Book Review: The Rare Metals War

The dark side of clean energy and digital technologies

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Aug 15, 2022
Summary
  • Written by an expert on commodities and geopolitics, this book explores important costs and risks for the energy transition.
  • Rare metals are key components for electric vehicles, electronic and digital systems and advanced weapons.
  • Drawing on eights years of research across a dozen countries, the book is well researched and highly insightful for investors.
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Guillaume Pitron is a journalist and documentary maker focusing on commodities and the economic, political and environmental issues associated with their use. He holds a master’s degree in international law from the University of Georgetown. He wrote the book "The Rare Metals War," which was first published in 2018. It is a book about the clean energy transition. Just as the moves from whale oil to coal and from coal to fossil fuels where massively disruptive to the status quo, the move to green energy is going to up-end the global order.

Most people are aware of the importance of crude oil for the global economy and geopolitics. Daniel Yergin wrote a great book called "The Prize" in 1990 to tell the story of that great commodity. Less known are the key resources for the current energy transition. These would include rare metals such as rare earths, vanadium, germanium, platinoids, tungsten, antimony, beryllium, fluorine, rhenium, tantalum and niobium, which are part of a family of about 30 raw materials that have superb magnetic, catalytic and optical properties used for wind turbines, solar panels and electric cars as well as new technologies of information and communication.

In 2015, COP 21 produced an international agreement to limit global warming to below two degrees Celsius by the end of the century. This requires the rapid phasing out of fossil fuels and ramping up of renewable energy. "The Rare Metals War" reminds us that nothing on this scale of transition is without trade-offs. There will be consequences for local and national governments thanks to changes in jobs which will cause social upheaval. The natural environment will suffer with the increased mining that will be needed to extract these important elements from their mineral compositions. As an example, one kilogram of vanadium requires the processing of 8.5 tonnes of ore. Fifty tonnes of ore need to be processed for one kilogram of gallium and a staggering 1,200 tonnes of ore need to be processed for one kilogram of lutecium.

The requirement for rare metals in renewable energy production, the electric grid and the digital technologies needed to manage these systems will put a new strain on geopolitics as China currently possesses most of the processing capacity to treat the concentrates. The book has an interesting chapter on how China overtook the West with a farsighted strategic decision to invest in both rare metals upstream and downstream assets. Western countries are now scrambling to build capacity and secure supplies.

The book also tracks the importance of these metals to technology supply chains and the American military industrial complex. Everything from precision guided missiles to robots to F35 fighter jets are dependent on rare metals. The book discusses the U.S. and China's race to secure access to enough supply for defence department needs.

Indeed, it’s no wonder that rare metals are being called the "New Oil." The book goes through both political and scientific detail about things like the rare metals contained in an electric vehicle, the rare metals needed for a smartphone, the life cycle of metals and describing the main industrial applications for rare minerals and rare earths.

While the book recounts the dark side of the quest for green profits and green power, what is described in the book educates the reader about the fundamental building blocks of the resources which are going to drive the 21st century. The book is well researched, with the author spending eight years travelling around the world to question key people in the industry and relevant government departments. The book covers issues on supply and demand and is well balanced between issues facing the private sector as well as the public sector. The book is key reading for anyone who is trying to think about the future of energy, mining, technology, military and international affairs.

Finally, the book has an extensive bibliography, appendices and notes which provide a great source for further research on the subjects. "The Rare Metals War" is that rare book on strategic resources that clean energy investors can’t afford not to read.

I believe clean energy or mining investors will find this book incredibly helpful because it teaches about the risks and opportunities for producers and consumers of rare metals. Mining stocks, for example, are most likely sending materials to China to be processed, so investors would need to research this possibility in order to determine whether they need to keep an eye on U.S.-China trade relations.

With the clean energy market currently lacking sufficient materials supply, it is important for investors in electric vehicle or wind energy stocks to keep an eye on whether their investments have robust procurement for processed rare metals. It could be a risk if a company sources its rare metals from only one country; if that country were to be sanctioned by their home country or an ally for any reasons, how long would it be without its key materials?

This also means that companies like Pensana PLC (

LSE:PRE, Financial), which is building the world’s first sustainable magnet metal supply chain to meet the burgeoning demand from EVs and offshore wind, and MP Materials’ (MP, Financial) Mountain Pass rare earth mine and processing facility, which is currently the only scaled site of its kind in the Western Hemisphere, will have massive advantages because they are in underserved markets and could receive huge government grants and/or benefit from being able to hike prices sharply.

Pitron's book helps investors understand the macro situation for green tech and how it isn’t a one-way risk-free bet on the future. The new dependence on rare metals will not only affect industrial supply chains, but also trade relations between rare metals producers and consumers. The U.S. has an advantage with Beryllium with 93% of the global supply, but China controls 95% of both light and heavy rare earth elements. South Africa dominates in platinum group metals with a 93% share of Ruthenium. The book will help you navigate where to invest if you want certain exposures within the rare metals space and help you think about the less-publicized risks in the clean energy and digital technology supply chains.

Disclosures

I/we have no positions in any stocks mentioned, and may buy the stocks mentioned or may initiate a short position in any of the stocks mentioned over the next 72 hours. Click for the complete disclosure
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