Guest Post by Chris MacIntosh
China has the world over a barrel in more ways than we have been led to believe.
It isn’t so much that China has the biggest resources of these minerals. Rather it has the refining capacity to produce these materials. Note that most of these “lesser known base metals” don’t occur naturally on their own (like copper or tin), rather they occur concurrent with other minerals and are essentially a by-product of refining common base metals. Of course, refining minerals is a messy, polluting, and energy intensive business that few countries want to engage or allow. In doing so, they open themselves up to national security issues.
All rather interesting, but what I’d like to point out is that there exists the probability that this all becomes weaponised. Reducing or entirely eliminating supply of these critical resources to “non-friendly” nations is increasingly becoming a real threat. That in itself would entail significant supply disruptions, higher costs of production (much higher), and subsequent acceleration of stagflation.
The New vs the Old Economy
We thought we had it all before with the TMT bubble of 2000 (goodness, that is now 23 years ago). But history has been rewritten highlighting the extreme performance of one theme against another. Real assets are more out of favour compared to financial assets than at any time since the 1920s. Some random charts we found on the information superhighway providing illustrative view of what we’re saying.
Any relationship in the chart above to the one below?
OK, let’s put it another way. What if the US 10-year yield is 10% 10 years from now? How do you think real assets would have performed vs financial assets?
Just a reminder of how out of favour materials and energy are compared to the broader market. Granted this is some 12 months old, but not much has changed since then.
We recall a couple of years ago when Tesla had a greater market cap than the S&P 500 energy sector and Microsoft had bigger market cap than the S&P Materials and Energy sectors combined. Seems like not much has changed on a global scale.
Taking out Saudi Aramco, Microsoft, and Apple have about the same market cap as the global energy sector.
A Think Piece on Solar Panels
Finally someone who has dug deep into the assumptions:
You really have to read the article. It’s a humdinger. But first, a warning to the tree huggers who buy the concept that paying more taxes to multiple home owning, jet setting globalists in order to eliminate a gas that is 0.04% of the atmosphere and for which all plants are dependent upon. My friends and colleagues over at International Man said it well:
But back to the report. Check out these snippets:
Last August, in an amalgamation of “The Green New Deal” meets “Build Back Better,” President Joe Biden’s Inflation Reduction Act gifted the renewables industry with billions of dollars worth of taxpayer-funded subsidies.
What few backing the bill realised was that the largest beneficiary would likely be China due to its expansive grip on the global solar photovoltaic (PV) industry. Worse than that, it might end up misdirecting the world’s clean energy efforts into dirtier than appreciated energy technologies because of the country’s ongoing dependence on coal-fired energy.
In essence, the IEA are basing their assumptions of how much CO2 is produced in manufacturing solar panels based on European energy data rather than Chinese energy data. China relies on coal more intensively than Europe:
the IPCC claims solar PV is 48 gCO2/kWh. But, as we’ll see below, a new investigation started by Italian researcher Enrico Mariutti suggests that the number is closer to between 170 and 250 gCO2/kWh, depending on the energy mix used to power PV production. If this estimate is accurate, solar would not compare favourably with natural gas, which is around 50 gCO2/kWh with carbon capture and 400 to 500 without.
Here is the conclusion:
A picture emerges of an aspirational Western industry captured lock, stock, and barrel by secretive, coal-loving Beijing. It’s a worry for the West’s economic development, never mind energy security and climate action. If solar is anything to go by, the great transition seems less based on data than a mixture of blind faith and vested interests.
Perhaps the broad populace will awaken to this blind faith when electricity prices go through the roof and standards of living decline significantly. Either way, the truth will eventually come into plain sight.
Reports of Its Death Are Greatly Exaggerated
Here’s a very useful resource:
https://yearbook.enerdata.net/coal-lignite/coal-world-consumption-data.html
Take a look at global consumption of coal in 2022:
China, India, Russia, Indonesia, South Africa, Turkey (and other emerging nations) make up about 86% of world coal consumption. Don’t be expecting them to buy into the “Net Zero” narrative anytime soon (this side of 2050 at least). Either way, coal consumption will continue to rise in line with global GDP. There is no other way around this. That is unless those countries are willing to see a deterioration in standards of living… which, as I sit in Turkey, I can tell you ain’t gonna happen without a fight.
By the way, here is global oil production by country.
Notice the importance of the US… or should we say US shale, because some 66% of US oil production is accounted for by shale oil. If shale is indeed peaking (or perhaps it has already peaked) as we believe it is (we’ve written about this previously and extensively), then we have ourselves a unique and long-performing investment opportunity.
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The Chinese have all the rare earths…
And they won’t share.
Or it is a narrative to foment discord?
“USA Rare Earth will bring into domestic production nearly half of the critical minerals identified by the USGS, including gallium, which tops the new Critical Minerals List,” Thayer Smith, USA Rare Earth president, said in the media brief. “We commend the USGS for its robust evaluation of these important mineral commodities and for identifying the material constraints for American technology and national defence.”
According to Smith, in February 2021, the USGS identified Round Top as the largest gallium deposit in the United States. Gallium is a critical semiconductor chip material, for which there are currently no US producers.
https://www.mining.com/usa-rare-earth-to-produce-nearly-half-of-critical-minerals-in-usgs-updated-list/
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The Round Top Mountain near Sierra Blanca, in Hudspeth County, Texas, holds one of the biggest deposits of heavy rare-earth elements (REE) in the US. It also contains a variety of critical industrial minerals and technology metals including lithium, uranium, thorium, beryllium, gallium, hafnium and zirconium.
https://www.nsenergybusiness.com/projects/round-top-rare-earth-critical-minerals/
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I heard there are other rare earth mines too.
rare-earth elements (REE)
Funny
When the mantra is changed it puts us deeper into the trance. In hypnosis, this is called Utilization. Call a lie a lie and a commie a commie. Don’t play the game, or you become the victim.
Dr. Micheaux shows that there are not enough minerals for a replacement of current energy levels and even if there was, we would be mining 50% of the earth’s surface for 100 years to even get started and using all the oil reserves that we know of. We are being lied to and handed busy work and unicorn pictures to keep us busy while they steal us blind of anything and everything.
What isn’t a lie if said by TPTB anymore?
We passed peak oil production efficiency in the late 70s. Where capturing 100 barrels of oil from the ground cost 1-2 barrels of oil. Now, that 100 barrels captured costs at least 20 barrels. It was 100:1 now it’s 5:1
Cheap oil was a time to grow wealth. Now, is a time to protect wealth.
Got precious metals?
Oil is a self replenishing resource. There’s no such thing as “peak oil”. It’s a BS lie to jack up the price.
That needs to be proven TCS and I ain’t seen evidence of abiotic oil yet, Do you have it?
TCS,
Even if oil is abiotic (which is doubtful) the costs to pull it out of the ground are undeniably going way up. What used to be 100:1 (100 barrels returned for 1 barrel of energy input) is now sub 10:1-ish, as low as 5:1 returns. This lower return impacts all kinds of development. We have to have 5:1 to keep the lights on. At 3:1 we might get to eat a few crops and nothing more.
We are definitely on an energy decline and that energy drives ALL economics is indisputable… 1:1 fashion.
It’s an exponential curve and the fall will be exponential in its fall, ferocity and damage.
TCS,
You haven’t seen Chris Martenson’s “Crash Course”‘
Do yourself a huge favor,,,
Bang on Steve Z – the evidence is overwhelming: https://austrianpeter.substack.com/p/the-financial-jigsaw-part-2-the-end?s=w
Thanks Peter!
I’ve seen articles discussing the amount of rock/ore that must be excavated to provide the lithium for just one TSLA (and its 1,000+ pound battery) … it’s on the order of more than 500,000 pounds of ore, plus all the water and other things necessary to the refining … and then, of course, there’s the disposal of all of that toxic waste.
And the ‘intellectuals’ tell US that this is ‘good for the earth and for US’? Really?
Read any account of Super Fund sites and it’s like sobering up.
“Of course, refining minerals is a messy, polluting, and energy intensive business that few countries want to engage or allow. In doing so, they open themselves up to national security issues”
Yeah,sure would be nice if the democrats woulda thought of that when they axed Keystone.
But think of all the sacred Indian sites that were saved!
Possible toxicity or environmental damage from mining, refining, or other processing may be a reason the Chinese dominate the production of these. Just guessing.
Natural resource extraction in places like China and Russia is never a environmental concern.