Can you give us a quick introduction to your work, especially within the battery metals space?
I’ve always been interested in this macro question of what happens when commodities, technology, and geopolitics collide, and trying to think through the investment implications of that collision. About 15 years ago, I left a career on Wall Street, with the intention to build a research and advisory platform to address that question for investors and for companies.
I now work with two groups. The first is companies along the battery supply chain. These are mining companies, refiners, battery technology companies, etc. helping them think through issues of corporate strategy, balance sheet optimization, financial markets intelligence, and how they need to position and adjust accordingly.
The other group that I work with is investors; hedge funds, private equity, sovereign wealth, high net worths, etc. Again, with this group, thinking through issues of where along in the battery supply chain do we want to play? Of course, if you’re a private equity fund, and you have a long-term time horizon, that means one thing in terms of where to position. If you’re a hedge fund, and you’re just worried about the next three or six months, it’s a totally different conversation.
It’s been pretty rewarding in that respect, being able to talk to two entirely different groups and bring them together.
I also have some board level experience, and I’ve done a lot of work with battery recycling. I like to say I’m always increasing my surface area along this ever-changing dynamic space.
Let’s look at the key supply-demand outlook for the battery metals. Where do you see some of the biggest shortfalls and do you see solutions to address this?
The simple solution is putting more capital into the ground as quickly as possible. It’s difficult to say what the supply-demand dynamics are for battery metals overall, because lithium, copper, nickel, and rare earths, are all somewhat different in terms of supply and demand dynamics.
Everyone is very excited about copper these days. It’s one of the few battery metals that hasn’t seen a huge price decline, as we have with lithium, for example. Copper is very interesting, because regardless of whether or not you’re talking about batteries, EVs, or the grid, electrification is copper-intensive and that means copper is one of the single most essential metals.
Lithium carbonate today, at US$8500/t, is completely out of whack, relative to what this industry needs in terms of an incentive price to attract the capital that it needs to grow. Lithium demand is growing at about 20% per year, and supply basically needs to double between now and 2030 in order to have things roughly equalized.
It’s an opaque, specialized commodity. We’ve never seen supply and demand in balance for lithium. There’s either been oversupply like we have right now or under supply like we saw in recent years. The issue is the current price for lithium is unrealistic. We really need to see 20 to US$22,000/t lithium, to start seeing capacity come back here in the US.
We’re way off that, but perhaps that’s the opportunity. In general, though, if you go down the supply chain, and we talk about supply and demand, you do need to see much more cathode manufacturing capacity, anode manufacturing capacity, electrolyte separators, and recycling capacity. There is a huge push even in the current environment to build capacity domestically.
It’s a chicken and egg problem and has always has been. What is the wisdom in building recycling capacity or cathode capacity if you don’t have a lock on the raw materials? That’s what the market is wrestling with right now. The prices for a lot of metals are down and do not incentivize building that capacity. Instead, everyone’s really focused on the mid and downstream that have different economic return profiles which are challenged as well.
President Trump has brought a significant amount of focus into the domestic critical minerals value chain. Do you see this helping or hindering development, both domestically and globally?
I think the awareness and the executive orders are helpful, while the tariffs and threat of export controls are not. The first Trump administration started the trade war, and Biden continued it. But the Biden administration really tried to help build domestic aspects of the supply chain through investment infrastructure, the jobs act, and, of course, the IRA.
The Republicans in the House of Representatives, with their Big Beautiful Bill, seem intent on wiping the IRA out, through different tricks. I think that the Trump Administration, with respect to executive orders is helpful by trying to expedite permitting, for example. But, again, you have some additional headwinds right now. You have higher real interest rates in the economy, which has increased the cost of capital to get projects built. Metals prices are all over the map and then there’s policy uncertainty as well.
If there were a situation where there were medium-term certainty around tariff levels or export control levels, you would start to see much more capital come into the United States, and get capacity building underway. But without that, it’s really challenging right now.
These executive orders are terrific – they create awareness of what we need to do. But dismantling some of the critical parts of the IRA, it just slows things down under the best of circumstances and halts projects under a darker scenario.
Has there been any change that’s come out of some of these new acts that Trump has brought in terms of growing domestic supply?
Right now, uncertainty reigns. I don’t want to call it the dismantling of the IRA, but it’s bringing about a high degree of uncertainty with respect to accessing investment or production tax credits as they start to sunset earlier than first thought. Additionally, tighter foreign entity of concern rules are complicating planning efforts as well. These are very large capital investment decisions that these companies need to make. Unless they know for sure that the tax credits or production credits are going to be in place for the next two to five years, they’re just not going to make the investment. It’s going to slow everything down.
Without getting political, you could make an argument that one of the unintended consequences of the Trump administration and the tariff regime is ceding leadership to countries like China, which is exactly who we’re trying to compete with. Representatives from the Trump administration and Chinese representatives are meeting in London today to talk about export controls, and try and figure out a way to get this Geneva agreement back on track. Who knows what we’ll see?
You have to have certainty with respect to the tariffs and the export controls before any investment dollars can be put in the ground.
The IRA is not fully being dismantled, but that discourse has completely shifted now towards a focus on defense. How do we bring a focus back into the energy transition?
I think there is still a focus on the energy transition, it’s just not here in the United States. The investment narrative under Biden was electrification, the greening of the economy, and 50% EV penetration. Now, it’s national defense. We’re going to do this alone. We’re going to dictate the rules of the game. I don’t think that our Chinese competitors are going to be willing to accept that. I don’t think we can or should do it alone, for what it’s worth. It’s hard to know specifically how this will all shake out.
I would argue that the whole discourse around deglobalization and decoupling is not going to happen, simply because it can’t. You can’t have a relationship like we have with the Chinese where you’ve got US$500B in trade every year just come to an end, and not expect to have some pretty significant ramifications.
Back to your question, the transition is still happening. It’s just not necessarily the same level of focus here in the United States. The only other thing I would say, is as we think about national defense, yes, it’s critical, obviously, right? But if you’re relying on the Department of Defense or the US government to be a buyer of last resort, or think that I’m going to be able to build mining capacity here in the United States, and the government’s going to take everything, that is misplaced.
The US government’s demand for certain rare earths is actually quite small relative to the overall commercial demand. How do we get these projects built? Regardless of the narrative, it’s going to take a mixture of public and private capital.
What are some of the implications of this type of mentality that a lot of countries now have with regards to critical minerals value chains?
I think it’s probably going to put pressure on pricing for some of the critical raw materials. Going back to what I mentioned before, what is the sense in building a magnet operation or a PCAM operation if you don’t have access to the raw materials? You could make the argument that as things splinter, the focus on vertical integration is going to become much more important. But I would be cautious of investing only in mid to downstream applications, unless you had some lock on the raw materials. Again, that comes back to accessing the lithium and the copper.
The funny thing is that none of these metals are rare. We could get a shovel and go to Central Park here in New York and start digging. While you probably wouldn’t be able to find a mine, you would be able to find these raw materials. You could get lithium out of seawater if you really wanted to. I wouldn’t recommend it, but it could be done.
It’s not so much finding the raw materials, it’s building that processing capacity. But you have to be able to have the raw material to be paired with the processing capacity to be able to move forward regardless.
That processing capacity has been moved to other countries. It’s almost all in China. We could spend a lot of time looking at the copper, nickel, rare earths, and graphite supply chains. It’s not really that the Chinese dominate the mining, it’s that they dominate that midstream piece where we take the raw materials that they’ve beneficiated and then turn them into battery-grade or magnet-grade materials.
Today, everything, for the most part, goes through China. This is something that we can address here in the United States and we are tackling it, but it’s not something that’s going to be solved in one or even two presidential election cycles. We don’t lack the capital in this country. We don’t lack the IP. We know how to separate rare earths. We know how to build lithium batteries. We just lack the political will. That’s always been in short supply. We’ll see if the Trump administration, with control of both houses of Congress, can push something through, and start to shift this tide to get it done. But again, this is not something that’s going to be solved in a year or two. It’s going to take at least a decade.
What’s your key focus moving forward?
I’m still optimistic about the need to decarbonize and electrify. It’s happening regardless of the rhetoric out of Washington. We can either invest in the entire supply chain or we can get left behind. It’s very simple.
I’ve always had two fundamental ways of thinking about investment. Number one is security of supply matters more than anything else. Number two is you better own the robots or the robots are going to own you. Basically, what this means is you can’t control metal prices and this volatility can directly impact project economics. One way to perhaps hedge against this volatility is through understanding next generation technologies and innovations that allow interesting ways to extract lithium, build magnets, or things like process technologies. Understand leverage technologies or get left behind. Over the next couple of years, I would be very focused on some of those technologies as hedges against metal price and policy uncertainty.
