mining company’s past projects and funding strength are interlinked, and can provide clues as to its potential success.

A good track record can provide better opportunities to raise capital, but the company must still ensure it times its financing with the market, protects its shareholders, and demonstrates value creation from the funding it receives.

Part 5: The Role of Funding Strength

We’ve partnered with Eclipse Gold Mining on an infographic series to show you how to avoid common mistakes when evaluating and investing in mining exploration stocks.

Part 5 of the series highlights six things to keep in mind when analyzing a company’s project history and funding ability.

Funding Strength

View all five parts of the series:

Part 5: Raising Capital and Funding Strength

So what must investors evaluate when it comes to funding strength?

Here are six important areas to cover.

1. Past Project Success: Veteran vs. Recruit

A history of success in mining helps to attract capital from knowledgeable investors. Having an experienced team provides confidence and opens up opportunities to raise additional capital on more favorable terms.

Veteran:

  • A team with past experience and success in similar projects
  • A history of past projects creating value for shareholders
  • A clear understanding of the building blocks of a successful project

A company with successful past projects instills confidence in investors and indicates the company knows how to make future projects successful, as well.

2. Well-balanced Financing: Shareholder Friendly vs. Banker Friendly

Companies need to balance between large investors and protecting retail shareholders. Management with skin in the game ensures they find a balance between serving the interests of both of these unique groups.

Shareholder Friendly:

  • Clear communication with shareholders regarding the company’s financing plans
  • High levels of insider ownership ensures management has faith in the company’s direction, and is less likely to make decisions which hurt shareholders
  • Share dilution is done in a limited capacity and only when it helps finance new projects that will create more value for shareholders

Mining companies need to find a balance between keeping their current shareholders happy while also offering attractive financing options to attract further investors.

3. A Liquid Stock: Hot Spot vs. Ghost Town

Lack of liquidity in a stock can be a major problem when it comes to attracting investment. It can limit investments from bigger players like funds and savvy investors. Investors prefer liquid stocks that are easily traded, as this allows them to capitalize on market trends.

Hot Spot:

  • A liquid stock ensures shareholders are able to buy and sell shares at their expected price
  • More liquid stocks often trade at better valuations than their illiquid counterparts
  • High liquidity can help avoid price crashes during times of market instability

Liquidity makes all the difference when it comes to attracting investors and ensuring they’re comfortable holding a company’s stock.

4. Timing the Market: On Time vs. Too Late or Too Early

Raising capital at the wrong time can result in little interest from investors. Companies in tune with market cycles can raise capital to capture rising interest in the commodity they’re mining.

Being On Time:

  • Raising capital near the start of a commodity’s bull market can attract interest from speculators looking to capitalize on price trends
  • If timed well, the attention around a commodity can attract investors
  • Well-timed financing will instill confidence in shareholders, who will be more likely to hold onto their stock
  • Raising capital at the right time during bull markets is less expensive for the company and reduces risk for investors

Companies need to time when they raise capital in order to maximize the amount raised.

5. Where is the Money Going? Money Well Spent vs. Well Wasted

How a company spends its money plays a crucial role in whether the company is generating more value or just keeping the lights on. Investors should always try to determine if management is simply in it for a quick buck, or if they truly believe in their projects and the quality of the ore the company is mining.

Money Well Spent:

  • Raised capital goes towards expanding projects and operations
  • Efficient use of capital can increase revenue and keep shareholders happy with dividend hikes and share buybacks
  • By showing tangible results from previous investments, a company can more easily raise capital in the future

Raised capital needs to be allocated wisely in order to support projects and generate value for shareholders.

6. Additional Capital: Back for More vs. Tapped Out

Mining is a capital intensive process, and unless the company has access to a treasure trove, funding is crucial to advancing any project. Companies that demonstrate consistency in their ability to create value at every stage will find it easier to raise capital when it’s necessary.

Back For More:

  • Raise more capital when necessary to fund further development on a project
  • Able to show the value they generated from previous funding when looking to raise capital a second time
  • Attract future shareholders easily by treating current shareholders well

Every mining project requires numerous financings. However, if management proves they spend capital in a way that creates value, investors will likely offer more funding during difficult or unexpected times.

Wealth Creation and Funding Strength

Mining companies that develop significant assets can create massive amounts of wealth, but often the company will not see cash flow for years. This is why it is so important to have funding strength: an ability to raise capital and build value to harvest later.

It is a challenging process to build a mining company, but management that has the ability to treat their shareholders and raise money can see their dreams built.

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