Post-Carbon, Post-Covid

...a perfect opportunity for an imperfect world?

By Suzannah Lipmann

 

The coronavirus global pandemic has been unprecedented and far-reaching in its primary effect on health and healthcare systems, as well as its secondary effect on markets.  As dismal as reading the news these days seems to be, the pandemic has also shone a light on opportunities relating to climate change, as we strive for a post-carbon world. 

 

Post-carbon related applications and technology has been at the forefront of our interest in minor metals supply in recent years.  (See Fastmarket's webinar on this subject on: https://www.youtube.com/watch?v=vuDMkBtHTd0).  But today, we can see how the pandemic has provided a much-needed catalyst for swifter change in areas which already provide opportunities for various green technologies whilst simultaneously paving the way for economies to reboot, post-crisis.  The recently announced EU green deal, as well as other stimulus packages, already in excess of $10 trillion worldwide, will oversee funds invested in ‘green industry’ and ‘green jobs’, which will benefit renewables and related technologies.  Germany has already agreed a stimulus package of €750bln with other EU nations to follow suit, with considerable % of GDP pledged.  With worst-case estimates in recent days - that the world has in fact 6 months, not years, in which to act to counter irreversible climate damage, governments would do well to focus on legislation, alongside investment, to reduce CO2 emissions in as many sectors as possible. 

 

Whether this is done via promotion of existing viable green technologies or investment in new technology, the global community and environment has everything to gain.  There have been many examples throughout our recent history where, only through environmental legislation, the market responded, and required targets were reached.  Legislation is not always effective, as its goals are often in opposition to market forces, however, it can be the catalyst required for us to combat climate change.  Before we look at examples of what effect legislation can have on new technology and the environment, I will outline what we see as the most promising technologies for the post-Covid/post-carbon world. 

Hydrogen Economy 

 

It is not a particularly new concept, but it is one we believe will be key for several technologies which together have great potential for the environment in the coming decades.  On the supply side, hydrogen can be produced from either fossil-fuel energy sources or more sustainable ones.  The sustainable ones - solar, wind, hydroelectric (or nuclear) - are all low-carbon options able to provide the energy required to crack water via electrolysis in hydrogen fuel-cells to produce hydrogen and oxygen gas.  On the demand side, this hydrogen can be used for metal refining and ammonia production or more excitingly, to power the next generation of vehicles.  An example might be the ‘Nikola’ trucks of the future, delivering minor metals from Rotterdam to Sheffield; or buses, ensuring our air quality, particularly in cities, does not go back to pre-Covid levels. Ultimately, hydrogen fuelled cars, emitting nothing more than water vapour into the atmosphere, could become a popular choice.

 

This economy will require ruthenium, iridium, and platinum to coat the electrodes within the electrolyser. Due to the lack of Ruthenium (it is only about 35mt of supply per year) Hydrogen cannot be the only solution to the green economy, but it will be part of the mix. Others who surely agree are: ITM Power – the largest PEM (polymer electrolyte membrane) electrolyser facility in the world in Sheffield (generating 1GW/yr) and RYSE energy (led by Jamie Bamford, son of the founder of JCB) which are producing hydrogen via wind and solar, making it one of the few integrated green-to-green hydrogen producers today.  In China too, a great deal of infrastructure is being built to accommodate this and other new technologies.  It was recently reported by Argus Metals that “Beijing is to build at least 50,000 new NEV charging points and 100 battery exchange stations before end of 2022”.

Magnets

One of the related technologies required for both wind turbines and cars (be they hybrids, EVs or hydrogen powered), are magnets.  Magnets typically used for these applications are: Neodymium-Iron-Boron (NdFeB) and Samarium-Cobalt (SmCo) magnets, though small amounts of other rare earths, such as Dysprosium and Terbium are also often incorporated in the former, and Zirconium in the latter.   Although the automotive and aerospace sectors are depressed due to the coronavirus pandemic, production of permanent magnets has been increasing over the past year.  China’s production of sintered NdFeB magnets is up nearly 10% on 2018 levels, while SmCo magnet production is up nearly 5%. 

Wind Power

In the UK, we have just seen in April 2020, approval granted for a new 50-turbine wind farm to be built in southern Scotland which will be up and running by 2023. “The South Kyle Windfarm is set to be Vattenfall’s largest onshore wind farm in the United Kingdom.  Once construction is complete, the turbines will be able to power approximately 170,000 UK homes (each of which consumes on average 3700 kWh/year), saving nearly 300,000 tonnes of carbon dioxide emissions annually. That’s the equivalent of 65,000 cars being taken off the road.” (https://www.euronews.com/living/2020/04/28/uk-blown-away-as-huge-new-wind-farm-will-soon-power-170-000-homes).

 

This project will join the existing installed capacity in the UK of 23.3GW, split between the majority on-shore capacity of 13.361GW and 9.701GW of off-shore capacity.  The growing popularity of on-shore wind farms overcomes the issue of voltage drop-off on the grid cabling of off-shore wind farms, but does it also indicate that nimbyism is on the decline and that consumers have bought into the financial and environmental benefits?  In any case, this type of commitment to renewable energy sources and related technology, amid a global pandemic, is good news and bodes well for the UK’s ‘green credentials’ and industry.  The UK is already the 6th largest producer of wind power (June 2020) and off-shore wind generates over 10% of the UK’s electricity needs.  As the cost of new off-shore wind has fallen by 50% since 2015, it is now one of the lowest cost options for new power in the UK – cheaper than new gas and nuclear power.

 

A press release (June 8th 2020) on the Global Wind Energy Council (GWEC) states that, “On World Ocean Day, OREAC has announced its vision for 1,400 GW of offshore wind by 2050 to drive decarbonisation and green recovery from the COVID-19 crisis.  1,400 GW of offshore wind could power one-tenth of global electricity demand, save over 3 billion tonnes of CO2 annually, and create around 24 million years of employment (defined as full-time work for one person per calendar year) by 2050.”  The GWEC has also issued a statement signed by major stakeholders in this sector, as an industry-led bid to policymakers, to take the opportunity now presented, to double-down on progress already made to avoid further climate change while achieving a sustainable and lasting economic recovery. 

https://gwec.net/wp-content/uploads/2020/06/Green-Recovery-Statement-EN-2.pdf

Solar Power

In the US, SEIA (Solar Energy Industries Assoc) is similarly calling on the US government to use solar, in the wake of the pandemic to “invest in programs that build new clean energy infrastructure and stimulate the economy” in the form of manufacturing tax credits among others.  With 20% of US electricity to be powered via solar by 2030, and 50% from renewables, once more we can see a case for legislation and investment to be the driver of the step-change needed in the world’s large economy.  One type of solar technology likely to benefit is that of Cadmium-Telluride photovoltaics.  Although only a fraction of silicon solar cells, CdTe has a low carbon footprint and we believe recent bolstering of Tellurium prices are due to investment in CdTe-based photovoltaic production projects in China.  CNBM (China National Building Material) is currently building a production line for integrated PVs (BIPV) made of CdTe thin film power generation glass.  Such projects could be game changers.

Environmental Legislation

From the 1970s, it was the successive Clean Air Acts in USA, the UK and Europe that drove the removal of lead in gasoline, thus spawning an entirely new PGM dependent industry - the use of automotive catalytic converters to selectively reduce CO2 and NOx emissions.  It produced huge demand for certain PGMs, namely Palladium which was below $100 per toz in the 1970s, and rose tenfold to $1000 per toz for the first time in 2000, when Ford had designed the catalytic converters to take only Palladium and could not do without it.  What followed was a swap into cheaper platinum but, following the Diesel-gate scandal in 2015, when Volkswagen breeched the EPA Clean Air Act, palladium once more became the catalyst of choice. 

 

Although unintended, the diesel-gate scandal inadvertently provided huge momentum to consumers wishing to move away from Diesel vehicles, and thus in time towards clean EV, Hybrid or Hydrogen options amid growing distrust of the incumbents.  It is in this space where we believe great opportunities lie for both metal traders and the environment.  The fact that Ford/VW signed an agreement in June 2020 to cover ‘EV production for the EU market in 2023’ is testament to their nervousness of losing market-share in this new area.  EV vehicles in the near term are likely to see increased demand if projections are to be taken seriously.  This has been a key driver of cobalt demand in recent years as well as Lithium, but it is likely a number of technologies will be required alongside one another for a more sustainable future.

 

The current crisis has particularly highlighted issues relating to air pollution, as COVID-19 disproportionately affects those with respiratory issues.  At the same time, the noticeable effect of reduced air and road traffic on the environment, hopefully will propel global climate change cooperation further and promote renewable technologies and even low-carbon emitting options such as nuclear.

 

Environmental legislation can however sometimes produce unintended consequences for markets. A good example of this was when China banned various scrap imports in June 2017 to send a signal that she no longer wanted to be the world’s dumping ground.  Vanadium, which is toxic, is safe and useful when added to steel in rebar to improve strength. In this particular case, the ban on imports led to a ban on the import of Vanadium-bearing scrap exactly at a time when China had stipulated an increase in V content in rebar for the purpose of building more earthquake resistant homes. All 3 of the main scrap sources of Vanadium (brown coal flue dusts, steel slag (containing around 20% V) and spent petroleum catalysts (10% V content approx.) were affected. With China responsible for about 40% of world Vanadium supply, Vanadium prices rocketed for about a year with the Vanadium pentoxide price increasing from around $6/lb to $28/lb V2O5 by end of 2018, and FeV from $25/kg to $110/kg V!

'Green' shoots for the stars!

Just the other day (June 29th 2020), the Council for Sustainable Business (CSB) in tandem with the government was meeting to discuss the climate action required by the UK over the next 10 years, in order to mitigate climate change and loss of biodiversity alongside creating a green recovery post-Covid crisis.  While, in mid-June, it was reported in the Guardian newspaper that sustainable investment funds are beginning to outperform traditional funds focussed on fossil fuel giants such as BP.  If this trend is to be believed, we can only wait and hope that there is enough incentive within government, as there seems to be from industry and investors, for the post-carbon world to arrive sooner than we think.

https://www.metalbulletin.com/Article/3939488/Minor-metals/5G-offers-greatest-long-term-potential-for-minor-metals-demand-post-Covid-19-panel.html

https://www.theguardian.com/business/2020/jun/29/match-covid-19-economic-stimulus-with-climate-fight-ambition-urge-mps

https://www.theguardian.com/money/2020/jun/13/ethical-investments-are-outperforming-traditional-funds

© 2020 Lipmann Walton & Co. Ltd

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