Funny minus we're joined by two extremely insightful gentlemen
in the world of commodity China macro research, metals, all
things property related. This this is this isn't going to
be an interesting conversation that we're having today JD we've
got Bentley Advery who the previous guest of the podcast, a
commodity trader who who runs mist trading out of Singapore
Bentley's just a wealth of insight.
He also happened to work in a previous life with our other
guest, who is Rogan of Rhodium Group.
He's a, he's a China macro property analyst and really,
really keen to see the two of them kind of talk about the, the
things that are like, you know, matter in our metals markets at
the moment, because there's a, there's a lot happening in the
macro world. And I feel like the commodity
traders sort of have their finger on the pulse, and
commodity traders like Bentley happen to rely a fair bit on the
research that comes out of people like Rogan.
So I think the two of them are kind of perfectly poised to
unpack a lot of the things that matter at the moment.
Thanks so much for joining us on Money Mine, guys.
Yeah, happy to be here. Yeah, cheers.
Appreciate it. It's the third time on third
different continent coming from. So I guess from here forward
it's gonna be. I'll keep that up.
Somehow. You never know what's going to
be what time zone you're in Bentley, or what what background
you're going to have because you dial in from all sorts of places
at all sorts of times. You're actually truly an enigma
to me still and I, I cherish it. I cherish the enigma that you
are. I think that's how commodity
traders like, I don't know, roam around.
I guess we get the wrong headlines.
We get, we get the weird and the wonderful.
And I remember last time we finished up with that, that long
form conversation, Bentley, that we had, I felt like I, I really
knew nothing before and I actually knew something coming
out of it. And you set the bar pretty high
that time. I can see in the show notes you
if you put in some Chinese characters.
So I'm expecting to, to learn quite a bit from you again.
And I think China is the place we should start this
conversation maybe with, with you, Rogan, given that is your
area of expertise. What what is the, the broader
market and the, the consensus sort of thinking of China at the
moment that you think is actually wrong?
Well, I, I think we're in a cyclical stabilization within a
structural slow down. And so the credit cycle in China
has gone on for far too long. The net interest margins are
getting compressed, but there are some green shoots in the
economy. There's certainly reasons to
believe that some of these subsidy programs can lift growth
marginally and the property market bottoming and potentially
contributing to growth by the end of the year.
You know, some of the investment Side Story may weaken, but
ultimately China's going from 710% growth down to, you know, 2
to 3% real. But you know, there's tremendous
headwinds in terms of deflationary pressures and and
other issues related to the banking system, Local government
financing revenues are associated with value added
taxes and corporate income taxes.
But ultimately there's, there's good reason to believe that this
year will be stronger than last and and that we'll continue on
this downward path of growth towards something in the order
of 2 to 3%. But you know, on the real estate
side it it, it's not as gloomy as as it, as it looks.
So you know, we had a long term equilibrium of 500 to 750
million square meters. We're at 517,000,000 square
meters in March 2025. But you know, that's down from
1.7 billion in March 2021, which was the peak.
So it's quite the contraction it it's caused the economy to need
to shift into new areas to find incremental ways to invest, you
know, domestic savings. And that's led to a lot of
discussions around things, you know, our letter quoted as
overcapacity or, or, you know, what's considered running ahead
of domestic demand. And so there's areas where
China's accelerating in technology and, and, and
stunning the world and, and moments like DeepSeek.
And then there's questions surrounding, you know, how many
more solar panels they need to produce when global demand is,
you know, at a certain level, let's call it 600 gigawatts per
year. So you know, in, in, in terms of
China, I'm I'm relatively bullish in the short term
despite the headwinds we'll see from trade.
Bentley. Yeah.
So Rogan's going to have all the the hard numbers like that.
I'm more of a on the ground and physical actual, you know,
transactions business right on. We don't necessarily we use
Rogan's research and that sort of thing.
But I guess from that perspective, I don't have it
memorized is what I'm saying? No, from that perspective, it's
interesting with the property sector, every time I come back
here, I always like to just have a look around that construction.
And really, I think the first time I was here is 2018 and I
can't don't have a great memory of, you know, what it was like.
Oh, this cranes, right. They used to actually have, I
guess collect data on how many cranes are up in the major
cities. And I don't know if they have do
that anymore. But just from the naked eye last
year, it was really interesting because that was that would have
been May of 2024 when I was here.
And you noticed, especially in the major cities that it didn't
look like anything really changed.
Everything was still being built even during the monsoon season.
They were still, you know, building during construction and
whatnot. But you did start to see some
areas of let's call it like neighborhoods that weren't
occupied. The best way to put it, I know
we were talking before we had this conversation, all those
like 30 story apartment buildings behind you and your
small town that that happens in a lot of like clustered little
areas. Well, that's where where people
live and there's a couple of those little cluster areas.
So as Rogan said, oh, it's a little over exaggerated.
I think that's a good way to way to kind of state that
qualitatively is you might have a cluster of five or six
buildings that they're there, they're built, there's not
really anybody in them. And that would be what people I
think really kind of consider as like the ghost cities or
whatever. So there's still a little bit of
that around, but coming back this year, you know, they
finished building what needed to be built and then now it's
really difficult for them to get permits to build anything new
unless they're a major by a developer engineering
construction company and they're in more of the Tier 1, Tier 2
cities. So they're being pretty
strategic with what they allow it to be built.
And I think I mentioned it last year when I was on as well,
building and property, especially residential here.
It's a different, the way it's done.
The the kind of the structure of how you build, buy and own
something is a lot different than what many people are used
to in different parts of the world.
It's called yeah, I don't know how it works in Australia, but I
have a pretty rough idea. And here though, you when you
buy a flat right and you buy an empty concrete shell.
So for developer to build that building and just have a
concrete shell like no appliances, no wall lights,
nothing, right. It's actually pretty cheap and
then it makes it so their break even costs are a lot lower and
then they're able to build more. And that is what LED, it's part
of the thing problems that led to everything.
But it's also, you know, it's all cheaper for people to just
buy. So people own a lot of these
units as well, even though they haven't developed them out.
So Brogan thinks the property market's bottomed.
I do have a couple flats if he's looking to buy that I can sell
for about half price. Well, you can do a dokey on that
actually, but. I I so this is the, this is the
real game too. Is, is there's a, a, a challenge
in, in the tier one cities for upgrading.
So you know, it the, the size of the real estate built in a
decade ago just isn't what people are looking for in these
tier one cities. And so that upgrading demand,
there's actually a shortage in some markets.
So, you know, it's a bifurcated market where you have migration
going to certain cities, town going to certain cities,
upgrading demand in those cities for nicer flats.
But then you have this overhang from, you know, the fact that,
you know, China has 300 plus cities with over 1,000,000
people. And, you know, what are, why
were we building so many buildings in, in cities that
didn't have, you know, the respective jobs associated with
them and, and what it, what do they do with the, the
overhanging there in the developers?
So the, the, the bad loans associated with it And solving
that problem is long from over. But certainly there are green
shoots and, and, and demand. And whether it's, you know, old
housing needs to get knocked down to build new, better
housing, or it's the size of the apartments that people are
looking at it. There's reasons to think that in
especially in these high income cities that with stretched
valuations that you can still see new construction so it.
Yeah, exactly what you were that that's a better way kind of of
what I was trying to qualitatively say.
So a lot of these the neighborhoods where there's no
one are like all half mostly empty buildings.
They're more in, in non well, not in Tier 1 for sure, but even
outside of like Tier 2, tier 3, they're not once you even get
into we, we, I think it's tier Tier 2 three, right, that you
don't have that problem there in the middle of the city like
Xinjiang, Guangzhou, They're still building like that's that
there's not that's the demand there is just fine, right.
I think that's what both of us are kind of getting that.
It was interesting to see though, And I know speaking with
Rogan a couple weeks months ago, he, he brought up something
about Shanghai and I noticed that the end of last year,
Shanghai prices went back above Shenzhen prices for the first
time in 10 years. And I don't know if you're
saying you had a Co workers or colleagues that it just doesn't
seem like the economy in Shanghai is slow at all or it's
hard to get a table I think is what you said.
Yeah, so it's very funny because you know, I, I I'll analyze all
of these cities retail sales and they'll generate into to a book
and you know, these tier one cities have had terrible retail
sales numbers. But you know, how do you, how do
you quantify some of the, the, the services level demand
associated with certain sectors? And, and so retail sales
continued to contract through March.
But you know, anecdotal stories, I've heard people are having a
hard time getting a table at the nicest restaurants.
So some of the bifurcated market, you know, if I'm not
buying a really expensive purse, I might be buying a nice dinner
and and moving to that services lifestyle that's more, you know,
reflective of what you see in in Europe or the United States.
But yeah, I mean, not to get too far into the, to the, to the
consumer, but yeah, it, it is a, a strange market that can be cut
and, and in a million different ways to, to, to pull things out.
But it'll all, all to say that there, there's reason to believe
that the, the real estate market is bottom.
It doesn't necessarily mean that it will ever go back to what it
was. It certainly won't.
But you know, a cyclical upturn from here isn't out of the
question. Rogan if we if we try to hide
into the Aussie market, what what's your outlook for steel
and then gone one step further for for iron ore.
Yeah. So I mean, I the, the bottom up
estimates I've done for real estate related demand
destruction are, are for for copper.
But on the the iron ore side, I find a very compelling story
that you know, the upper bound is certainly going to be $100
and and the lower bound could be as low as 60.
The reasons being is, is that when China pivoted away from the
real estate sector, there was a ton of money that went into a
varying number of industrial industries.
You know, whether it's ethylene production, copper smelting,
shipbuilding, the EV solar modules, battery manufacturing
plants, all of the, you know, cathode, anode material
manufacturing it, it was tremendous.
And, and in many ways it's led to China leading the world and,
and catching the rest of the world on their back foot as they
look at these new emerging industries that are extremely
power intensive. And so in that effort to pivot
away from real estate and redirect investment into other
areas, they created additional steel demand.
But how many more factories do you need to build?
How much more can you know of the global shipbuilding quotas
can you get when you're already at 60%?
So if 60% of new ships are Chinese, you know, it's, you
know, probably a couple million tons there.
If you're talking about the exports of 7 million electric
vehicles, you know, it's a couple million tons there.
And you know, add in the solar and the equipment and, and, and
when it's a couple million tons. But ultimately, you know, the
embedded steel plus the steel product exports cannot continue
to grow without getting tremendous reactions from, you
know, great trading partners for China.
And so steel products falling into Vietnam and getting
tariffed or, you know, import bands.
You know, it's South Korea, it's it's South Africa, it's Brazil,
it's it's, you know, Mexico and Chile.
These are countries that aren't necessarily aligned with the US
on their strategic initiatives, but they're countries that have
domestic capacity that's now dealing with with Chinese
exports that are extremely competitively priced.
And, and, and so it's creating consternation.
And so ultimately what it comes back to is does the Chinese
government choose to lower domestic production?
And there's already evidence that they're going to move to do
so. And so the headwind there is, is
that, you know, steel production in China, steel demand in China
is probably peaked. And and so it's hard to see how
the capacity is is brought down, what photos are issued at the
provincial and local government level, how they respond to those
in terms of, you know, all we're replacing old capacity with new,
more carbon efficient capacity. But have you truly, you know,
ramped down that other factory? But yes, there there's certainly
big steel manufacturers that are cutting the hours of, of certain
employees and and reducing capacity to produce rod relative
to flat products. And flat products can be used
for cars and and ships and the rods are generally looked at in
infrastructure and and real estate.
So that pivot has been on ongoing over 100 million metric
tons and and shift over the last couple of years.
But ultimately can they sustain the build out of more industrial
capacity without contributing to deflationary pressures, which
puts the economy in a much more difficult position.
A deflationary debt spiral certainly is something China
doesn't want. That $60.00 number you mentioned
for, for iron ore that that's quite alarming, I think to A, to
a lot of people sitting here in, in, in WA to, to dive into that
part of your response there. You mentioned before we started
chatting the impact of Guinea and SIM Andu.
Obviously, what do you make of that?
And you know, given your, your position in, you know, sitting
there in Washington, what, what is the, the broader kind of
consensus view of, of the evolving landscape of the iron
ore market? Well, you know, in, in the US,
it's whether or not, you know, we should be more protectionist
or not. I don't think they're
necessarily looking upstream to where the iron ore is mined or,
or the price there where it's at.
I, I do and they're really concerned about these other
critical minerals. But we come back to that.
I think that, you know, the, the West African region, especially
Guinea is a very interesting story because of the bauxite
production there and where it goes in terms of China's
aluminum supply chain. The build out of this mine and
you know, the multiple sites, the railway, the, the quality of
the ore, the cost of mining in a place that, you know, I lived in
eastern Sierra Leone for a while.
Once you're out into the Bush, there are fewer, fewer rules.
And so, you know, the regulatory burdens and the like certainly
are lower. You know, there's political
risks associated with the West African region.
But, you know, in terms of being competitive at the global scale,
China was looking for a way to to diversify supply chains away
from Brazil and Australia. And this, this project certainly
stands out as one that, you know, increases supply when
demand is about to define. Bentley I I have to imagine as
well you've, you've done a bit of digging on, on bulks.
I don't know. We spoke about the, the alley
sort of chain and just in the, in the past couple weeks,
there's been some, some pretty noteworthy events.
How close have you been sort of tapped into it lately?
Past couple weeks, not as much, I think late last year, yeah, we
discussed it. I know I had whatever the 2025
predictions, Illumina as my, oh, that's what they call that and
zinc I think. So I, I know what was going on
there for, for the most part, there's a lot of this mistiming
between new capacity of alumina coming online versus what's
going on in bauxite and aluminium demand.
So that was what really went on there.
And once once the new production came online, Indonesia, India
and China as well for alumina, you saw the prices come off
quite a bit. Box site haven't followed the
markets too closely in the past few weeks, so I can't comment
too much on that. It's Jack's mine license was
revoked by I mean, it's been offline for, for, OK, I think I
think like 9:00-ish months. But the Ghanaian government has
just revoked their mining license from the alleged refusal
to build a country. Oh, so I am a little familiar
with that. There is, I won't say here,
there's some, I know someone down there that's actually
trying to get a project started and they were required to do
some downstream like alumina eventually at some point.
I don't know if they need to do it before I can start exporting
their box site. But he mentioned that I was
going to be a thing in Guinea and they were going to do that.
So I don't think it's necessarily a huge shock to
people in that part of the industry.
But maybe, maybe you guys got to bring up aluminium Al to get the
full scoop on that one? Well, it was it's funny you
mentioned that we're we're dead keen to, to go to go to China
with aluminium L1 day. I reckon that you should join us
on that trip. Bentley as a, as a, you know, as
a an almost amazing China local these days.
His, his story about I think it was from Jamalco, they had the,
the box site and they first shipment of that from I guess
the Caribbean up to I think Qingdao or wherever it was that
they the both, both part and the moisture content, which is not
right. Like 18% is pretty high.
They thought that'd be fine. And then it's just huge clouds
of, you know, the red bauxite dust because.
So they did it at that time. That was the best.
Exactly. Like that's China.
Yeah, for sure. Potential business risks for a
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Yeah. Anyway, yeah, I'm that's not
fully in tuned with the most the gap story, but yeah, familiar
with what's happening. Yeah, you spend a lot.
I think, oh, I was, I was just going to say that, you know,
the, the story I keep hearing from a lot of different parts of
the industry is, is that everybody wants to localize and,
and every government wants, you know, Africa wants to add value,
add on to things. And, and, you know, every
industrialized country wants to secure their supply chain.
And so it, it, it just seems to me that we're going to have a
whole bunch of ability to, to process this, the major metals,
but you know, not necessarily demand at the end or the supply
of the raw materials. I don't see it's the Indonesia
model. So they've seen a success right
from Indonesia and for certain aspects it's taken Indonesia a
lot longer than maybe people think about.
It's been well gotten, what, 20 years ish of them trying to do
what they've been doing in terms of bringing the next stage, the
value add online in their, in their country.
And it's, it's worked for things like like nickel and tin, for
example, you can't export tin concentrate from Indonesia.
It has to be tin ingots. I don't know about there's
other, let's say red tape parts of of it that gets bottled up
every once in a while as an annually.
But you know, it's, I think that that's the model that other
countries are trying to go after.
And it's, it's interesting when you talk about steel because
steel is such a simple one that everyone's kind of had it for a
while. And that that's the one where
it's just, I don't think you can slap the same sort of mindset on
all of these, on all these metals because yeah, steel, it
isn't that expensive to produce steel and iron ore is fairly
abundant as long as you have ports or have it in your country
and feels a very domestic use in construction, right?
So you got India where they're going to what basically 3X their
steel demand over the next decade.
But it, as you guys, you know, were talking about it kind of
gets pulled from other places and then like they're not going
to import Chinese steel. In fact, they're doing quite the
opposite, but they still need the iron ore.
A lot of iron ore in India is not, especially with they
export, they don't really export, but they export low
grade stuff. I think.
So the, the whole dynamic of that, I think too, when Rogan's
getting that is like, all right, you're going to have these more
domestic supply chains, not necessarily the most efficient
way of doing it, but for, for let's call it easier to produce
commodities such as steel. It, it becomes you kind of have
to accept that at some point, you know, India will have lower
capacity steel. Are you going to start
exporting, dumping the market? Sure.
You'll have the same story over and over again.
Indonesian example is a really interesting one because capital
certainly came into the country in response to their their their
policy. There are a lot of tax holidays
provided for, for investment in, in these industrial parks like
Morrowali Industrial Park. And then like, like relatively
recently there's been a proposed regime change from the royalty
front royalties kind of unfinished product going from
sort of 10:00-ish percent to up to 19% depending on, on nickel
price. Surely that just kills that
kills new investment and in and when other countries try and
roll out similar agendas of of of downstreaming like doesn't
capital think twice before actually adhering?
Or do we need the need the middle so much from that
specific country that there's no choice in some instances?
I think it just depends on who's willing to take the risk.
That's part of it, right? So we'll see what happens with
the Indonesia going forward. Is it going to be an interesting
case study? How about that?
Because there's a difference between doing something like
that kind of tweak versus every once in a while just be like,
now we're going to have, you know, 100% tariffs or you're not
allowed to export this, you're not allowed to do that.
I think they've gained enough goodwill from the Fujianese or
Chinese. It's a lot of Fujianese.
They're very entrepreneurial part of China.
And it's like 1 and a half, 2% of Indonesians are what would be
Fuji's hockey and Hokian culture.
And they make up. What'd you get?
I think you guys said it was like something like 50% or 30%
of GDP or output. It's kind of nuts.
But so I I wouldn't expect, yeah, I wouldn't expect them to
stop coming just for that. But at some point I think it
would. It will erode it Is it where's
the line? Right where you raise it a
couple percent, No one's going to really care.
I mean, they care, but it won't won't halt slows.
You start going back and forth with major changes and a lot of
uncertainty. And I think that's that's even,
that's even worse. Can they bring that royalty back
down? I, I don't we'll see what the
discussions come out of that. But I, I think a lot of times
it's more of if it's slow and steady, that's a little better.
If it's kind of all over the place, then yeah, that, that
crushes uncertainty. But time, time will tell.
And I know it's a different, different government, somewhat
similar party, I believe than it than it's been for the past,
what, decade plus, I don't remember how much, how long was
Jack gonna be there if I can't remember.
But yeah, it it'll be interesting to watch that.
Yeah, I think a lot of, I mean the, the these major minors, you
know, making 30 year investments, if you're 15 years
in and and they come to you and everything's been hunky Dory for
the last 15 years. And they say, Hey, we want you
to move upstream and, and say, well, what if we don't and
think, well, then you can't export your concentrate.
You're in a, you're in a challenging position, starting
position in terms of the negotiation.
So I you know, it certainly the level of uncertainty associated
with changing government policies.
It is something that each company has to take into
account. But you're in a challenging
position on the mind is in a country and you you don't have
political power over the government in that regard.
So it, it can be challenging. And I think, you know, I think
Freeport's dealing with a similar issue in Indonesia now.
Yeah, yeah, great mind. One of I think it was one of one
of my favorite minds to I guess dig into the engineering of it.
But yeah, we'll talk about, you know that yeah, there's a lot of
uncertainty with that, but they were able to kind of work
something out, I guess getting getting concentrated out because
it's like, OK, well the smelter isn't ready to come online so.
All right, well then let's allow another 200,000 tons of
concentrate shipments, which has helped balance the markets.
I think. I think the government has
earned some goodwill in Indonesia for yeah, it's a pain
in the ass, but they showing they've been a little bit
reasonable with stuff like that. I don't know, reasonable mean
not the right word. So flexible.
I mean, like, OK, well we're going to ban it now.
And and that was then, you know, it still takes an extra couple
of years. So I think at this point, if
you're going into news and wolf into Indonesia, you know what
you're getting into. But I think other countries need
and governments, it'll you know, you can't go.
I shouldn't say you can't. I don't want to offend people
here, but you get you struggle when you go full Ghana, right?
That's a different problem like. You're going to say you can't go
full guy? Yeah, I mean, that's that's a
whole mess. It's a real big mess.
You guys are closer to that than I am.
But we've had people, we had people poke us when stuff was
going on there and like, we need to get you're interested in X
amount of gold. I'm like, I'm not a gold trader,
but we're trying to get stuff out quick.
Rogan, let's let's go back to, to China.
The, the, the evolution of the, the new energy market to kind of
clump it all together has been astronomical.
It's been, it's been crazy to, to view from the, the outside.
What, what's your sort of take been on that?
And maybe you can sort of hone in on on EVs kind of
specifically and the the emergence of hybrids in there
too. Sure.
I'm I'm happy to to to color this end to end.
Electrification is quite possibly one of the the best
stories coming out of China and the hardest to replicate
internationally. And so, you know, there's still
consternation about what happened in Spain and Portugal
over the last several weeks. But they're, they're people who
are saying that this is associated with a higher degree
of renewable energy as a part of the energy mix and the issues
related to that. In China over the last 12
months, the the growth in energy demand has come from wind,
solar, hydro, which had a drought in the previous period.
So year on year it looks positive.
And then an expansion of a nuclear, three months of
contractions in, in coal. And so going into the
second-half of the year, there's a changing dynamic on the energy
supply side. So the feed in tariffs
associated with the renewables will be removed, which means
that renewables will have to compete at market prices, you
know, in, in spot markets for, for demand.
What does that mean? If everybody's producing solar
energy at the exact same time, the spot market goes to 0, then
you have this, you know, duct curve that you, you see in the,
in the western world. And as a result, energy prices
fall to zero and, and there's essentially no money to be made
in installing the the next installation of solar.
So future solar installations in the second-half of the year and,
and going forward will likely decline.
What does that mean for something like batteries In the
short term? It means that there's a new Ave.
for storing energy and competing in spot markets at different
times. There's incentives associated
with installing batteries on your end of the grid, you know,
at your factory and storing the energy for later use of cheap
prices. So that end of end of the
spectrum is is going to change dramatically coming into the
second-half of the year. And that has material impacts on
on polysilicon, copper, aluminum, and we can, you know,
battery relate related materials, lithium in
particular. But yeah, on the other side, you
have this dramatic shift towards electrification.
So, you know, when I choose to charge my car, when I choose to
track, you know, charge my truck.
And I'm creating new demands that are also intermittent that
are also hard to calculate and also can incentivize energy
storage localization because, you know, you can up the energy
coming out of the battery relative to what's going into
it. And so end to end, you need a
stronger grid. And what we've seen in China
over the last 12 to 18 months, this is that what was a cycle of
growth and grid investment has broken out to, to a new level.
And it, it's been extraordinary to see.
And, and it's hard to see anywhere in the world
replicating what China's done there in the last, you know,
year or so. There's been a, a greater pickup
of plug in hybrids and hybrid electric vehicles relative to
BEVS. But you know, the, a lot of the
demand in China has been driven at first by subsidies and, and
consumer incentives. And now it's, it's to price
competitiveness. A lot of these vehicles, the
convenience of, of, you know, being able to charge in some of
these two one cities. And, you know, China's ability
to, to build out the grid and an accelerated rate, you know, the
number of charging piles, you know, private level, we're,
we're talking over 8 million public level, over 3 million,
you know, talk total charging kilowatt hours was 9.1 billion
in September of 2024. This is an extremely, you know,
hard thing to do from a, from a grid standpoint, from an energy
production standpoint. And so China, you know, has
moved in this direction. You know, a lot of the energy
that they're using to charge these vehicles would, you know,
some would say is coming from coal and, and the like, and, and
all of these supply chains are extremely energy intensive, you
know, synthetic graphite production and all the smelting
of metals and, and, and, and the like.
But yes, I, I'm, I'm, I don't want to sound too, too bullish
on, on Chinese pivots towards renewables.
I, I continue to think in the second-half of the year, we're
going to see a return of coal as an, as a major comeback.
But you know, what they've accomplished is, is stunning to
me. And I and I, it's been wonderful
to have the ability to watch it over the last four years.
Bentley, what's, what's your sort of take of the implications
of this on the, on the metals that you you kind of trade and
maybe touching on some of those there's more nation and quirky
metals. Yeah, I think the one thing that
that I did definitely took off faster than a lot of people were
expecting is to plug in hybrid stuff.
But you still can plug in your car and charge it and really
depends on guess how much you care.
Some people just plug it in whenever, even though you can
just put petrol in it too, right where, you know, petrol,
probably gasoline prices here are pretty cheap actually.
Well, guess these days they're kind of getting cheaper
everywhere, right? It's sub 60 crude, but they're
the that that expansion, I think over pure EVs has been very
interesting. And it's probably somewhat
regionalized as well. Like around here, there's a lot
of plug in hybrids. People drive a little bit more,
a little bit further than you would maybe in other cities.
You still have like the Chi. I don't know.
I was at breakfast this morning. You had the Hong Kong mini
Pokémon style with Pikachu, you know, happy, happy girl at the
steering wheel drive by. And I was like, that's funny,
but it was also, you know, that's the equivalent of what
something around the lines of maybe 7000 Aussies.
So it's a pretty cheap alternative.
And these are, it's also a society that 2025 years ago, no
one had cars, very few people had cars.
So what they just sort of decided to do was, OK, we can't
really compete with, I don't know, Volkswagen, BMW, Mercedes,
You see a lot of German cars here.
Can't we compete with them? So they did JVS and they also
then chose, OK, well, why don't we do our own style?
They have a little bit different tastes, right?
It's a lot of luxury and tech. They're like in cars.
And they then they went the EV route, You know what, 1213 years
ago when they really made that decision to put money into it,
subsidized it, and that just took off.
Using JVS to to enter a market and forge a competitive
advantage. JD This strategy sounds all too
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brands, right? They don't see as many new
vehicles that aren't Chinese. But what that's had on the
lithium industry is you still see demand, like demand's been
fine. It's more of a supply side
situation I think in lithium at the moment.
The battery energy storage stuff was an interesting thing that
that Rogan hit on there where there was the policies that went
in place where you no longer have to have energy storage
systems with your, you know, your solar, I guess whatever
solar like grid, the solar farm there we go.
But realistically you wouldn't do that, as Rugen pointed out,
right, because you it wouldn't be economic without the battery
storage. And that's made-up for a lot of
the deficiencies in demand from North America and Europe for EVs
and and lithium from that standpoint.
But the supply size has been massive.
I mean you had South American brine a lot more of that that's
decent amount of that coming online and it's starting to come
more into China. I think Argentina exports are
about double what they were a year ago and that's you know,
still has to be re refined. So just I don't know how much
people are familiar with that, that it gets re refined into a
battery grade material in China. So it still ends up here for the
most part. I can go to Korea as well the
likes, but that has essentially flooded the market.
And I was talking to actually talked to YJ a little bit last
night and he mentioned that a lot of the refiners are in a
position where they don't want to lose qualification with the
downstream. So they're not turning offline
and that's why you see the supply response you have.
We had a problem, not a problem but.
Situation last year where, you know, spodumene was still in
high demand despite prices coming down and you know what
you'd think of being oversupplied, like why is there
such a demand for spod? But that a lot of that is just
how the refiners are built and how they can make money.
And late last year when some production came offline, it was,
you know, it caused a small spike in the market.
What people did is they were able to go and hedge forward.
So they pre sold May and July, right.
Prices in the spot markets are mostly linked to futures prices
here in China. It's just a formula.
So they were they really do that and you've kind of started to
see the impacts of that now where that helps keep spot.
You mean prices up in the 8 hundreds where it was like I
wouldn't go out and buy a spot cargo or we would never what we
never would. We're going to win any of those
SQM auctions when people were bidding 850 and I'm sitting
there like you can't make money on that.
The only way you made money on it is you pre sold at, you know,
8590 thousand R&B per ton, which you know, eleven $12,000 a ton.
So that started to actually finally wear off and that's why
you're seeing Hard Rock prices come down.
You know, Woolamina material, we think it's been coming to the
market as well. Longer term demand wise, it's
going to even itself out where you have these, you know, pre
pockets of demand that are brought forward that make up
for, you know, levels of weaker, weaker areas, right, where Rogan
brings up the battery energy storage, I'll hit on that.
So late last year, you saw a lot of these material flowing into
North America knowing that there's going to be tariffs and
never going to be profitable again.
So North America has battery energy storage systems to be
built out and have the material sitting there, but that's not
going to come again. So this ebb and flow and we're
going through it right now where that that demands a little soft.
And same with the, you know, EV salt, Tesla orders at some point
you're like near 0 around here in Asia.
So, yeah, it's we're right now and you can see in the prices in
lithium that's that's where it's at.
It's kind of pricing in what Rogue is talking about for later
part of the year already when you're looking at when people
are making orders. So yeah, I guess.
That's an that's an interesting dynamic, right.
You've got you're trying to you're trying to disaggregate
what's like genuine demand versus brought forward demand to
kind of front run tariffs that's.
Yeah, that's a huge thing. It happens cyclically or I don't
know, micro cyclically, whatever you want to call it all the
time. And there's seasonalities that
then people pick up on. So you don't see that occurring
price as much when it happens seasonally.
But when it happens more through other non reoccurring events,
that's where it can kind of throw off the, you know, what
you might see in production or downstream consumer numbers
versus what you're seeing really happen at the micro level in in
the material sectors. You know, one thing to, to break
from the, the, the cyclical story here in, in terms of the
lithium demand is, is, is that China over the last two, 2 1/2
years has pivoted away from the nickel cobalt based chemistries
completely to the LA. And so, you know, when we look
at that price spike when as China ramped up the production
of batteries and then you see nickel prices and cobalt prices
going through the roof, you know, you saw it is the Chinese
started building out their solar.
It was the only silicon prices went through the roof.
You know, lithium is the one that stands out as one of the
most abundant resources on Earth, whereas, you know, nickel
is concentrated in Indonesia and cobalt is, is concentrated in
the DRC. And so, you know, lithium, the
abundance of it has made it just so challenging to, to, to
navigate. I mean, are, are there moving to
increase trading on the LME? Is, is this something you you're
seeing Bentley at all or like, are people just not?
It's just, it's too hard to to to navigate in a public market.
Well, without like just ripping apart some of these exchanges,
basically extra non Chinese exchanges did the wrong way.
So they try to approach it from, hey, let's make these average
price contracts that are like an average price based on some
pricing agency. And that doesn't work because
you're not actually as a physical player in the market.
You're not actually hedging anything because you're that's
not the market price, right? We're like LME metals, for
example, that is the market if I go hedge 10 or that's the actual
10 market for it, right, where it's a representation of average
price of, you know, some pricing agency, which who knows how what
really goes on there and especially in smaller metals.
So they kind of all did it wrong.
Anyone that decided to do average price contracts and for
lack of better term, from where I sit, and as a, you know, my
trader, pretty useless and something gets less, something
gets way out of whack. Like basically, if I'm going to
sit there and take advantage of some asset managers, whoever
wants reason wants to buy 20% above the market one month from
now. But yeah, OK, I love them for
that reason. But we had Guangzhou exchange,
they launched their lithium carbonate futures and that's
deliverable now. Problems with it because the
chemical, right? Reality is, yeah, it's assault.
But I hope I didn't say something really stupid there
about it being assault. But it is a chemical.
It's not the most commoditized material and that creates some
issues and it's not perfect, but now everybody can base their
contracts on that price because you can actually go forward and
hedge it where it is a real market where you know, I can
deliver on that or I can go take delivery on it.
There's again, small things that occur there in terms of the like
the material you deliver to exchange can't be more than I
think 90 days old and stuff like that.
But yeah, I what I'm trying to get at is the, it just wasn't
done right. There's a attempt at it.
I know a box which is like a Canadian company.
They're, they've been trying to launch something that's
physically deliverable without setting up warehouses and that
sort of thing. So until that happens, you won't
see it as much in the as much physical use.
So you mean, look, physical volumes that drives market
volumes that makes a more efficient market.
I mean, look what happened, Nicole, 2022 didn't work in the
physics. It just blew out, right?
The whole thing that was a disaster.
But what happened is, is they allowed more Chinese brands to
be delivered in the LME. Will that increase the physical
volume that can flow through there?
And I mean, look at it today, it's higher volumes than it was
before. And the market is, let's say,
functioning for the most part, right?
So yeah, that's the long answer, I guess to the question no, why
isn't, you know, LME and stuff and it's you got to have a
physical contract for it to really be useful.
No, we, we and we talked about something I, I, I'm interested
in this, this paradigm shift because it, it's important to
copper demand is, is that when we spoke, lithium prices have
dropped so much that in the LMP battery prices have dropped so
much that a lot of people that were talking about sodium ion
batteries. Number one, they're very low
energy density. So, you know, it's not very,
you're never going to put it on a pickup truck.
But you know, we talked about you're saying maybe that the
sodium prices have made it so that lithium, you know, based
batteries are still the, I mean in, in, in premise here that
sodium based batteries don't require a, a copper film
associated with them, but the the lithium based ones do.
So is there, is there something there with the sodium based?
Have you seen anything in the market people talking about it
more? I know that they're actually
building batteries in China, but is it still it's just a dominant
lithium market? Yeah.
Well, look, when we last spoke to somebody about it March, I
mean, I think it was BYD, right, that came out like the hybrid
LSP slash sodium battery. I think that's like the greatest
attempt at something really commercialized.
It's still less than 1% of the market.
And part of the problem is it's about double the price of LFT.
So it and you would look at all the materials separately of the
two and you'd be like, oh, sodium ion can compete, can
compete. The problem is that the entire
supply chain, the entire value chain has been built around
lithium and LFP where kind of can't compete.
You have to like think about the size and scale of that.
You would have to redo that with sodium.
And there's other materials that go into it like tin and stuff
that would you know. Yeah, you don't have copper foil
and film anymore, which I didn't know.
Thank you for letting me know that.
But you still have other materials and and the logistics
of building our entire supply chain I think are something that
may be unless there's a sustained period of like, you
know, really high lithium prices again, I I think it'll kind of
just sit in the background, especially to put.
It is it right to think Bentley that they, they greenlit that
factory BYD when lithium prices were approaching 80,000 bucks,
you know, and, and there was, you know, much more impetus to
do so. I can't for sure say that, but
that would logically make sense. There's always, you know,
technological studies that people do and they want to, you
know, increase technology, find other ways to do things.
And a lot of time, I will say a lot of time I spoke with a guy
in rarest market about this and he was bringing up that a lot of
these R&D facilities and brought up a good point.
I never thought about what I should say.
He said that they will spend years developing things just
general manufacturing industrial complex.
But those teams a lot of times are more like engineers and
scientists where like the cost of the material in the economics
aren't necessarily a part of the equation.
So they can be developing that technology and then, you know,
spend 10 years on it, be like, hey, look what we did.
And then, you know, it turns out, well, there's not enough of
this material in the world to actually make this happen.
That's not the case for sodium, but you know, stuff like that.
So it also could have just been basically a project.
And then they're like, well, we're going to go forward with
it because the economics aren't that bad.
So one of those 2 probably. Yeah, I mean, I can't tell what
came first, the chicken or the egg here.
But it, you know, it seems like the resource constraint, nickel
and cobalt forced this hard pivot towards, you know, I, I, I
don't know the, the truth there or well, you know, whether or
not it was just a price, price competition in terms of the EU
market, but. Yeah, that that, Yeah, I think,
I think LFP in that regard for sure.
Was it the technological breakthrough of the BYD Blade
battery that really made it take off?
Yeah. But they would have had to been
developing that for years, I guess.
So it's probably what Rogue is talking about where it's OK,
especially cobalt. How do we, how do we build
something without cobalt? That's more so than nickel, I
believe, yeah. Bentley, what what do you make
of the, the role of of spot and the the balance of various
sources of lithium set say if we look forward like 10 years or
something, what sort of size of the market does that kind of
make up? Yeah, Hot Topic, I guess without
beating the dead horse of DLE, I'll kind of push that to the
side a bit. The interesting aspect of DLE,
I'll say we've, you know, we have the opportunity to sit in
front of a lot of these guys. They're trying to get DLE
production online and it's actually not a new technology.
It's another common misconception, but the the cost
of it is much higher than I thought.
So even where we're at now, a lot of these DLA projects won't
be profitable. They might say that they are,
but you got you got the industry a while, right.
If someone's, you know, their pre keys, are you going to take
their, you know, they're saying they're all in sustaining costs
is $8000 a ton. OK, it's going to be higher than
that. I've seen a few of those I
should say, and we know you know what Arcadian slash Rio is doing
down in South America, for example.
I think that's a little bit different, right where if you
looked at their pilot stuff, you're like, that's not even
close to profitable. I think, you know, scaling that
up and and learning from that eventually will that those costs
will come down. But brushing that part of the
deal aside, I don't, I think it's going to kill Hard Rock
either. A lot of the converters and
refiners, the battery grade are set up around Hard Rock and the
economics of that part of the intermediate steps is better
using usually better using Hard Rock versus carbonate, not all
the time. So that's not going away.
But the interesting aspect I think that we're seeing is the
possible push towards something like LSM, which is lithium
sulfate monohydrate. That is a value added step.
So when you have spodumene, there's basically effectively 2
stages right before you get to a carbonator hydroxide.
And that first stage produces the lithium sulfate monohydrate,
LSM, lithium sulfate. And we've seen spod producers
consider putting that in on site instead of going to spot.
You mean concentrate, then they do that.
And then actually like the lithium sulfate, especially in
places like Zimbabwe where you have transportation costs of
like 150 two, $100 a ton, right? If your production costs outside
are $400.00 a ton, like that's great, that's low.
But 200 two, $150.00 a ton transportation costs, well, now
all of a sudden your economics aren't great.
So if you can add a little bit of value to it, then your
transportation costs also come down because the amount of
material that you're moving is less.
So I believe Sino mines in, in Zimbabwe, they, they started to
do it. I think major miners, especially
in Australia are going to consider as well.
I know Pilbara was working on, they're working on something
else, but I think that's where the the industry, yeah, yeah,
exactly. I think you understand the
rationale for like. A like a, you know, line town
where the transportation costs would be pretty, you know,
pretty substantial too with so far, so far in land, Yeah.
Yeah. And so exactly like in there
will be I think minors that maybe still get away with with
spodumene if they're logistics are there for it.
It's kind of like iron ore, right, in that in that sense.
But the the push will be especially for someone like Lion
Town, I think we'll be creating some sort of midstream product
that I mean, even if you just double the value of it, that
creates a much different economic situation for where you
can export from the mine. And I think that's where the
industry's headed for that. That makes a lot of sense.
Makes a lot of sense. Got to ask you Bentley Tin
tantalum niobium 3 commodities. I wanted on the last few, Yeah,
yeah. Have you guys ever talked about
tantalum niobium? We've we've certainly talked
about niobium yeah, Jadi and I shareholders in in WA 1 here
Ding Ding, Ding and then Tin of course talk about it very
frequently. Tantalum not, not not very
often. Like, yeah, I mean to the extent
that there's the the history of of games like, you know, like
tantalum circuits surround the old sons of quality assets in in
WA. But but, but other than that,
very, very, very little. Wow, we've got green bushes.
That's yeah. Yeah, Yeah.
There's still a phenomenal tandem section there, right?
That you're still owned by GAM if I'm not mistaken.
It is. It is.
Yeah. I mean, it was A, and sometimes
read some old stuff just for, I don't know, to see what things
were like and like Base Metal Handbook used to be a big thing
that was from like early 2000s and it brings up oh, like the
big tin mines and stuff and it brings up green bushes.
And I was reading that a couple years ago and just laughed.
I was like, Oh my God, I forgot about that.
But that's why they go together. I guess that's that's the topic
though. So I think look, Naobian markets
are 80 plus percent of Naobianism comes out of Brazil
from CBMM, just a little bit different in that regard.
It's heavily controlled by that. And then another 10% are coming
out of Canada. But tantalum, that's a pretty
small niche metal that's found a lot.
And I'm not a geologist, but reason why we're involved in it
is it's found a lot with the, you know, the tin.
And. Artisanal stuff and throughout
Africa, but it's also found in pegmatites, right?
So that's what he was talking about spodumene.
So actually these lithium miners, people forget they
actually do make money and sell tantalum, but it's a capacitor
metal. So that's what it's uses for
super alloys, so aerospace, but also capacitors for chip
manufacturing. So it's a pretty important
metal. And outside of the the lithium
miners known and they produce a very small amount of it by the
way, But outside of that it's it's effectively all artisanal
and a lot of it came or comes from Eastern DRC in Rwanda.
So there have been pretty substantial supply disruptions
and you haven't necessarily seen big prices up, don't be wrong
1520%, but you haven't quite seen that follow through.
And a lot of it is just like long term contracts, there's no
way to hedge it. So you do have to have different
pricing mechanisms where there'll be a lag with that.
But overall, the past couple years price is up quite a bit
because demand has been up. As you know, the kind of the
chip boom here the past couple years has taken off and now you
have almost like a war, right? So wrong way to put it, like
production war for who's going to make the next, I don't know,
chip for AI or whatever. Is there overproduction there?
Maybe Rogan knows better than me, but so you're seeing, you
know, these Asian manufacturers, especially here in China, try to
compete with NVIDIA and stuff and they'll get there.
But it's creating demand imbalance and and metal that
basically no major minor goes out and tries to mine.
That's always been my long term theory, by the way, on tin as
well as like it's the same sort of thing, right?
And such a small amount of every electronic that no one cares at
the price quadruples like electronics makers did.
Some small amount, but Tantalum's a similar.
Story and. It's even less Subs, it's even
smaller. So the supply side doesn't
really react outside of artisanal.
So yeah, when you say. That that Rwanda ECDR.
So we're talking about like the coal tan deposits, right?
Or, you know, coal tan artisanal mining and, and that that that's
wow. The the Rwandan percentage might
actually just be the Eastern DRC kind of deposits, which are, are
somewhat kind of just appropriate.
I called Rwanda because of the the, you know, whoever has
control in that area. I'm not going to get myself in
trouble, sure. There's.
You gotta be really careful with some of that stuff if you're
dealing it because you don't know what what it.
Yes, what you're saying is, yeah, it's right.
Coltan, colonite light, it's coltan.
So that's, you can't, the refining process of it.
You can't separate it like the concentration of simple levels,
you know, hundreds of $1,000,000 equipment to do that.
But yeah, that's, that's where that pill comes from.
There's some out of Nigeria as well and other parts of Africa.
But the the disruption area is yes, yeah, yeah.
Yeah. Rwanda, ECDSC.
And is it, is it really kind of the, you know, the demand, the
demand story that gets and I suppose supply concentration
that gets that makes that kind of niche sector particularly
attractive as a commodity trader or is it the volatility?
It does, yes and no. I mean, demand has been not as
you know, upward as you would imagine for something like that
even tends the same way for for someone like us, it's more of
it's all smaller and artisanal, right.
So it's, yeah, that's that's where our attractiveness comes
in without like lightly saying like it's easier for us to make
money, but it's actually easier for us to get in the industry
and it's easier for us to get involved in the mining part of
it, the upstream part. So putting money in the projects
and things, you know, they they're not asking for fifty 100
million plus, right. It's a lot smaller stuff.
Why we like to get involved in it.
Yeah, yeah. What about the disruption with,
with BC, you know, the, the major mine in the area, Bentley
coming offline for, I mean about a month or so because that
really kicked up some of the, you know, the, the prices that
we see and the, the one listed player over here.
Other than alpha men being the owner, what what are the
ramifications and the the consequences of all that action?
Well, I was sitting around my phone waiting for a call from
somebody in jail group seeing if I had some supply to replace,
but I forgot it. They have 100% of the off take
at this ease. So it's a lot of supply to
replace. I don't they apparently they
didn't have problems. They got to concentrate out and
slowly ramping back up. But I mean, I can't really speak
for it other than they didn't call.
I was just kind of hoping, you know, getting really high
pressed, no kind of joke aside from that the I forgot the
question. What is the, what are the
consequences and what, what do you think with this sort of
disruption in mind? And you know, I mean, you can
maybe speak to all the other things happening in the tin
market, Myanmar and the like going forward or tin.
Yeah, So concentrate markets tight, that's not really
shocking, but it was actually pretty tight without these
disruptions. Remember, you know, Myanmar and
the wall state they they shut things down 2023.
So it's been nearly two years now.
And I would say the biggest surprise actually has been how
long it's taken to really hurt, hurt the market.
But it's, you know, we were, there's, there's smelters here
in China that were going through their tailings, which you don't
hear much about tailings that tin smelters or smelters in
general to be used as feedstock. You, you have operating rates,
the smelters are pretty low. So refined tin outputs going to
come down. It goes back though a little bit
to the demand story that we were talking about was kind of
pulling things forward. We saw that late last year as
well, same sort of concept where tin demand was pulled forward a
little bit. So that's why outside of the
spike from the busy news, you haven't seen tin do a whole lot
other than 30,000. Is the demands just pretty dead
at the moment and how long is it going to take to go through
inventories that have been built up over the past year or so?
Tough to say, but that's what's happening.
That's why you're not seeing too much from the final product come
through yet in in price outside of the that short term spike.
But you know, but this he's not producing yet what they were
before the disruption. And you know, man, Mawa State,
yeah, I think we talked about over WhatsApp a couple months
ago, It's, it's it's been things are coming back online in three
months for the past year. So that's the best best way I
can state that. Rogan, I know you've you've
thought a fair bit about the tin supply chain.
Well, yeah, I mean, well, you know, from earlier, I I remember
you guys talking about where mines are and where where
minerals come from. I was living in Sierra Leone
outside of the mine annexed by the South African mercenaries
after the war. And you just start to realize
that it's really challenging to to use these resources as a way
of development because once you raise taxes high enough, people
just start moving them across borders.
But, you know, in, in terms of the tin market, I mean, both of
these countries are tremendously important suppliers to China.
It was interesting to me to see the Americans get involved in
the conflict and that certainly was something that surprised me.
You know, I think most of the minerals that the US is
targeting are in the South of the country and, and you know,
with that railway through Zambia to the the corridor there.
And then, you know, so the, IT coming to a quick end is, is
certainly positive in terms of stability for, you know, not
only the to the market, but the people of the the region.
I'm sure Goma and, and the other regions are still, you know,
it's a challenging situation. But yeah, where these minerals
come from and how they get to their final destination and in
China being an important market for them, you know, it's it's
just as Bentley states, it's a tight concentrate market,
downstream demand. You know, it, it'll be
interesting to watch over the next six months.
But I think that, you know, what happens is, is that the
constraint hits and then everybody panics.
And and so, you know, when inventories hit these, you know,
historically low levels, then I think people start to to pay
attention. And so that's what I would watch
in terms of a market reaction. What were you surprised, You
know, being being in Washington there the Americans getting
involved and do you do you put any weight in this quote UN
quote minerals deal that's that's going to emerge.
In in the DRC, yes, or, or the Ukraine one or you know.
Take your pick. You know, I, I, I would, I would
view it positively to see more activity in, in the southern
part of the country to develop those resources, whether it's on
the DRC side or the Zambia side. I think that there is a show of
commitment from the US and, and, and a growing understanding
that, you know, these regions are are places that they must
engage with rather than, you know, a choice of engagement.
And, and, and from someone who, you know, has spent some a good
amount of time in Africa, I view it positively.
But yeah, I don't, you know, what are the teeth to it?
That's that's a much harder thing.
You know, there's a lot of things that come out of
Washington in terms of statements.
You know, we're going to invest in the the mining companies now.
And you know, from my perspective, the US would be the
most successful if they develop something like a Japanese
trading house, then, you know, trying to, to get individual
lining companies to, to pull the trigger and invest more in the
southern part of the country at the eastern region is something
I'm, I'm less familiar with other than watching the media
reports and, and trying to track where the M23 rebels are
occupied. So, yeah, I, I mean, All in all,
it's it, it's extremely positive to see the US engage and
something that I, I thought could have, could have escalated
quickly and, and for the betterment of the local
population. I I think that a stale, you
know, a retreat to however it's going to be called is is
positive. Bentley imbalance in the copper
market. What's going on?
Well, you know, Rogan might actually have have a little more
hand on the pulse here than I do that talk about a lot with him
actually. But the imbalance really is
really has been the flows out of regional flows.
So replacing if you, if you're going to put a 25% tariff on
something, what you could effectively do today or have
done is buy copper one price, sell it forward in the US.
And even if that takes a year for that 25% to come in, that's
pretty nice little payday, right.
So it's a combination of that and doesn't quite work that
simply, but it's a combination of that and the fear of needing
the copper to be there, right? If you're actually some of that
distributes and supplies material or need it and that has
just caused mass amounts of flows, right?
Whereas I know last year when I came on, I was like, all right,
well, there's no, there's no material in North America.
No one really kind of used what what's there gets used.
And that created like the CME problems last year was some
different situation, but then this year now, you know, the
tariffs and it's driving flows there.
And that creates it's, it's, it's, it's a fake demand
essentially, right? It's not being transformed or
value added at that point. So that it's not a necessary
fake demand in terms of price because price can move up from
it. But it's something to be wary of
Where right, where, if, if there's a lot of material that
can come flood the market at that point.
Now I think Rogan, you were talking about why, you know,
producers in South America importing material like ramping
up production just to import in the US make more money rather
than, you know, dealing with TCR, CS and the like.
And I know you're speaking also with somebody about recycling
too in the States. Curious on on she's seeing
seeing differences in the recycled markets.
Yeah, no. So I mean, it's starting with
the recycling side. And I, and I've been, you know,
pounding the head on the table about these tariffs because it
seems like they're risking millions of jobs in, in
construction for 130 jobs in a smelter.
But in the US, the bottleneck is the mine or, you know, in this
case the, the scrap as a, an input.
And the rest of the world, you know, it's, it's a smelter.
They there's too much capacity, but you know, the US exports a
million metric tons every year in, in scrap and scrap dealers
make profit off an arbitrage, right?
So, you know, they buy from the manufacturer, whether it's
Bearbright or #2 and they try and sell it for more than they
bought it for. It's a pretty simple business in
that regard. But the fact that you're
capacity in the United States, you process the material is less
than what you're producing means you have to export it.
And now the LME is a 15% lower than the COMEX.
It means that a scrap dealer is either building additional
inventories or selling out into the global market.
So if you take a 12 month rolling year over year US
exports of copper scrap, traditionally as copper prices
rise, scrap exports increase. You know it helps to rebalance
the market. But that mechanism is, is
slightly broken because a scrap dealer now needs to wait till
that, you know, position goes up 15% more to actually make a
profit. So they, they're selling it a
loss into the global markets, you know, if there was no price
volatility or they're, they're waiting for prices to rise in
order to sell. So, you know, whether it's the
manufacturers that are holding inventories of scrap, whether
it's, you know, AT&T figuring out that they've got a couple
1000 tons in their warehouses that they can get rid of when
prices rise, people start looking at, at, at, at scrap and
start, you know, off loading it. And those scrap dealers are, are
in a challenging position because they're, they're fewer
and fewer arbitrages, you know, on the other side of the
Pacific, though, what's really interesting to me over the last,
you know, month or so of data is, is that China's exports of
refined copper are increasing with the Yongshan premium and
the market in backwardation. And so those you know, issues,
if we look at the decline in inventories, I think we're down
over 60% in the last month and you know, in the US you're up
over 50%. And so where, how is how are
price mechanisms operating? Well, if I'm trying to sell
right now, I'm going to the Americans and I'm saying,
listen, if the IT gets support, I'll take it back.
If the tariffs are implemented, don't need to worry about it.
We'll we'll just cancel the contract there.
But if it gets support, you're getting a great deal because you
know, I'm selling it you to you below comex.
So you know, I can link to my, to the LME and and my business
is fine. And so there's this rush to
deliver into the United States and that creates a, a
predicament for, for the Asian markets and in particular China,
which, you know, consumes more than half of the world's copper.
And unlike last year when we saw the, you know, a peak demand
destruction associated with real estate on a, you know, 12 month
rolling basis, or that's how we, how I, I put it through.
And, and that's what the data showed, you know, there, there's
less demand destruction associated with real estate
right now. Everybody's rushing to get these
renewables installed And you know, the question is whether or
not we have a drop off in demand in the second-half of the year
from China and in the renewable sector, whether battery
production expansions can make up for that.
You know, whether the grid investment that's extremely
robust right now is, is consuming more copper or they're
switching to aluminum on these ultra high voltage lines.
So there's tremendous, you know, the, the demand question is
totally uncertain, but one thing is for certain is, is that the
marginal production of, of refined cathode and, and rod is
being delivered into the United States for profitability
reasons. And China's finding themselves
in a, you know, quickly declining inventories, rising
prices and you know, the market. If I, you know, can say what you
know, I'm here is, is that, you know, the Chinese start
rejecting prices at 80,000 RMB per ton.
So that's the, that's the level to watch is as inventories
decline into to to June. And, and whether or not you see
the Chinese buying at about 80,000 RMB per ton is, is kind
of what I'm looking for. But in the short term, it's
really hard because, you know, a trader takes a risk by
delivering to the US in terms of when the Section 230 twos come
out. And, you know, they're saying
they should come in Trump tongue.
So I, you know, if that meets in short order means it could come
any day rather than the allotted period for Section 232 to go
into through it the investigation.
But yeah, you know, if it's in line with some of the other
dramatic moves in terms of metals tariffs, you know, the
market is right to price in this premium right now.
But the the contango in the US and the backwardation in China
kind of just is a great depiction of where the flows are
going and and the issue to develop in the coming months.
How does this play out? Jeez.
Well, there's, I mean, I guess there's multiple paths, right?
So if, if, if COMEX, you know, the response from COMEX on the
day of the Section 232, whether it is or isn't implemented will
be very interesting, right? Because if it isn't implemented,
you know, it should fall back to the LME price, at which point
everybody would want to buy off of COMEX and sell, sell them to
China, you know, So, but I have a hard time thinking through
what happened with the Section 232.
I have an easier time thinking through Chinese inventories
continue to decline on a week up over week basis.
You know you get them on Friday morning and when they hit this
level, you know let's say 20,000 metric tons of available
unwarranted inventories. Do we see backwardation continue
to increase relative to to other futures prices, you know Ford
futures because then everybody's trying to lock in these
inventories. I always like to come back to
the key in this industry is always wiring cable.
So raw and production rates and then the wiring cable operating
rates are my key indicator indicators of downstream demand.
Thin films sheets, all of these other materials and copper
markets are important. But if the wiring cables humming
then then we could see higher prices.
Enlightening, Rogan and maybe for us to wrap up any last
thoughts on the the tariff mess that we're we're seeing daily.
I, you know, I, I, I think about this more often than I should.
You know, there are communities in the United States that have
been decimated by globalization, but I believe that the
production frontier is optimized with free trade.
Disruptions to free trade are detrimental to growth and
ultimately are paid by the consumer as in the form of the
tax. So efforts by the Trump
administration to restore supply chains and, and, you know,
remake the American economy will likely not succeed in the short
term. And the amount of economic pain
associated with the disruptions, I think our, our keys to why we,
we ended up where we were today. It, I don't know if this will go
out today, but yeah, today was the essentially, you know,
Liberation Day +7 for the rest of the world.
We're, you know, we're right back to where we started before
Liberation Day. And, and a lot of it is, is that
you'd end up with empty shelves in a month.
So this off data turns to hard data and the hard data then
eventually shocks the consumer. And that's something I don't
think I would, I would want to be have my name on as a as a
president or so I think there there are extreme challenges
associated with the imbalance trade relationship with China,
but I don't necessarily believe tariffs will solve it.
Bentley what do you think It's I was going to ask for Reagan.
Does he think it's kind of, do you think it's I guess too late
to solve or to prevent any of the economic, not any economic
damage, but let's say notable economic damage?
I I'm of the opinion that that a 10% rate on the on the rest of
the world, whether it's bananas or or what have you, it
increases prices, which will increase inflation.
That can be a one time shock in prices, but it will raise the
rate of measured inflation. It and at that point it makes it
harder for the Fed to lower rates.
If the tax bill this month comes out and and they blow out, you
know, the budget, That's just one more reason that, you know,
you could see, you know, demand outstrip supply and and, you
know, prices just rising higher. And, and I I think that's a, a
really awkward position for the bond market as well.
So the the tariff situation. A lot of it's baked in at this
point. To answer your question
directly, it could be made worse by other policy decisions.
I'm not bullish on the US economy in the short term
because of this price shock. But you know, I think we have
some of the most brilliant and excellent to tech engineers and
and some of the things I'm seeing in AI make, you know, me
optimistic about the future. So, I mean, I, I'm sorry that's
a little bit rambling, but yeah. I was going to ask because I
know you're a thick guy too. So like just in general on the
on the dollar. I mean, it's it's come back and
and racer, I don't know I would call low cross the curve.
So are you I don't know, especially with some of you guys
are clients. Are you guys seeing people?
I guess unwind that, yeah, dollar short and short yield or
long yields play? Or are they still thinking that
that's coming through? Because in reality, like, yeah,
you know, tariffs not less than they were going to be, but you
know, that deficit is not getting solved.
And it's not like, yeah, stuff still happened.
It's still a problem. Yeah, I, I mean, it's the, the
looking at capital flows is, is like looking through a a bowl of
spaghetti noodles. You you just you never know who
wear it along the path this this flow comes from.
But I believe that that the East Asian savers have certainly
pulled back the insurance companies and I also think that
the European repatriations have have happened.
I think it if I was investing in the environment right now in the
United States, I think the on the fringes of the market places
like private equity, venture capital, I don't want to send
money to the US and and lock it up for seven years at this point
because it's the regulatory landscape is is is becoming a
little less foreseeable in that time range.
And so you know, you can see fast money flows back into to
debt securities in the US for sure.
But I think some of these more private markets will have a
little bit more of the challenge going forward, attracting
foreign investors. No, interesting.
So the I guess I don't know. I don't I can't remember how
much you really see but or talk to people in the private
markets. But is, you know, there was
especially in a real estate, right, there's been so much
rollover in that space. How is it like if if outside
money doesn't come in to to make the next to extend funds or, you
know, we're going to have series seven of our fund or whatever.
I feel like that's kind of a, you know, that becomes a
problem, especially we all get into a pension discussion.
That's Rogan and I's previous life, but.
Yeah. Yeah.
That become like almost like a tipping point of of, I don't
want to say a financial crisis, but you know, something more
significant that we've seen. I I think that the, the issue
remains that the United States is the global reserve currency.
These these individual markets will rebalance in a way that
find identified market clearing prices.
But the attractiveness of the US and it, it isn't almost appears
in an intentional decay of attractiveness to investing in
the US, whether it's, you know, greater control over private
markets, you know, intentions of bringing back supply chains that
have higher costs. It, it's not the post 2008
capital market that everybody flooded money into.
And, and it seems that some of the, the pushing of money away
from the US is intentional. And so I don't know how that
finds that's the balance. I, I think about more, I, I, I
can't tell you how the market clearing prices of, of real
estate in the private transactions associated with it
will, will, will, will find it, its place.
But yeah, I mean, some more liquid fund comes in and, and
buys out some private fund and someone takes a loss along the
way. But yeah, I the, the main story
and, and the question we should all have it is, you know, where
does the marginal dollar of investment go to?
And if, if it, and hopefully a lot of the rest of the world
could use investment and, and a lot of, in my belief, you know,
the the largest shortage of metals is, is based in the
copper market. And you know, we have climate
change, but also competition coming from some of these
renewable sectors. And so it'll be very interesting
to watch. And then, you know, there's this
theory that there's a jeweled economy, you know, who can
produce the most energy will, will produce the future.
And so artificial intelligence is going to be limited by the
amount of energy you can produce.
And so again, I always come back to copper is is the
indispensable metal. It's a great place to leave it.
I've loved, I've loved the the dynamic that both of you have
brought to the episode today. And, and yeah, just it was, it
was wicked to to kind of sit back and hit both of you, kind
of ask each other questions. I'm going to have to listen back
to that one, JD myself, even though I was part of the
conversation. This has just been awesome.
Bentley and Rogan, thank you both so much for joining us.
Thanks guys. Appreciate it.
Thank you, I appreciate it. There we go mate and a massive
thank you to all our partners. Firstly, Mineral Mining services
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