In the first part of this blog I looked at the metals currently considered critical among sector analysts, and those that UK consultancy Oakdene Hollins has identified as likely to remain or become critical in the next five to 10 years.
The potential for strong price growth among these metals, at least in the medium term, means technologies and processes that can recover them efficiently from waste streams look like good places to put your money, whether you’re an investor or a corporation operating along a supply chain.
Oakdene raises two key factors however that could significantly impact on demand for these metals and which should be considered by anyone looking to enter the recovery market. I’ve included below a table from Oakdene’s report which provides some context.
Factor 1: Is the metal highly reliant on a single application?
Such metals can be vulnerable to technological change and substitution, particularly if their prices become expensive relative to alternative materials.
The rare earths Dysprosium and Neodymium are two examples. Nearly all of the current demand for these metals is for powerful magnets. With the development and growth of two new markets for these magnets – namely EV motors and wind turbines – demand has skyrocketed and manufacturers having been hunting around for alternatives. Tesla has developed and commercialized a cost effective, rare earth-free motor and Toyota and others are doing it too. Siemens and Vestas are thought to be developing turbines which also reduce or remove the need for rare earths.
Graphite’s new growth market in Lithium-ion batteries could also be at risk. Nexeon, a UK start-up, has developed a Li-ion battery which substitutes uniquely structured silicon for graphite as the anode material. Only 2.6g of silicon are required per battery compared to 10g of graphite, and it significantly increases battery performance by 20 – 30%.
And Ilika, another UK company (which listed on AIM this year), is developing cheaper alternatives to using platinum electrodes for use in fuel cells.
Not all efforts to substitute critical materials have been successful though. Efforts to replace indium in display screen and PV panels showed inferior cost/performance.
Swiss-based VC firm Mountain Cleantech which is raising its second fund, some of which will target the resource recovery sector, says the European Union’s research-funding framework put out a EUR4 million call last year for proposals from groups working to develop novel materials, with the goal to replace rare earths from magnets and other products. But the amount is far too low – the development of new materials will likely take years to develop. The first goal is to focus on reducing the amount of rare earths, rather than replacing them altogether. The threat of new materials is not seen as a short-term issue at least.
The other side to this of course is that new applications for these metals take off, and because some have relatively small markets to begin with, both in volume terms (around 1,000 tonnes per year or less) and in value terms (maybe a few hundred million dollars), growth of just a single new application can add significantly to demand. In the case of rare earths we have seen this happen, as I mentioned earlier, when the cleantech industry grew and the magnets containing Dysprosium and Neodymium had new applications in wind turbines and EV motors.
Factor 2: How is the metal produced?
Some of the critical materials identified are produced as by-products of much larger base metals e.g. tellurium from copper, indium from zinc and gallium from aluminium. Mining for these metals alone, because of their small occurrences, is never economic and they consequently have a negligible impact on the profits of diversified miners who are driven by demand for the base metal. This means that demand for these ‘by-product’ metals can only be met if demand for the base metal rises. If copper production falls, so too does production of tellurium, furthering the case for ‘urban’ mining (recovering raw materials from waste streams) which would free such metals from the restrictions, and subsequent price volatility, caused by primary mining.
The third and final part of this blog will look at the current state of the critical metals recovery sector, the opportunities and risks, and the companies currently leading and innovating.
Article by Tom Whitehouse. Tom is the Chairman of the London Environmental Investment Forum (LEIF), a conference platform which connects environmental innovation with capital, and the Founder and CEO of LEIF’s Initiating Partner, Carbon International, a fund-raising consultancy for environmental and cleantech industries.
photo: Jake Slagle