How the Global Warming Agenda Affects Critical Nonferrous Metal Demand

DETROIT () -- Last week, I wrote an for RI about the fact that the Federal Government's principal advisory service on technical matters, the National Academies of Science (NAS), is now finally addressing a critical issue for America's economic future that rarely gets any attention from the Congress or the President, the identification of the present and future impact on the U.S. economy, and on America's security, of shortages of, or the total secession of availability of, metals and minerals without which our industrial economy cannot function.

In order to address the issue it was first necessary for the NAS to find out which are the critical strategic materials without which America cannot function. One of the ways they chose to identify these materials was to ask our largest end user of metals, the General Motors Corporation [NYSE:GM], to send a representative to a meeting with a mandate to openly reveal which metals are, or should be, considered by heavy industry to be today both strategic and critical.

I published the current "top five" list presented to the NAS meeting by the gentleman from GM last week.

  1. Rhodium
  2. Platinum group metals (PGMs)
  3. Lithium
  4. Molybdenum
  5. Rare earth metals

I want to expand upon last week's discussion and delve deeper today into how the global warming agenda impacts the strategic and critical position of each of these metals. Long-term investors are the audience I am addressing.

Although the decline of the competitiveness of American heavy industry is attributed solely to high labour costs by ill-informed politicians the decline really began when the environmentalist agenda gained ascendancy in the United States during the Vietnam era.

The effect of environmentalism upon the American domestic production and refining of natural resources of metals, minerals and energy has been to add such costs and delays to their production that the domestic sourcing of American industry's annual demand for any of the five metals listed above, except for molybdenum, is physically impossible and the costs of these five, representative metals, has gone up so much, without exception, that, their price volatility is an excellent illustration of the little known fact that raw material cost increases have been a more significant cause of industrial bankruptcies in U.S. heavy industry than labour costs.

To be fair, in some cases, such as rhodium, this is not due only to environmentalism it is also due to the fact that there is no domestic commercial source of rhodium (always a byproduct or secondary material) readily found or being worked in the U.S.

I do not agree with those who think I should say the same about domestic platinum and palladium and exempt those two metals from the negative impact of environmentalism on their domestic supply. The U.S. has considerable resources of platinum and palladium bearing chromite ores in Northern California, Oregon and Washington State as well as large deposits of palladium bearing ores containing significant amounts of platinum and rhodium, yes rhodium, in and around the geologic formation that broaches at Stillwater, Montana.

Although the Stillwater deposits are commercially mined there is only now, with the advent of the commercialization of the Pro-Or [TSXv:POI] process, the potential for commercially mining the chromite ores of the American West and commercially recovering the platinum, palladium and rhodium therein contained as by products. The chalcogenide ores of the platinum group metals mined at Stillwater are anathema to activist environmentalists, because extracting the PGMs requires processing large quantities of sulfur, selenium and tellurium all three very toxic both as metals and compounds.

The newly organized Michigan nickel mining venture, which surely contains PGMs as are known in and recovered from the geologically nearby Sudbury nickel mines in Ontario, Canada has now been stopped by environmentalists thus setting back the solution of the global warming problem through reducing the supply of critical metals.

As for lithium, there is one deposit being worked in the U.S. It is a desert brine pool in Nevada, and it produces less than half of our current yearly demand. Lithium rich deposits of the mineral spudomeme are not mined or processed in the U.S. due to environmental restrictions.

Molybdenum is produced both primarily and secondarily (as a byproduct of copper) in the U.S., and as long as copper production is maintained at its current high levels a significant amount of molybdenum will be produced in the U.S. probably enough for America to be self sufficient.

The mining and refining of rare earth metals in the U.S. has ceased entirely because of environmental issues. One of the great tragedies of the current uranium rush is that the thorium rich monazites of southern California, which are rare earth minerals, are not mined because there is no commercial use for and thus no processing of the tailings from such mining that are rich in thorium, which environmentalists see as a radiation hazard rather than as a safe source of fuel for nuclear reactors, which would produce no global warming gases at all and no weapons grade byproducts.

Today the global warming agenda has added, in America, in particular, and more detrimentally economically than anywhere else in the world, its anti-growth influence to activist environmentalism to accelerate the impossibility of America achieving natural resource and energy independence and the reduction of greenhouse gas production.

In America the cost of the technology to ensure arbitrary, politically drawn, levels of air and water cleanliness is added well before a shovelful of earth is turned or a processing facility is even ordered. This has insured that those nations who do not concern themselves with such niceties or have realistic determined allowable pollution levels have now eclipsed America in mining and processing of a growing list of the materials upon which we critically depend.

I am writing this during a snowstorm in mid-April, which is helping to make this April in Michigan it is said the coldest in 113 years. Notwithstanding this aberration let us assume that global warming is real and it is man made as the American political elites have decreed.

How will the global warming agenda affect the use of any or all of the currently critical materials listed above in the long run?

  1. Rhodium usage and therefore demand in the U.S. will go ultimately to a very low figure. Perhaps zero. Why? Because almost all of the new rhodium imported into the U.S. each year goes to make that part of an automotive emission control catalyst, which reduces nitrogen oxides produced in the internal combustion of liquid petroleum fuels burned in air, which oxides form corrosive and toxic acids with water, to ordinary nitrogen, the gas which normally is 80% of the air we breathe. As and if hybrids proliferate they will use a combination of a small very efficient, low emission, internal combustion engine and a battery pack. Such vehicles already use much less rhodium (and much less platinum and palladium) than a car of equivalent weight propelled only by an internal combustion engine (ICE) burning gasoline or diesel fuel. A large ICE powered car or SUV burning hydrogen such as the 100 test vehicles built by BMW and now on the road will use no rhodium (or platinum or palladium) at all. Likewise no PGMs will be required by a battery powered all electric car. Even a fuel cell powered electric car which is fuelled by hydrogen will use no rhodium. Ethanol blend fueled ICEs require as much rhodium in their exhaust emission control catalyst as those fueled by gasoline or diesel fuel, so if Ethanol becomes the fuel of choice to replace straight gasoline or diesel fuel rhodium usage and demand will be maintained.
  1. Platinum and palladium usage for exhaust emission control will also decline and ultimately disappear as electric and hydrogen propulsion replace gasoline and diesel fuelled ICEs. Investors should watch fuel cell technology news carefully. Today's fuel cells of a size necessary to produce enough electric power to run a mid size car use between 1 and 3 ounces of platinum in their construction. There is no way today with platinum at $1200 per ounce that a fuel cell can be competitive. In any case even with only 1 ounce of platinum per fuel cell global production of new platinum is at 6 million ounces per year so if all of it went for fuel cell production for mobile power use only 8% of the ICE powered cars now built yearly could be replaced. This will never happen no matter what the price of platinum, because there simply is no where near enough platinum supply possible. Researchers are currently on the trail of fuel cells that use no platinum or much, much, less platinum. When that happens, platinum will no longer be a critical or strategic material. I predict that within 25 years America will be self sufficient in platinum if the fuel cell catalyst usage problem can be solved.
  1. Today there is no other technology on the horizon that can be used to make batteries of sufficient capacity and life cycles than lithium. In order for the U.S. to be self sufficient or approach self-sufficiency in lithium will require that spudomeme mineral deposits be worked. They are not now because of environmental objections. This, the recovery of lithium from spudomene in the U.S., will be a political crisis when it becomes necessary. It will be a test of environmentalism even at the cost of our economy versus the reduction of greenhouse gases to save our planet. I look forward to this battle, and I suggest that all of you keep a supply of popcorn handy for the show.
  1. Molybdenum is used in (high strength corrosion resistant) tubular goods for oil field production and distribution, high temperature metals for tooling and automobile exhaust manifolds, and in some chemical operations as a catalyst. If the global warming agenda moves us towards a world where oil and natural gas are used more and more only for non-fuel purposes then the first two uses of molybdenum will decline and America will remain self sufficient in molybdenum probably just from its byproduct production from copper mining. Current designs for mobile power fuel cells use a lot of molybdenum strengthened steel to conduct heat and corrosive flows, so some automotive demand would remain even in an age of hydrogen powered fuel cells.
  1. Rare earth metals are critical components of super strong magnets used in miniaturized mechanical components, and in electronic devices, and for nanomaterials. Just as an example, off the top of my head, I think it may be impossible to build wind following windmills and sun following solar collectors without rare earth metal components. In addition nickel metal hydride batteries need rare earth metals as do fuel cells. The U.S. has large deposits of rare earth containing minerals that are not mined due to environmentalist objections. Will we need a Solomonic leader to decide between environmentalism and global warming?

Whether or not the global warming agenda can be actualized will depend in great part on finding compromises between activist environmentalism and production of critical materials from domestic resources. It is time to stop pretending that the two agendas do not compete.

About the Author
Jack Lifton

Jack Lifton is a leading authority on the sourcing and end use trends of rare and strategic metals. He is a founding principal of Technology Metals Research LLC and president of Jack Lifton LLC, consulting for institutional investors doing due diligence on metal- and material-related opportunities.

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