This is Dana Perkins and you're listening to Switched on the BNAF podcast. Which countries in the world are doing the best job of building a secure, reliable and sustainable lithium ion battery supply chain. As we know, lithium ion batteries are an important part of the energy transition. They provide everything from flexibility for wind and solar to the batteries that are found in electric vehicles and so much more so. Earlier this year, BNAF released the fourth edition
of our Global Lithium ion Battery Supply Chain Ranking. We rank the top thirty countries using forty six metrics across five categories, and we take into account things like the sourcing of raw materials, battery manufacturing capacity, downstream demand, environmental,
social and governance factors as well as innovation. So on today's show we speak with Eli Gomas Calous and Quisiampofo from b and EF's Medals and Mining team, and in addition to the ranking, they get into the last year's collapse of lithium prices as well as the impact that Indonesia has had on the global nickel market. To access this latest edition of the Global Lithium Ion Battery Supply Chain Ranking. B and EF subscribers can find it on b and EF dot com or at BNF on the
Bloomberg terminal. Subscribe to the show to receive updates for future episodes, and consider giving us a review to help share us with others. But right now, let's jump into our conversation with Ellie and Quasy. Ellie, thank you for coming back on the show.
Thank you for having me again.
Dana and Cozy, good to have you here again too.
Thank you for having me again, Dana.
So we're here today to talk about the Global Lithium ion Battery Supply Chain Ranking, our own version of the OSCARS for metal. So the name is on the tin in that we're talking about the supply chains for all of the things that go into batteries with the metals specifically. But let's just have a moment for talking about who was in the running, who the nominees were for these oscars, if you will. How many countries were we reviewing when we set out to make this ranking.
So unlike the Oscars, it wasn't just six, seven or eight nominees. Each year, we look at thirty countries and judge their potential to form a secure, unreliable and sustainable battery supply chain.
Now, rather than make everybody wait for us to open the envelope, let's just get right into who the winner was and let me take a guess. Because on this show, the last couple of episodes, we've been talking about China dominating the electric vehicles market and the solar module market. So is it China?
No? No?
All right? So who? Yeah? Who came out on top?
So it's undeniable that China leads the current supply chain. But the purpose of the ranking is to try and understand and see what countries canform supply chains for the future. And with that in mind, Canada actually came out on top. So the difference is with the ranking is that we don't only look at the but we look at the future.
So we include two categories ESG Credentials and Industry Innovation and Infrastructure, And the inclusion of these help us look to the future because supply chains will need to be more sustainable as we go towards net zero, and also because demand is going to grow very quickly, so do these countries have the supporting sectors in place to be able to support the growth in supply chains.
So let's take a moment on ESG, so environmental, social and governance factors. What do we mean by that in this context because that term gets reapplied to so many things, and we Bloomberg try and have quite a strict definition what does ESG mean for us in this specific context.
So in the ranking, we include around ten ESG metrics are split between each of the three sub sectors, and we look at most of the ESG metrics on the country level, so we look at things like carbon pricing, environmental health of their ecosystems, as well as looking at the control of corruption and government effectiveness within the region. So with the rankings, a lot of what we do focuses on the country in that sense.
Then also, I think one thing out our day naristat So the methodology overall was developed with the industry. So it's essentially what companies are saying in their boardrooms, what the supply chain industry is discussing. So when we select the criteria, particularly with respect to ESG, it was really dozed at the auto companies as well as the mining companies and governments are talking about that matters to them. In order to dominate the supply chain.
Yeah, because we did a previous episode where we were talking about the use of blockchain and verifying minds and some of their social practices. It would kind of go into how they treat workers. So there's a wide basket of things, but a bit specifically related to metals and mining. Here you brought in ten important factors for this industry.
So going back to the winner of this particular ranking, which isn't necessarily where the majority of the refining capacity is, but where it comes out on top when we're actually considering some of these different things like ESG. What does it take to come out on top? So you've gone through these various areas that went into the ranking, but essentially where does Canada really excel? Are they across the board or is there one specific area where really kind of set them over the edge.
So Canada doesn't actually place in first position across any of the categories that we judge, but what they do do really well is that they have a consistent top ten performance across all of the five key categories, and ensuring that they can perform to a decent and sodid level across various different parts of supply chain has helped them get to first place. This is a fourth edition of the ranking, and what we've seen over the past
two is in every single category they've continuously improved. So it's a combination of the consistency across the categories, but also the continuous improvement that has helped them get to where they are today.
So they're an all rounder. Well, let's talk a little bit about the different geographic split then, if we will. Among those thirty countries, were they all centered in certain parts of the world or is this some really global supply chain.
I think it's very global. One of the key things we should highlight is that we picked thirty countries out of over one hundred and ninety countries. So if you're in this ranking, you're probably already a winner. So I mean, going back to your scarce analogy, you've probably have won award an award in one of the five categories that we mentioned if you're in the top thirty arm In terms of the regional split, we wanted it to be very global. Obviously, you're going to find that in most
of pretty much every region around the world. We did include some countries, so they are quite a number of countries in Europe, and for us, a minimum criteria to be part of that top thirty is really to have something going on within one of the criteria that we selected or that we assessed. So Europe would certainly feature quite strongly because they have a lot of battery manufacturing going on. We have North America where Canada, America, Mexico
features quite strongly. You've got South America where Chile also features in addition to other countries. Then you go to Asia, you've got the Japan, the China, and then in the Pacific region in Australia as well. So certainly a global benchmark. But then to be included in that top thirty, I think the key criteria is that you need to feature quite strongly in the five areas that we assess, at least one of them.
And so since this is the Metals in Mining team, can we talk about raw materials and really what's going on there and where it comes out on top because a lot of our conversations do tend to focus on Africa's in area that has a lot of raw materials that are necessary for the battery supply chain. How is that region faired when we come to the raw material space specifically, so.
Actually, in this ranking, Africa is the only region where all the countries that we include in the ranking in this case it's Morocco, Democratic Republic of the Congo DRC and South Africa. Africa's the only region where all these countries have improved in the raw materials category. And we're seeing that as there's a renewed interest in energy transition
and metals for the energy transition. Nations in Africa particularly are trying to harness the potential of their critical win reserves, as we've seen other supply chains try to decouple from China there turning to Africa to see if they can use some of their critical minerals there as well.
So while we're on the topic of battery metals, let's talk about prices, because that is certainly something our clients on the commodity side are watching closely. And there are two medals that have had on one side of fluctuation on the other side a dip. So let's talk about lithium and nickel, and I know we could spend an entire show talking about each independently, So maybe let's start with lithium. Why the fluctuations and why did the price collapse in twenty twenty three, I.
Think disclaim every morning day. Now, the first thing I do is so look at the lithium prices. So certainly you've got me on the right sport. And I think the key thing to understand is there are two factors that drive supply in the market. Okay, Obviously there's a supply and the demand. And for every commodity, if you have more supply than demand, you obviously get price dipping. Okay.
And what happened in the lithium market is a few years ago, Batri became the biggest consumer of lithium and we saw battery demand grow, which essentially led to an increased in demand for lithium as well. Supply was very late to the game, so you had a lot of demand with very little supply, and we saw prices go from ten thousand to about eighty thousand in a matter of eighteen months, which is very rare in the commodities market.
Right to go times eighteen such a short period. Now, what happened is that once you have a commodity go that high level, two things happen. Everybody now becomes a lithium minor, even my good old friends in Australia who were exploring for gold decided to go for lithium, and now that price point as well. The second thing that happens is that it becomes very easy to develop new technologies to improve assistant processes. So your efficieness has become better,
your recoveries become better. So no, I'll think about it. My good old friends in Australia, all of them exploring for gold overnight and technology becoming better to improve recoveries meant that supply really increased significantly within a short period. Now let's go back to the laws of economics. Remember when I said, when there's a lot more demand, we few supply, prices go up. When the revers happen, prices
go down. So that's precisely what happened last year, where the technology improvement in China, where there was a certain type of lithium deposit called epidolite, historically had not been able to be mined, but then with higher prices they were able to crack the technology code. And then suddenly China becomes a key producer with all those new projects.
Even my home country Ghana discovered lithium and they are on their way to develop it, So that meant that prices came down significantly as a result of a lot more supply coming in at a time where demand was beginning to slow down. That was the story for lithium.
But then you note that companies that were mining other things like gold have actually pivoted their businesses. So is this actually had a knock on effect for other commodities and driven prices up as companies have actually switched their attention as opposed to adding additional capacity.
I think very minimal in the sense that most of these companies that were exploring have not started producing yet, okay, so their supply had not actually entered the market for it to distort the market if they pivoted away from it. So I think the good for gold producers as well as other commodity producers is that those were early stage exploration projects that's simply pivoted, so their supply never really
added onto it. But then what happened with other metals, Obviously the impact will be different, but at least within the context of gold explorers pivoting to lithium, that was very minimal effect on gold and other metals.
So after you checked lithium prices and had your morning coffee. Is it on to nickel? And why has nickel been from a pricing standpoint a somewhat similar story. So is the reason behind it? Is it the same?
Quite similar? So also you had nickel ten years ago, prices went quite high and then technology played a key role. So back to what I said earlier, at higher prices, new technologists come online. In this case latrites. There are two types of nickel depicits. Obviously, you have what we call the sulfite, which historically had been the dominance nickel source. So you go to countries like Russia, Australia, Canada, you find the sulfit. It's high grade quality, all requires less
energy to process. And then there had been historically low grade deposit is that nobody really touched because they were quite expensive to mind. Then the Chinese competition Shan discover the technology where they could actually convert those lattert or into what we call nickel peg ion using steel. So overnight, if you look at the last ten years, Indonesia moved from being an insignificant producer of nickel to the largest within ten years. They're enough for one reason, improvement in
technology that made their deposit viable and economic. But here's what has happened over the last two years. Indonesia kept ramping up their production, kept ramping up their supply, and once again they coincided with the period where demand is slowing down, so prices began to fall. But the good news in Indonesia is that they are producing at a very competitive cost, so they don't feel the burniar whereas everyone else or most companies around the world are beginning
to feel the impact. Called prices are actually at a point where it's lower than the cost of production. So we've seen glen Core BHB and other major producers in Australia beginning to put their minds into care and maintenance. And when we say care and maintenance, we are not going to produce anymore, but we're just going to maintain those minds. Simply cost prices are lower than your preating costs. But that is not happening in Indonesia.
Is it common for a government to get involved in the supply and demand balance to keep prices or to attempt to make prices more stable.
So you can do that in the oil industry through a peck in mind. And if you try to influence. Obviously, the EU has the anti trust laws, so two companies cannot speak to each other. So I've got my colleague here. Early, if Ellie was an independent nickel producer and I was an indictdent neickero producer, the EU laws andi trust laws, which enforces competition among companies, prevents us to try to
moderate supply in order to influence prices. So the simple answer is no. And because governments don't actually produce these metals, they also don't have direct control over how companies are preid because then it goes against the rules of competition. So that's why it's like, all of a sudden you see everyone pumpinging supply. That leads us to a cliff edge in mining where overnight we wake up and everybody asks what happened simply because all of us we're producer at the same time.
Now, as we're talking about these metals, in light of the rankings that we did that focus more on sustainability, this brings us to one of my favorite terms, so hybrid word the green premium together is the greenium. Is there a green premium for essentially those countries at the top of this ranking, are they selling their products at a higher price because the buyers, well not all of them, but some are looking more seriously at sustainability metrics.
It's always a hard one, right. So the mining industry is one of the most unique industries in the world. Okay, so mining industry has what we call price takus in most other industries. So let's take the phone industry. If some song or Apple produces a phone today, they actually decide how much they want to sell it. If Timcook came out with a new iPhone, he decides that I'm going to sell this a thousand, three hundred because my cost was whatever plus my margin. In mining, mining companies
won't have that luxury. They take whatever price and market decide, so that premium would have to come from the market. And now you need to understand how prices are set. So most prices it's either through benchmark or through exchanges. If you look at the current structure of the exchanges where the prices are discovered, there's very little room for them to actually have what we call it the word grimium.
I'm going to seal that by the way there now, there's very little room for them to actually put on a premium because there's no structure to incentiviize. Prices are set at the macro level, not based on company. Now, the assumption is that companies can decide to go into bilateral agreements. Okay, so myself and Elie can decide that you produce the green to kill for me, I would pay it at an extra dollar because I want to
reach my zero target faster than my competitors. But then the key thing is that you need to understand where the EV industry is. Every EV company is looking at improving its margins to break into profitability by reducing its costs. So at the moment, premium is not something any EVA company is willing to put on its costs given where we want to go with evs to increase the adoption,
so green permium. Two things I want to end with on this question is that one, it will be difficult in the current structure of the exchanges where prices are discovered for there to be a premium in the market. But then secondly, what companies or to companies actually be willing to pay for green premiums. That will be hard because all of them are trying to reduce costs in order to improve the margins. Of the electric vehicle production to maximize their profit.
So perhaps as learning rates improve and electric vehicles become more price competitive with internal combustion engine vehicles, which we are seeing happen, and we do have forecasts that actually think about when that's actually going to be, which is not too far away, then it becomes maybe potentially a bigger factor in the future, and this ranking maybe it'll go precisely.
But then there's actually a plot twist, right. One thing I left out is policy. So look at the impact of Seabama as an example. So the Seabama I mean the carbon boder adjustment mechanism the European Union introduce, And what that means is that if you're a seal or aluminum important in the EU and you decide to import from a country whose emissions standards is not equivalent to what you have in the EU, you pay a premium on top of that, right or you pay a charge
based on where the prices. So similarly, the EU is trying to introduce the battery passport. So what's going to happen is that the EU is hoping to track the emissions profile of auto companies in the EU. So if you don't want to pay that penalty, which is aligned with the carbon price. Then the good thing is that you go to the producers that produce the good stuff.
And because everybody will be going to the producers that produce a lower emission nickel, that is where we think that obviously there might be a potential premium attach touced producers doing it in low emissions profile. So yes, character and stick. I think that one's a big stick, particularly from the EU is enforced. There's a probability that companies would have no option than to offer premiums in order to get access to the low emission stuff.
So now we've entered our let's predict the future part of the podcast, which always seems to come at some point in the show when it comes to these different well nickel and lithium specifically, do we expect twenty twenty four to be a more stable year depends.
On what world leaders have for coughing the more. But then what I tend to realize the near term price movement is mostly based on geopolitics, which is number one. A classic example is Russia is a major producer of nickel, so nichol is actually the only metal that has class class in the sense that there are two types of nickel, the Class one, which is a high priority stuff used in battery manufacturing, and then the Class two, which is
used for seal steel production. So Russia is a key produce of Class one, and if America or any other country for that matter, decides to impose assanction on Russia's nickel, that certainly would move the market and unfortunately not make it a stable yet. So I think that's one. But then burying all these assumptions and geopolitical impact, we do think that we expect recovery in the market because we are seeing that companies are increasingly beginning to shut down supply.
And then, if we go back to the economics one O one that I mentioned, when supply finally is lower than demand, or let me say, when demand finally exceeds supply, what you see is that prices begin to recover. So as more companies furlow or put their operations into care men, if it tips to skill to the point where supply becomes less than demand, we think that prices will recover. But overall our view is that that recovery would not be significant compared to the drop we saw last year.
So we've spent a lot of time talking about countries, and invariably this is a really important policy discussion. As you've pointed out, Quazy, Let's talk a second about the companies involved here. What are some of the bigger companies and is that actively shifting. Are there new entrants in this market or is it really the same companies that have always been in the space.
As Quzy mentioned earlier, we're seeing companies expand into different metals and into new portfolios. But in the terms of lithium, for example, we've seen that there's top five producers standing firm in their position, for example Alba Marley, SQM, gan Feng in China. But as people are recognizing the potential and opportunity that comes with these energy transition metals, companies from sectors aren't necessarily in the metal space are getting involved.
And a perfect example of that is in the in gas space, where we're seeing Exon Mobile planning to produce lithium by twenty twenty seven and people probably thinking like why is this happening? How does this actually work in practice?
But interestingly, there's actually a lot of synergy between the production of oil from oil fields and the production of lithium from Brian, so a lot of the expertise and equipment that is already existingly used in oil and gas can also transfer over to lithium, which is great as we're seeing these companies trying to take advantage of what they have already in place.
Even in the lithium space as well, we've seen battery manufacturers actually also go all the way upstream. So c ATL has concessions where they're actually mining lithium mum as we speak now, they've taken equity in our Congolese coboar to mine.
Given.
One example that would actually surprise you, danais GM General Motor Zeroto Company has actually gone into take equity in a mining company. And look, I'm not all but then I know that the last time an auto company took equity in a mining company was the days of Henry Ford. So simple terms, yes, companies that are actually making entrant and dominating the supply chain is actually evolving similar to what we are seeing in steel, and there a whole
lot of reasons we can talk about. One other reason why we are seeing that shifting companies coming from different places into the mining industry is the fact that people have realized that there's a probability that there would not be enough for all of them. That's one second. People have realized that there's a probability that the good stuff from a sustainable or ESG perspective might not be enough
for all of them. So, rather than adopt the historical supply chain strategy of just in time, and by just in time, auto companies historically don't want to commit to more than teddy days or sixty days of inventory is we're just going to wait to factor gator and deliver. They realize that, look, if we don't go out there and help these miners or even become minus like Tesla Annow's a few years ago, there might not be enough
for us. So you're absolutely right. The companies in the mix that are dominating the industry are gradually shifting, and I'm quite interested in what that list would look like by twenty thirty.
Who knows now, And I was going to say, we've seen this early move approach be so successful on a country level. That's the reason why China dominates a supply chain today. So what these companies are trying to do is replicate that on a more granular level. To ensure that they can be the leaders in the market that they want to be.
So we've got a diverse set of companies and a diverse set of countries in this ranking. How do we compare apples to apples, Because this seems like it's a pretty diverse set of things that we're going to have to look at. I mean, how do you do this from a methodology standpoint?
So i'dan, I don't know if you want us to release the BNF secrete sauce of comparing level, but look, I think it's that's a hard part of what we do with these rankings because obviously you've got other micro level of companies. Even within companies, different minds or different projects have different metrics, right, So I think it's important for us to first of all set that benchmark, so we go into details. If you take an example, their missions.
So fortunately BEINGF has this really good climate scope is an example. All Climoscope is one of our big research pieces we put out every year where we sort of rank countries and the progress they are making in the renewable energy space, whether policy or capacity build. So for us, these are in house methodologies that we've built that have to standardize what countries are doing within the renewable energy space, which sort of makes our life easy because we don't
have to reinvent the wheelders. So that's an example the fact that we have in house benchmarks we've developed that helps us to compare these countries in other areas as well. It's also important that for us having that benchmark that all other countries input aligns with.
Is it a pretty tight race between those thirty countries that we were evaluating or is there a big gap between Canada and everybody else.
There's a big gap. And what we've seen as the rankings have gone on is countries are starting to form into clusters. So we've seen at the top the countries that have the clear policy commitments, have the ambitions in place,
and are actually getting to the implementation stage. We've seen at the bottom of the countries such as Bolivia, DRC and Argentina that have raw materials to a certain extent, but aren't necessarily capitalizing it across the whole supply chain, so they're just sitting within their strength and not developing as much as they could. And then we have the middle round, which involves a lot of the Southeast Asian countries actually, such as Indonesia and India, that are trying
to make the next step to success. So we've seen Indonesia build their nickel market, but now it's how can they use that nickel market to try and attract manufacturing investment, And that's at the stage r at the moment, trying to get to the next step in building the supply chain.
Adding what too Early said, this is a unique ranking where it'll only get lonely at the top four one year. Because us early mentioned the competition really horisen. Never in my wild as imagination when we started as four years ago did I think that Canada would become first down the line, right, So the competition is quite high. If you look at the earlier IT creations of the ARM rankings that we did back I remember vividly when we did the first one, the difference between China and the
second country was very significant. And then last year you had, for example, the Inflation Redaction Act and you can see that instantly it puts America in the game as well. And then the EU came with this Green Deal and it also helped propel countries like Germany, Okay, and then you look at a country like Elie mentioned Indonesia, where a few years ago in nickel class one refinery, China
was number one. This year, according to being a forecast, Indonesia is likely to overtake China in the refinery of nickel soffet used in batteries. So it's important to realize that. I think the key thing is that, yes, you can win today, but then it's very very difficult. With the pace of growth we've seen in countries like Germany, in countries like the United States, and then in countries like Canada, it becomes unpredictable who's going to be first in subsequent editions of the ranking.
So, Elie, you'd mentioned those in the middle of the ranking are potentially striving to raise higher. Maybe they're not looking at this ranking specifically is their aim, but they're certainly looking at their sustainability credentials. And what I want to know is what's going to take to actually rise in that ranking, and which countries are thinking about it and how are they going about it or maybe even a playbook. I mean, basically, how are countries approaching improving in this ranking.
So what we've seen successful for lots of regions is they've capitalized on their strength to help build out other parts of the supply chain, and we're seeing that approach being used again and again by regions that are striving to improve. So if you take Africa, that's a really good example because as you mentioned earlier, they're the only region that is improved across the raw materials sector, but actually in the overall ranking they still sit pretty low.
And we as BNF had opportunity to visit South Africa for the BNF Forum in Cape Town and we had a discussion about how we could harness the critical murial's potential in Africa to ensure this foundation for growth can be made. And what we found is that in Africa, for example, they are established in the mining sector. South Africa's the top producer of minds manganese DRC takes the larger share of the mind's cobalt supply in the world,
but it stops at mind supply. And what Africa trying to do and need to do is actually harness the critical minerals potential to be able to move further downstream in the raw materials value chain, so actually take part in the value adding activity which can bring more development and economic benefit to the region so they can build
further down the supply chain. There are of course challenges to that, and what the report hired is that there's been progressed, but actually there's a real long way to go for Africa still and focusing on specific areas is important to ensure that Africa can become a supply chain for the future.
I think Dana can I can talk about some of these specific points that we highlighted the and the report in how Africa can improve its critical mineral's potential, And one was obviously sustainability and as you know, are being
there for something that is important to us. But it's not just we have benf Also the wider industry is beginning to look into how can mines be more sustainable though, so one way where if you look at South Africa's South Africa has one of the highest CEO or two emissions on its grid, so that doesn't help really well if Africa wants to be the raw material producer of
the future. Another area is also good governance. So there were instances where if you look at the country like the Democratic Republic of Congo a few years ago, I'm net International that a report and talked about how there were incidents of corruption and also human rights abuses in the minding value chain, particularly at the atis now illegal
atismal small skill level. So that's also one thing where the reporter highlighted that good governance will certainly go a long way into making Africa the important region to produce
a raw materials we need for the transition. Financing was also part of it, right because most companies for most countries are not able to transform the amnial resources into value art products which would improve the ascores on the ranking simply because they are not getting access to financing, and we ded touch on the important factors that is needed to ensure that these projects get the much needed financing.
Another important thing is the one thing that most people don't know is I started my care We are in a university, so skill set mutchs a lot to me.
And it's important that one of the challenges we put to the people around the round table was the fact that how many universities are actually offering a cross in battery management or battery engineering or call it whatever, right, So it's important that countries regions can be passionate about the transition, but without preparing the workforce of the future today, it becomes practically impossible to play any key role in there,
and a host of other factors as well. And I believe once African countries, particularly in this ranking, are able to address these, are pretty sure that the rankings under line might look different from what it is today.
Well, Quezy Ellie, thank you so much for coming on the show today, sharing the rankings and just some of the really interesting things that are happening in metals and mining at the moment.
Thank you for having us.
Thanks Daniel.
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