I was a keynote speaker at the recent Murdock Capital Partners Critical Metals/Strategic Elements Symposium in New York City. This is my second gig at one of convener Tom Dean’s on-going series of symposia and I thank him for continuing support. Although the venue is small, intimate, and limited to 75 attendees, the investor quality is second to none, particularly in the amount of money represented and managed. In my presentation I categorized the metals critical to modern-day civilization and reviewed the minor metals that are increasingly used by society in new technological applications.
Recently a plethora of alternative names have been proposed and promoted for what were once known as the specialty or minor metals. These mostly obscure elements span the gamut from the lightest to the heaviest on the periodic table. In my opinion, analysts and investors alike have become confused by these newly-invented misnomers.
Much of the confusion can be blamed squarely on two recent reports from the United States government.
In December 2010, the US Department of Energy (DOE) produced a report entitled “Critical Metals Strategy.” It identified seven rare earth elements and three minor metals (lithium, indium, and tellurium) that are or could become in high demand and short supply from 2011-2025. The DOE list and analysis was predicated on future growth fueled by Obama’s proposed subsidies of the electric and hybrid vehicle, wind turbine, solar, and fluorescent lighting industries.
Subsequently, the US Department of Homeland Security produced its list of “Strategic Metals” based on national and economic security and public health and safety. However, its list had few metals in common with the DOE compendium. Homeland Security’s strategic metals were more realistic and included ferrous alloys chromium, manganese, titanium, and cobalt, and minor metals germanium, niobium, tellurium, the rare earth elements, and tungsten.
Not surprisingly, these government studies recommended bureaucratic and regulatory solutions involving interagency coordination, cooperative studies, research funding, comprehensive plans, and international workshops.
The various proposed names for the low demand metals are arranged below from youngest to oldest and include short explanations of their origins:
- Critical metals: DOE’s aforementioned list in late 2010 is based on Obama’s agenda for green energy subsidies.
- Electric metals: This is the title of annual conferences beginning in April 2010 and held by Byron Capital, a group of Toronto-based research analysts.
- Doping agents: A name that was proposed by The Hague Center for Strategic Studies in early 2010 for metals that are minor additives in alloys and composites.
- Rare metals: Don Bubar, CEO of Avalon Ventures, renamed the exploration company Avalon Rare Metals upon gaining a TSX listing in mid-2009.
- Technology metals: According to my source, this term was coined by materials engineer Jack Lifton and first used publicly in September 2007.
- Strategic metals: A term that was first used for both major and minor metals during the Department of the Army metal mining subsidies in the 1940s and 1950s. It also references the National Defense Stockpile from post-WWII until the Soviet Union’s failure in the early 1990s.
However, this alphabet soup of metals has long been known by two names that are of common usage and are easily categorized by several key criteria: Specialty metals, which is the term I prefer; or if you wish, minor metals.
Before we delve further into the specialty metals, I offer my real world answers to the question, “What makes a critical metal “critical”?
In my opinion, the general characteristics of a critical metal include the following: It is essential to modern-day industrial processes and/or applications and therefore, world economic health and well-being; a major tonnage (with few exceptions greater than one million tonnes) is mined, processed, and used per year; it trades on open world markets, including futures and options; or, it trades as a bulk dry commodity via a negotiated contract or pre-set price.
I submit that these are the world’s critical metals, arranged for the most part in order of their yearly mined tonnages:
- Iron ore (Fe) comprises 95% of the world’s total metal production. Iron and steel are the foundations of our modern-day civilization and the Iron Age marked a major advancement for mankind beginning in 1200 B.C.
- Aluminum (Al) is the strong and lightweight metal that was not used in any major industrial application until the 1890s and now is the world’s second most important metal with over 44 million tonnes of production in 2011.
- Copper (Cu) with a Ph.D. in Economics is the true “electric” metal. Its 19 million tonne supply, demand, and price most directly reflect the world’s current industrial and economic health.
- The major ferrous alloys including: Chromium (Cr), the third most used metal at 24 million tonnes, manganese (Mn), fifth at over 14 million tonnes, nickel (Ni) with 1.8 million tonnes, and molybdenum (Mo) with 250,000 tonnes. These metals are alloyed with iron for various types and grades of steel, essential for today’s industrial applications.
- Titanium (Ti) oxide production was 6.7 million tonnes in 2011. Titanium minerals are used mainly in the pigment industry in addition to 186,000 tonnes of metal sponge demand for iron and specialty alloys.
- Zinc (Zn, 12.7 million tonnes, lead (Pb, 4.5 million tonnes), and tin (Sn, 250,000 tonnes) are essential for major industrial applications including galvanizing, batteries, and alloys respectively. Copper-tin combinations were the first alloys used by Man and ushered in the Bronze Age at about 3300 B.C.
- Uranium (U) had no significant use or supply until the1950s but it now contributes 14% of the world’s electrical energy supply. Current mine production of 53,000 tonnes is about 75-80% of annual world demand. Uranium diverges from the other critical metals in its relatively low tonnage and it does not trade on open markets, but it is no doubt essential for our long-term energy future.
Despite the aforementioned efforts to invent new names for the specialty metals, each individual metal has a number of common characteristics with its brethren. First and foremost, a specialty metal is non-essential to a healthy and well-functioning world economy.