2021: How Biden's Green Plan Could Affect Battery Metals (Lithium, Nickel, Cobalt)
Politics is a matter of international importance, and this years presidential race in America is no different. Waiting for the last few states to be called was a ground-breaking moment, not just for America, but the whole world - especially the world of investing.
Democrat Joseph Biden has been sworn in as the 46th and current president of the United States.
Among implications for change already scrutinized by the financial press and business, few are as potentially drastic as those for energy policy. Specifically, Biden’s policies for battery technology and battery metal investments.
The President-Elect is a believer in catastrophic climate change as an "existential threat" to the planet. For 4 years, Mr Biden, many fellow Democrats, much of the media, and many millions of Americans have lamented President's Donald Trump's environmental views, or lack of. Specifically his withdrawal from the Paris Accords, releasing of U.S. federal lands and waters for energy development, encouragement of the fossil-fuels industry including coal, and many other steps.
Overview: Biden's Green Revolution
Over those years, in the run-up to the 2020 election, Democrats in Congress and Mr Biden and his advisors have made increasingly specific plans, declarations, and promises for a wholesale Green Revolution if Mr Biden won the presidency:
- Regulation, suppression, and ultimate replacement of the U.S. fossil-fuel complex from coal mining to oil drilling to energy production by utilities to implement regulations to produce "non-polluting" (non-carbon-dioxide-emitting) U.S. vehicles.
- Worldwide diplomacy through the United Nations to get leading greenhouse-gas-producing countries, to sign on to timetables for becoming "carbon neutral" (adding no additional greenhouse gases to the atmosphere).
- Massive investment in "clean energy" focusing on the conversion of the country to use of electric vehicles (EV), movement of its existing electric utility companies toward the elimination of greenhouse gas emissions, and eventual replacement of them with "alternative energy" such as solar, wind, and nuclear.
- Sweeping transformation of the country's housing stock to "sustainable" forms of energy use.
Battery technology and battery metals
Many energy analysts and industry leaders indicated that to a significant degree all of these plans depend upon the emerging revolution in battery technology.
Electric vehicles and reliable continuously available solar/wind power are the "green" alternatives to the foremost producers of greenhouse gases (combustion engines and burning of fossil-fuels)
What do these green alternatives depend on?
Both depend entirely on efficient batteries for electrical energy storage.
There are 2 pressing agendas if batteries are to power the green revolution:
- Improve battery technology.
- Secure the supply chain of metals and other materials that these batteries require: cobalt, copper, graphite, lithium, nickel, rare earths, and zinc.
In this article we will try to project how Mr Biden's first year in office may impact the advancement of new battery technology and the supply chain for battery metals.
- His executive orders
- Directions to federal departments
- Prioritization of the government's own budgeting
- Regulations & proposed laws
- Proposed federal spending
Using targeted initiatives such as research support for battery technology or the prohibition of energy production on federal land. Or more general initiatives like putting public and political pressure on utility companies and the suppression of fossil-fuel supply.
Making the transition away from fossil-fuels
President-elect Biden enters office with an ambitious plan to drive America's transition from fossil fuels to clean energy.
His vision is a "Clean Energy Revolution" (not dissimilar to the "Green New Deal") subordinating all change in energy to the higher goal of managing earth's climate change. He views this as a double whammy: attainment of the climate agenda and restoration of full employment to the United States with 10-million new jobs (Mr Biden's own estimate) in the green energy industry. As part of the plan, Mr Biden would "double-down" on tax incentives for carbon capture and sequestration (CCUS) technology.
Net-zero emissions target
Mr Biden plans to eliminate emissions from power plants by 2035 and achieve "net-zero emissions" across all sectors, including automotive, by 2050. Forbes commented that these "randomly selected targets have more than a whiff of central planning, known for disappointing results from the U.S.S.R. to the P.R.C."
The cost to switch to clean energy
Mr Biden projects spending up to $2 trillion in his first 4 year term. This is not entirely out of line with other estimates of the cost of decarbonizing the U.S. power grid. Obviously, oil and gas producers will no longer enjoy the unstinting support they have under President Trump. For example, Mr Biden has said he would cut off subsidies for fossil fuels—an estimated $20 billion annually.
In a major CNBC round-up on "The Battery Decade," Pippa Stevens began by noting:
"UBS estimates that over the next 10 years the energy storage market in the United States could grow to as much as $426 billion, and there are many ways to buy into the surge, including chemical companies, battery cell makers, car companies, solar companies and utility companies."
"Capturing the massive economic opportunity underlying the shift to controls and battery-based energy systems requires that planners, policymakers, regulators, and investors take an ecosystem approach to developing these markets...' the research firm Rocky Mountain Institute said recently."
Given the pivotal role of battery technology in all plans for the future of energy, and the complexity of the challenge, it seems inevitable that Mr Biden's administration will pour government research grants, subsidies, and other support into getting the battery technology required.
Mr Biden's campaign website writes that he "will use purchasing power, research and development, tax, trade, and investment policies" to position the United State as a global leader in EVs..."
Prohibiting drilling on federal lands
He has vowed to prohibit drilling on federal lands, including the Arctic National Wildlife Refuge. The United States currently produces 3 million barrels of oil a day from federal lands and waters as well as 13.2 billion cubic feet of natural gas per day. Closing the source will set back U.S. oil and gas production and drive up prices of both as supply tightens.
This summary of the new president's plans for the U.S. fossil fuel industry implies that the industry will become less competitive with alternative energy companies, less attractive to investors, and a declining force in the American economy. Biden proposes to throw the whole weight of the U.S. presidency against the existing energy complex and equally behind the emerging alternative energy complex.
Investing in battery technology
Mr Biden addressed a "town hall" session on October 15 in Michigan, considered a battleground state where President Trump narrowly won in 2016 by his smallest margin in any state. Both candidates repeatedly visited Michigan and Ohio to talk about the automotive industry.
The Detroit News reported that at the meeting Mr Biden presented his plan to energize electric vehicle manufacturing. He said that electric vehicles would save "billions of gallons of oil" and create 1 million auto industry jobs. He said of EV technology, however, "We're not investing. We're not doing any of the research." (The
News remarks that it was unclear if he was referring to the government or the industry. General Motors Co. and Ford Motor Co. have committed to spending 10s of billions of dollars on electric and "autonomous" vehicles in the next few years.)
500,000 charging stations
Earlier the same week, campaigning in Ohio, Mr Biden had made another major promise: to create a network of 500,000 charging stations and give car owners rebates for trading in their older vehicles for newer ones, presumably EV. The Detroit News quoted him as saying:
"We're going to make it easier for American consumers to move to the vehicles of the future."
S&P 500 Market Intelligence quoted Professor Mark Rom of Georgetown University as saying:
"Knowing the government is committed to an electric future would boost automakers' confidence in focusing on EVs - especially when it comes to charging infrastructure. Automakers don't want to build the charging units, but if the government does that, if it's part of our infrastructure, that would make it much more attractive to the auto companies."
Tesla & Battery Day
The President-Elect's plans synchronize well with leading electric-vehicle maker Tesla, which took Battery Day (September 22) as an occasion for announcing new strategies.
For example, Tesla will build a battery cathode manufacturing plant in North America and, as part of this plan, begin "leveraging all the North American resources that exist for nickel and lithium".
Company executive Drew Baglino said:
"It is important to note that there is a massive amount of lithium on Earth…There is a massive amount of it pretty much everywhere."
"This dream of building a local metals supply, where a manufacturer oversees its materials from mine to finished product, is not new to the EV market. Industry observers say reliable sources of battery metals may be necessary to make electric cars affordable and plentiful enough to widely deploy them in the U.S. and elsewhere, a step some say is needed to limit global warming and avert a permanent climate catastrophe."
"However, how mining companies, battery-makers, and automobile manufacturers invest in that vision could very well depend on who wins the U.S. presidential and Senate elections in early November."
How will Biden support battery metal miners?
The Biden campaign said privately to U.S. miners that he will get behind boosting domestic production of metals used in making electric vehicles, solar panels, and other products vital to his climate hopes.
The statement may have been intended to counteract the record of the Obama administration, which put through rigorous regulations that slowed the U.S. mining sector's growth. Biden had been expected to carry forward this work.
Domestic supply chain for battery metals
But during the campaign, he said that he supports bipartisan (two-party) efforts to forge a domestic supply chain for lithium, copper, rare earths, nickel, and other strategic materials that the United States now imports mainly from China.
The reference by Mr Biden to "bipartisan support" probably relates to the rethinking of sourcing strategy in Washington since China is now the world's foremost producer or consumer of almost all metals used to make EVs, cell phones, weapons, and high-tech equipment.
Lithium miners win in battery metals rush
A source in the Biden administration was reported to have said, on condition of anonymity, "A Biden administration would emphasize green energy…you need more raw materials. These materials don't come out of a test tube."
Based on remarks like this, ScotiaBank analysts forecast that the Biden plan would ignite a multi-year boom for copper, which is one of the best electrical conducting materials, as EVs use twice as much copper as internal combustion engines.
Lithium miners, including U.S. companies like Lithium Americas, Albemarle, and Standard Lithium are expected to be winners in a Biden presidency because lithium is key to building EV batteries. Not surprisingly, donations by employees at U.S. lithium miners to Democrats this year doubled over 2016 levels.
With the head of National Mining Association, Rich Nolan, commenting simply:
"The Biden campaign understands the need for domestic supply chains."
On November 11, a week after the presidential election, in an article, "Lithium Leads a New Battery Metals Rush" geologist Tim Treadgold wrote in Forbes:
"It was the apparent win by Joe Biden and the prospect of a more environmentally-focused administration which lit a fire under Albemarle's share price which has risen by 21% from $93.43 to $117.93 since November 4.
"Citi sees Albemarle heading towards a target price of $132 as demand for electric vehicles in Europe and China quickens with the U.S. also expected to see an increased demand for EVs."
Will the green revolution be "Made in China"?
As it has planned for years, the People's Republic of China now dominates global production of the new generation of batteries that power electric vehicles and portable consumer electronics like cell phones and laptops.
For now, if the Biden green revolution goes forward, most of the required batteries will come from Chinese sources, including the lithium-ion batteries favoured for consumer electronics. Thus, the United States supply chain for new green technologies will begin in China.
Chinese chemical companies account for four-fifths of the world's output of raw materials for advanced batteries. And it also controls the processing of almost all the critical materials: rare earths, lithium, cobalt, and graphite.
Out of 136 lithium-ion plants planned for 2020 globally, 101 will be in China.
What is the Biden agenda and timetable?
President-elect Biden has a global vision of his mandate when he takes office in January.
It is nothing less than a revolution to overturn the fossil-fuel industry that today powers the world and to replace it with a world powered by alternative sources of energy. That includes electrical energy produced in enormous amounts by new battery technology using new battery metals.
Some of this vision has been translated into broad policies, proposed laws and regulations, plans for spending, ideas about how government purchasing will be redirected, and many quite specific promises and pledges. It is worth looking very briefly—just in terms of headlines, really—at Mr Biden's own priorities for proceeding.
The Intergovernmental Panel on Climate Changes (IPCC), from which almost all official announcements on climate change predicted by computer models ("global models") originate, says that on the day Mr Biden takes office only 9 years will be left to stop the worst consequences of climate change. No time to waste!
Mr Biden's manifesto, a plan for "Clean Energy Revolution and Environmental Justice", for coping with the crisis has 9 points:
- Take executive action on day 1 to not just reverse all damage Trump has done but to go further and faster.
- Work with Congress to enact in 2021 legislation that, by the end of his first term, puts us on an irreversible path to achieve economy-wide net-zero emissions no later than 2050.
- Rally the world to urgent and additional action. "We know we cannot solve this emergency on our own: the United States accounts for only 15% of global emissions."
- Make a historic investment in clean energy and innovation. "Biden will invest $400 billion over 10 years, as one part of a broad mobilization of public investment, in clean energy and innovation. That investment is twice the investment of the Apollo program which put a man on the moon, in today's dollars."
- Accelerate the deployment of clean technology throughout our economy. "Creating the best, most innovative clean technology in the world is not enough. We also need to make sure it is used by households and industry to achieve aggressive emissions reductions."
- Make environmental justice a priority across all federal agencies.
- Hold polluters accountable. On day 1…"require public companies to disclose climate-related financial risks and the greenhouse gas emissions in their operations and supply chains. In his first year, he'll work to enact legislation requiring polluters to bear the full cost of their climate pollution."
- Create 10 million good-paying, middle-class, union jobs.
- Fulfil our obligation to the communities and workers that have risked their lives to produce fossil fuels.
It is too early to say how much of this vast agenda will be achieved on day 1, in the first hundred days, or the first 4 year term of Mr Biden.
Perhaps more important is the impact that Mr Biden's commitments are already exerting on the plans of U.S. and international energy companies, the enthusiasm of investors for all elements required by the green energy revolution, and changing public perceptions of the importance of new technologies and challenges to the supply chain for them.
For example, in terms of revenue, North America at 7 percent is a very distant second among regions in terms of their shares in the market for battery metals. But now, actual and anticipated demand from the EV companies is stimulating the creation of new capacity.
SK Innovation has a 9.8 GWh battery production plant in Georgia that will become operational in Mr Biden's second year in office (2022). It has plans to build a second plant with 10GWh capacity.
Miners in the battery metals space range from major companies like Canada Nickel to companies exploring for new high-potential mines and developing them with the prospect of a continuing secular shift in demand driven by battery technology needed to power the green revolution.
What do the experts think?
Howard Klein of RK Equity
Discussed the role of "market sentiment" that in recent years has not favoured lithium miners because of oversupply and consequent depressed prices. But now, thanks to a supply deficit, the market is starting to heat up, again, making lithium look much more promising - including EV penetration set to be 25 percent by 2030. These comments were made August so that the election of Mr Biden, and his overwhelming commitment to new energy technology such as batteries, was a matter of speculation.
Fast-forward to november and although Biden is the projected winner, the same levels of speculation are apparent.
Excerpt from Howard Klein #04
"Look, Biden just got elected and it’s going to be very interesting. He’s obviously going to be pro EV and pro-climate policies. The question is where does he fall on mining? I don’t think he's completely anti-mining. He's a Senator, and when you look at like Senator Murkowski and Manchin who are doing the minerals policy legislation, I think that there are a lot of things that have just been sitting there for the last two years because Nancy Pelosi and the Democrats didn't want to give Trump a win on anything. I’m talking about the minerals policy.
So, I think the divide part is in you’re going to have pro EV and anti-mining. I’ve been evangelising this is bipartisan, it's kind of make America great again, do both. So, I think there is receptivity, and it is bipartisan to be anti-China. The Democrats and Republicans are both fearful of China. So, I’m optimistic you're going to get both pro EV policies and pro-mining policies in the United States in general. But I think rare earths are different than Lithium. It is on the critical minerals list as Lithium's irreplaceable, but it’s not critical. There’s lots of Lithium in the world in friendly countries. America actually happens to have a lot of great Lithium resources and should be developed, but it’s a growth, private sector funded thing that maybe could be enabled by the Department of Energy.
Whereas rare earths has all this paranoia from the Department of Defence. So, it’ll be interesting to see how all of that plays out. But the fact that MP Materials has this high profile now is a positive. One caveat to all of that is when Biden was announced, he appointed his environmental team. Like the people he’s appointed on the transition, that are going to be dealing with environmental issues are all Obama appointees. I looked into a lot of them and a lot of them were ones who were slowing down things at the Bureau of Land Management. They’re people who are not naturally predisposed to advance permitting for mines if there's a bird or a plant that's in its way.
So, I’m watching very closely because there are Lithium Americas and some other projects, their projects are under environmental review and they’re due to be approved after Biden takes over. So, the people who they’re dealing with now may not be the people who make the final decision in Q1. There’s some risk to the Thacker Pass’s permitting in my opinion, to be seen. They’re putting a brave face and saying everything’s going smoothly but I don’t know."
Mark Selby CEO of Canada Nickel
Mark explored the changing market for the critical battery metal nickel, which recently has gone from $11,000 a ton to $13,430 a pound. In part, the price has been sustained by Elon Musk who told nickel miners that they should produce more nickel because he and other battery metals users were about to accelerate the EV revolution.
Nickel's price peaked and Musk made his prediction in July as the U.S. presidential election was heating up, as was excitement about the prospects for battery metals miners. Nickel is forecast by some analysts to grow fastest of any battery metal between now and 2027 because of its high demand for EV batteries.
Excerpt from Mark Selby #23
"The US is really one of the lone global holdouts and really currently not doing much except California, to promote electric vehicles. Obviously now with Joe Biden being elected, that’s very clearly going to shift. So, if you see the US market really start to gear up then it’s going to be a really interesting year in terms of EV sales I think by the time we get through this next round of closures here with COVID.
Do not underestimate Joe Biden as he is going to want to clearly have a line dividing his agenda versus Trump’s agenda. The good thing with a green vehicle and green vehicles built in the USA mandate which he’s got very clearly as part of his platform, it solves several things:
1. It shows that he’s being clean and green to the progressive part of his party that he needs to keep in line.
2. In terms of okay we're going to invest in car production in the USA, it throws some bones to the blue wall states that he just got back. We are going to focus on building an industrial platform in the US, to be able to deliver these vehicles. Which means more jobs for Americans.
3. In terms of stimulating the economy it's a lever to be able to help stimulate the economy on its way back from the COVID hits. Now, it does cost money but in these times right now where every government's running (depending on the scale) multi-hundred billion or even trillion-dollar deficits. So I think it's one of those things where what's another CAD$200Bn on CAD$1.2Tr. So, I don't think that they're going to let any sort of fiscal constraints hold them back at this point in time. I think they're going to try and be as bold as possible and then they'll figure out in two years how we're actually going to pay for it."
Joe Kaderavek of Cobalt Blue
Joe Kaderavek commented on recent bearish sentiment toward the important battery metal, with demand for almost everything suppressed by the COVID-19 economic lockdown. But he said he saw the pandemic, now, as an unexpected catalyst for the transition to an EV dominant economy that would be dependent on advanced battery storage capacity.
Cobalt has held the second-largest volume share in the market for battery metals. Cathodes of lithium-ion batteries use cobalt because of its high conductivity and stable structural ability across the charge cycle.
But the metal has a high cost and for that reason, manufacturers will continue to seek alternatives.
Brandon Munro CEO of Bannerman
The Biden presidency does not only have an effect on battery metals, but every single commodity mined and used in the US - Uranium being one of the most impactful. Brandon explains the consequences of bipartisan support on nuclear reserves.
Excerpt from Brandon Munro #34
"We’re seeing some real progress. Like as we discussed last week, the Senate, at the time we thought that it was bipartisan support approved the Uranium Reserve, which was a turnaround from the House Appropriations Committee. This is an example where I’m very happily eating my words because it wasn’t long ago when I thought because of the Democrat Administration coming in that there’d be some resistance to the Uranium Reserve.
So, I’m pleased to say that I called that one incorrectly and I think it’s good for a lot of people out there and the investors in those US names. So, now they’ve come out very clearly noting the bipartisan support, which I think speaks absolute volumes for where bipartisan support of nuclear generally is in the US."
Clearly, a lot has been promised and the question is then, how much can be fulfilled? Only time will tell.