{"id":38720,"date":"2018-04-20T09:00:41","date_gmt":"2018-04-19T23:00:41","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=38720"},"modified":"2023-04-12T12:09:28","modified_gmt":"2023-04-12T02:09:28","slug":"scarcely-ahead-tech-titans-resource-race-part-1","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/scarcely-ahead-tech-titans-resource-race-part-1\/","title":{"rendered":"Scarcely ahead: tech titans and the resource race (part 1)"},"content":{"rendered":"
<\/figure>\n

In 1980 US President Jimmy Carter established the Carter Doctrine, asserting the right of the United States to protect strategic interests in the Middle East. The doctrine reflected the reality that oil sustained the US (and world) economy, and without it economies would collapse. \u2018Energy geopolitics\u2019\u2014competition between states for energy security\u2014reflected this worldwide resource race; a race as relevant today as it was in the 20th century.<\/p>\n

Today we\u2019re approaching an era where clean energy technology outstrips<\/a> fossil fuels. This means that there will again be an energy race\u2014but the essential component will be the humble battery. Western tech companies and their Chinese counterparts are competing, and right now Western tech companies are on their own, while Chinese companies have the full backing of their government.<\/p>\n

Batteries are essential to all wireless electronic equipment. There are many battery technologies, but lithium-ion batteries are the most widely used in portable electronics. Raw materials account for up to 39%<\/a> of a lithium battery\u2019s cost. The hardest to obtain is cobalt, one of 27 \u2018critical\u2019 minerals<\/a>. Though it comprises only 10\u201320%<\/a> of a lithium-ion battery\u2019s materials, cobalt costs six times more than nickel, the primary component. Cobalt is also \u2018scarce\u2019, making it a good case study in what tomorrow\u2019s resource race might look like.<\/p>\n

Cobalt has always been rare but several factors have made it even more difficult to access. First, it\u2019s being used more and more<\/a>. Though we may have reached peak smartphone<\/a>, advances in renewable energy, electric vehicles, robotics and wireless gadgets depend on expected innovations in battery technology<\/a>.<\/p>\n

Reflecting this demand, it\u2019s anticipated that the still-underdeveloped lithium-ion battery market will grow to US$81.65\u00a0billion<\/a> by 2021. On the supply side, cobalt\u2019s economics are complex, partly because it\u2019s a byproduct of copper and nickel mining, and so dependent on fluctuations in those markets.<\/p>\n

Second, and more importantly, political instability makes cobalt vulnerable to supply disruption<\/a>. The Democratic Republic of Congo (DRC) supplies more than half<\/a> of the world\u2019s cobalt. Armed conflict plagues 10 of the country\u2019s 26 provinces, and most Congolese earn less than US$1.25\u00a0a\u00a0day. In February The Economist<\/em> warned that civil war in Congo might resume<\/a>. President Joseph Kabila presides over a state that Steve Reid quips<\/a> is \u2018neither democratic, nor a republic, nor in control of the Congo\u2019.<\/p>\n

In response, Western tech companies are looking to alternative sources of supply, such as Canada<\/a>. That may pan out. Erich Zimmerman argued that \u2018resources are not, they become\u2019<\/a>. That is, deposits are found as the need arises.<\/p>\n

On the other hand, according to<\/a> South Africa\u2019s Mandini Minerals, for now \u2018if you want to become a player in the cobalt market, you need to be in the DRC\u2019. A cursory glance at known cobalt reserves<\/a> speaks to this point. DRC has 3.4\u00a0million tons, with Australia second at 1\u00a0million tons. That presents an opportunity for Australia, particularly since we can guarantee uninterrupted supply. But for tech companies, this doesn\u2019t solve the immediate problem of rising demand and prices.<\/p>\n

China recognises as much. It has piled investment<\/a> into DRC even as Western mining companies cut jobs. China, the world\u2019s leading producer and supplier of refined cobalt<\/a>, imports most of its ore from the DRC. The risk of supply disruption<\/a> became clear last September when DRC briefly ordered China\u2019s Sicomines to stop exporting cobalt.<\/p>\n

But the risk may be overstated. China pursues several stratagems to ensure supply, such as contributing peacekeepers<\/a> and funding to the UN mission in DRC. In addition, President Kabila has personal ties to China.<\/p>\n

China\u2019s cobalt market domination has paid off in the battery market. Chinese battery companies are major players<\/a> in a sector long dominated by Panasonic and Samsung. CATL is the fastest-growing battery producer in China and dominates the country\u2019s electric vehicle market, which is the world\u2019s largest. By 2020, CATL aims to be the world\u2019s largest battery cell manufacturer.<\/p>\n

To succeed, the company must secure supply. Recently it and other Chinese companies signed large contracts with suppliers, stealing a march on their Western competitors<\/a>. For example, last month a Chinese supplier of battery chemicals signed a deal to buy one-third of Swiss miner Glencore\u2019s cobalt production.<\/p>\n

Some Western tech firms are looking elsewhere. Tesla proposes buying only North American cobalt<\/a> (partially in response to human rights concerns). But the US and Canada produce only 4%\u00a0of the world\u2019s cobalt, too little to meet Tesla\u2019s ambitions<\/a>.<\/p>\n

Vertical integration is another alternative\u2014gaining control over the supply line, as Alcoa did with aluminium. And Apple wants to buy cobalt directly<\/a> from Congolese miners. But this is risky, not least because tech companies have little experience with mining and conflict zones.<\/p>\n

Whatever they choose, Western companies\u2014and governments\u2014cannot be starry-eyed on this issue. Raw material extraction is the ugly side of technology development, as mining operations and oil extraction across the developing world has shown. \u00a0Even so, cobalt and other critical minerals will continue to be mined. Leaving lithium-ion batteries aside, cobalt is a \u2018high-speed, high-strength wear-resistant alloy<\/a>\u2019 that\u2019s critical to aerospace and military technology. It can even be used to make bombs<\/a>.<\/p>\n

So if the West loses access to critical minerals like cobalt, it may also lose the energy\u2014and tech\u2014race.<\/p>\n

In part two, I will look at options for Western governments.<\/p>\n","protected":false},"excerpt":{"rendered":"

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