Fireside Chat with Ambassador Kevin Rudd

Summary

In a rapid-fire fireside chat, the former Australian Prime Minister and Ambassador discussed the pressing issue of nickel market dynamics and its impact on Australia's role in the global transition to a minerals-based economy. Highlighting a market failure due to a dominant player's monopoly and monopsonistic purchasing, the conversation delved into strategies to ensure resilient supply chains, the importance of ESG-compliant nickel for renewable energy, and the need for transparent pricing mechanisms. The discussion underscored the urgency of collaborative policy solutions to secure a reliable and sustainable supply of critical minerals, emphasizing the 'green premium' as a security premium for the future.

Takeaways

• 🌐 Australia is a significant player in the mining industry, being the largest supplier of lithium and a major producer of other critical minerals such as nickel, cobalt, and rare earths.
• 📉 There is a perceived market failure in the nickel industry due to a single dominant player acting as both a monopoly producer and a monopsonistic purchaser, leading to a concentration issue and operational pauses for several Australian nickel operations.
• 🔄 The Australian government, along with partners in the United States and Canada, is actively seeking solutions to the market challenges in the nickel industry to ensure a resilient supply chain for the global transition to a minerals-based economy.
• 🔍 The importance of transparency and the need for a separate listing mechanism for ESG-compatible nickel is being discussed to differentiate it from other types of nickel, such as that used for stainless steel production.
• 💡 The conversation is focusing on creating a new listing for battery-grade nickel to meet the emerging demand in the market and to ensure ESG standards are met, which is crucial for the production of electric vehicles (EVs) and renewable energy transformation.
• 🛑 The immediate challenge of price disparity in the nickel market is being addressed by governments, with the aim of finding a solution that balances the need for a 'green' or 'security' premium with affordability.
• 🌍 Diversification of supply chains for critical minerals, including nickel, is essential to avoid over-reliance on any single source and to ensure the security of supply for the clean energy transition.
• 🤝 International collaboration, such as the critical minerals compact between Australia and the United States, is key to addressing the challenges in the supply of critical minerals and building a sustainable and secure supply chain.
• 📈 There is a growing awareness and urgency among policymakers and industry stakeholders to act on the challenges posed by market concentration and to develop policies that support a reliable and green supply chain.
• 💼 The speaker, a former Prime Minister of Australia, emphasizes the national and global responsibility Australia has in supplying critical minerals and the importance of embracing ESG standards to support the global economy and the clean energy transition.

Q & A

What is the main topic of discussion in the transcript?

The main topic of discussion is the convergence of market challenges, pricing challenges, standards, and the ability to have resilient supply chains, particularly focusing on the impact of these challenges on the nickel industry in Australia and its implications for the global transition to a mineral-based economy and electrification.

What is the current issue with the nickel market according to the Ambassador?

The Ambassador identifies a market failure in nickel due to a single dominant player acting as both a monopoly producer and a monopsonistic purchaser, leading to a collapse of market principles and causing several nickel operations in Australia to pause.

How does Australia's position as a mining country relate to the critical minerals market?

Australia is a significant player in the mining industry, being home to three of the world's largest mining companies and having a long history in mining. It is a leading supplier of critical minerals such as lithium, cobalt, rare earths, and nickel, which are essential for modern technologies and renewable energy.

What is the Australian government's approach to addressing the market failure in nickel?

The Australian government, in partnership with the United States and Canada, is seeking to take action rather than just acknowledging the problem. They are exploring policies to improve transparency and develop different listing mechanisms for ESG-compatible nickel to ensure a reliable and sustainable supply.

Why is the establishment of a separate listing for ESG-compatible nickel important?

A separate listing for ESG-compatible nickel is important to differentiate it from other types of nickel, such as that used for stainless steel production. This differentiation is crucial for meeting the emerging demand for nickel that is produced with environmental, social, and governance (ESG) standards in mind, which is essential for the production of electric vehicles (EVs) and renewable energy technologies.

What is the significance of the 'green premium' mentioned in the transcript?

The 'green premium' refers to the additional cost associated with sourcing materials that are produced with ESG standards. It is not just an environmental consideration but also a security premium, ensuring the reliability, safety, and sustainability of supply chains for critical minerals.

How does the conversation with Canada on diversifying supply chains for critical minerals like nickel play out?

The conversation with Canada involves working together to address the challenges of concentrated supply chains and to establish higher standard supply chains. This includes discussions on alternative sources of supply and the complexities of both supply and demand, with the aim of creating reliable, safe, secure, and green supply chains.

What is the role of the critical minerals compact between Australia and the United States?

The critical minerals compact between Australia and the United States is an agreement signed by the two countries' leaders to collaborate on turning the vision of secure and sustainable supply chains into reality. It involves close cooperation and discussions on policy solutions and strategies to address the challenges in the critical minerals market.

How has the issue of market challenges in critical minerals manifested when the Ambassador was Prime Minister of Australia?

During the Ambassador's tenure as Prime Minister, these issues were not as prominent. The trend lines of market challenges in critical minerals were barely emerging, and it has taken time for analysts and policymakers to understand the impact of the scale of the Chinese economy as a purchaser and supplier, particularly with state actors involved.

What message does the Ambassador leave with the audience regarding the future of nickel production and supply chains?

The Ambassador emphasizes the importance of recognizing the reality of the challenge and moving towards policy solutions rather than just acknowledging the problem. He encourages the audience to see the 'green premium' as a security premium, ensuring the sustainability, reliability, and safety of supply chains for critical minerals like nickel.

Outlines

00:00

🌐 Market Challenges and Nickel Dynamics in Australia

The speaker expresses gratitude for the audience's engagement and introduces the topic of market challenges, particularly focusing on nickel and its role in Australia's economy. The conversation highlights the issue of market failure in nickel due to a dominant monopoly and monopsonistic purchaser, which has led to several operations in Australia pausing. The Australian government, along with partners in the US and Canada, is actively seeking solutions to this challenge. The importance of nickel and lithium in battery production for electric vehicles (EVs) and renewable energy is underscored, emphasizing the need for a reliable and ESG-compatible supply chain. The discussion suggests the development of new policies and a 'green premium' to address the market failure and ensure a sustainable supply of critical minerals.

05:01

📊 Addressing Nickel Market Failures and Supply Chain Diversification

This paragraph delves into the specifics of addressing the market failure in nickel. The conversation centers around the need for greater transparency in listing arrangements to differentiate between nickel used for stainless steel and battery-grade nickel. The potential for a new listing mechanism for ESG-compatible nickel is discussed, with the aim of attracting end users and original equipment manufacturers (OEMs) to commit to higher standards. The importance of price and the challenges of immediate price gaps are acknowledged, along with the long-term implications of a single monopolistic entity controlling the market. The discussion also touches on the geopolitical aspects and the need for secure and green supply chains, not just for nickel but across all critical minerals.

10:01

🤝 International Collaboration for a Sustainable Supply Chain

The speaker, a former Prime Minister of Australia, discusses the importance of international collaboration in ensuring a sustainable supply chain for critical minerals. He highlights the challenges faced by countries in recognizing the scale of the issue and the need for collective action. The critical minerals compact between Australia and the United States is mentioned as a significant step towards addressing these challenges. The conversation also involves Canada and the potential for collaboration with African countries that have sulfide nickel deposits. The speaker emphasizes the importance of understanding both supply and demand complexities and the role of powerful minds in finding solutions to the challenges posed by market monopolies and the need for ESG-compliant operations.

15:02

🌿 The Imperative for a Green and Secure Supply Chain

In the final paragraph, the speaker reflects on his experience as Prime Minister and his perspective on the evolving challenges related to critical minerals. He acknowledges the slow realization of the scale of the issue and the need for a sense of global responsibility. The speaker calls for the Chinese economy to embrace its climate and sustainability responsibilities and for the construction of reliable, safe, and secure green supply chains. He concludes by emphasizing the importance of a 'security premium' over a 'green premium,' suggesting that the focus should be on ensuring the security of supply, which inherently includes clean and safe practices for workers and the environment.

Keywords

💡Nickel

Nickel is a chemical element with the symbol Ni and atomic number 28. It is a silvery-white lustrous metal that takes a high polish and is used in various industries, notably in stainless steel and batteries for electric vehicles. In the video, the discussion revolves around the market dynamics and challenges affecting the nickel industry, particularly in Australia, and its impact on the global transition to a minerals-based economy.

💡Market challenges

Market challenges refer to difficulties or obstacles that affect the functioning or performance of a market. In the context of the video, these challenges include pricing issues and supply chain disruptions, especially concerning nickel. The script mentions that there is a 'market failure on nickel' due to a single dominant player, which is causing operations to pause and affecting Australia's ability to serve the global market.

💡Pricing challenges

Pricing challenges are issues related to the cost or value of goods or services in the market. The video discusses the current situation where there is a concentration of market power leading to a collapse of market principles and affecting the price of nickel. This is a critical issue as it impacts the viability of nickel operations and the broader mining industry in Australia.

💡Supply chains

Supply chains are the networks of organizations, people, activities, information, and resources involved in producing and delivering a product or service. The script highlights the importance of resilient supply chains in the context of market challenges and the need for Australia to maintain its position as a key supplier of critical minerals like nickel to support the global transition to a minerals-based economy.

💡Resilience

Resilience in the context of supply chains refers to the ability to withstand or recover quickly from difficulties. The script emphasizes the need for supply chains to be resilient in the face of market challenges, ensuring that the supply of critical minerals like nickel remains stable and reliable for the global economy.

💡Electrification

Electrification refers to the process of converting a system or industry to use electricity as the primary power source. The video discusses the importance of nickel and lithium in battery production for electric vehicles (EVs), which is a key component of the global shift towards renewable energy and electrification.

💡ESG

ESG stands for Environmental, Social, and Governance, which are three central factors when measuring the sustainability and societal impact of an investment in a company or business model. The script mentions the need for a reliable and ESG-compatible supply of nickel and lithium, emphasizing that without it, the goals of renewable energy transformation could be undermined.

💡Monopoly

A monopoly is a situation in which a single company or entity dominates a market, often leading to reduced competition and potentially higher prices. In the video, the Ambassador discusses the issue of a single dominant player in the nickel market, which is causing market principles to collapse and affecting the operations of nickel mines in Australia.

💡Monopsony

Monopsony is the opposite of monopoly, where there is only one buyer in a market, allowing them to control the price of goods or services. The script refers to a 'monopsonistic purchaser' in the context of the nickel market, which, combined with a monopoly, leads to market failure and challenges for the industry.

💡Transparency

Transparency in a market refers to the openness and clarity of information, which is crucial for fair trading and decision-making. The video script suggests that improving transparency, particularly in the listing and pricing of ESG-compatible nickel, is a necessary step to address the challenges in the nickel market and ensure a reliable supply for the future.

💡Green premium

A green premium refers to the additional cost associated with products or services that are environmentally friendly or sustainable. The script mentions the concept of a 'green premium' in the context of paying for higher standard sourced nickel, suggesting that the premium is not just for environmental benefits but also for security, safety, and reliability of supply.

Highlights

The conversation is set to be the fastest fireside chat ever on a difficult topic, the nickel pickle.

Australia is a major player in mining, especially critical minerals like nickel, which is essential for the global transition to a minerals-based economy and electrification.

There is a market failure in nickel due to a single dominant player acting as both a monopoly producer and a monopsonistic purchaser.

Approximately 80% concentration with a single player leads to the collapse of market principles, affecting nickel operations in Australia.

The Australian government is working with partners like the United States and Canada to address the nickel market challenges.

The importance of nickel and lithium in battery production for electric vehicles (EVs) and renewable energy transformation is underscored.

A lack of reliable and ESG-compatible supply of nickel or lithium could undermine the purpose of renewable energy efforts.

There's a push for better transparency and a different listing mechanism for ESG-compatible nickel to differentiate it from other types.

The London Metal Exchange is resistant to separate listings for different types of nickel, raising questions about market responsiveness.

There's an emerging demand for a separate market listing for battery-grade nickel to meet the needs of the EV industry.

End users and OEMs are interested in a different pricing mechanism for higher-standard sourced nickel to drive ESG standards globally.

The conversation about a new listing for battery-grade nickel sulfate is ongoing, with end users considering the benefits of higher standards.

Long-term ESG requirements, driven by legislation like the Inflation Reduction Act (IRA), are prompting OEMs to look at supply chain standards.

There are concerns about future price manipulation and supply uncertainties if the nickel industry collapses into a single monopolistic entity.

Diversifying supply chains for critical minerals like nickel is crucial for the clean energy transition and involves international cooperation.

The Critical Minerals Compact between Australia and the United States is an example of ongoing efforts to build reliable supply chains.

Ambassador Red, a former Prime Minister of Australia, brings a wealth of leadership and knowledge to the discussion on critical minerals.

The challenge is to balance national interests with global responsibilities, ensuring secure, safe, and green supply chains for critical minerals.

The discussion calls for a shift in consciousness towards policy solutions rather than perpetually admiring the problem.

The 'green premium' for ESG-compatible operations is reframed as a 'security premium' for supply, cleanliness, and worker safety.

Transcripts

hello everybody I'm so happy to see

you're still here You' bear with us for

two very intense days of conversation

and it's only going to get more intense

I'm very honored any entertainment out

there we we are the entertainment oh

yeah we're we're we're closing closing

entertainment for everybody they're

expecting a comedy roast I'm sure uh I'm

really honored to be joined by the

Ambassador who I won't go through his

really distinguished background because

we are going to accomplish The

Impossible and have the fastest fireside

chat of all time on a really really hard

issue the nickel pickle uh so Ambassador

I want to get right to it with you you

know this is the this is the topic

that's been permeating throughout

conversations and the conference it's

the convergence of Market challenges

pricing challenges standards uh and the

ability to have you know these resilient

Supply chains and Australia is really in

the middle of it so you know yesterday

we got great uh great great insight into

the the past couple of months on the

nickel side so maybe we'll pick off from

where we left off and just get to the

real human impact of what's happening

with Nickel in Australia as a result of

these market dynamics a and then B what

does this mean for Australia's ability

to serve the the global transition to a

minerals based economy

electrification well thanks um Australia

as you know is a very big mining country

um has been for a very long time three

of the world's largest mining companies

are Australian we've done this we've

done it for 100 150 years in some cases

so we know what we're doing um secondly

um in the hard rocks and in terms of um

critical minerals of which nickel is one

if you go to your periodic table

basically you find most of it in

Australia um first

largest largest supplier in the world of

lithium third or fourth largest in terms

of cobalt rare Earths following not far

after that and nickel probably fifth

largest so let's cut to the chase on

nickel um

uh at around the world at the moment

what we would say I think is there is a

market failure on nickel and that's

because you have a single dominant

player both as a um uh as a monopoly uh

producer and also as a monopsonistic

purchaser and so you put those two

factors together and when you get sort

of 80% concentration with a single

player frankly Market principles

collapse which is why you've seen in

recent times five or six uh nickel

operations in Australia uh go into um

into um pause let's say so the key

question given that challenge is what do

we do about it we can either admire the

problem or do something about it and

what the government and Australia is

seeking to do with Partners in the

United States and Canada is to do stuff

about it so let's let's hear maybe a

little bit more about that you've done a

great job as have several of the

companies that you've implicated really

underscoring the challenge that we're

facing with n today but how are we

turning this talk into action What

policies are we going to utilize to

solve this problem Robbie was saying

backstage that this is this is the face

of all of that we are struggling with at

this conference as we we transition um

and it has a name now in nickel so

really really interested to hear how

you're building on policies how you're

developing new ones how we have a green

premium okay good well uh one point

that's been necessary in the entire

transition debate cuz not everyone's

completely across it is the fundamental

role of nickel and lithium uh in battery

production and and therefore the

production of EVS which is fundamental

to fundamental to renewable energy

transformation around the world but if

you don't have a reliable uh and frankly

uh ESG compatible supply of nickel uh or

lithium then frankly uh you're going to

be defeating your own purpose which is

where this big monopolistic

monopsonistic player comes into the

market so that's the definition of the

problem what can you do about it I think

one of the things that um governments uh

are now discussing we're listening very

closely to the industry uh companies

like you know BHP and Wu that's foris

and Australia but others as well is that

a minimum level of transparency is a

time to develop a different listing

mechanism for the price of ESG

compatible nickel nickel is a um is uh

has a different uh chemical composition

for example when you're producing

stainless steel which is how it's listed

for example crudely on the London Metal

Exchange as opposed to battery grade

nickel which is what we're talking about

so I think the time has come for there

to be two separate listings lme don't

like that um and uh they should answer

to the world why because I think now

there is a cleared emerging demand in

the marketplace to service this

additional need so pillar number one of

transformation

of U processed critical minerals Market

starting with nickel uh is to have

better more transparent listing

Arrangements which enables two suppliers

uh to then use set exchange and three uh

oems and others to step up to the plate

and indicate that they would use it of

course this gets down to the

nitty-gritty question of price I don't

push that to one side but these are the

sorts of uh discussions that we're now

engaged in and so on on getting this new

listing for battery grade nickel nickel

sulfate how is that conversation going

are the end users interested in having

this different PR pricing mechanism to

see potentially the opportunity to pay

for higher standard sourced nickel that

you have in Australia Canada and other

parts of the world to then drive those

standards um in the places that don't

currently adhere to them as closely when

you see end users including oems will

over time have to respond to Ira

requirements anyway and so therefore

you're going to need to be looking at

listing Arrangements which are specific

to inputs which are Ira compatible uh

and that means embeding uh ESG standards

of the type you use in the United States

the type you use in Australia the type

you use in Canada uh into the one as it

were approach and so therefore a number

of oems can see the future coming and

the IRA compatibility uh crossover date

is probably around 27 or 28 uh in which

case we're in 202 for now so this is not

you know uh this is not future Rama this

is uh this is in the here and now so

that still doesn't solve your immediate

price Gap problem um but here's the

other factor that people are putting

into their mind if you allow this uh

industry to Simply collapse into the

hands of a single monopolistic

monopsonistic player then what happens

you're also beginning to engender

long-term uncertainties about Supply and

furthermore if you have a single player

in nickel think about what therefore

happens once all the competition's

eliminated in terms of future

manipulation of price uh in other words

it's the hazard of um of trust and

antitrust which you in the United States

dealt with more than 100 years ago in us

uh economic law so for those reasons

you've got a number of oems looking at

long-term ESG requirements coming in

anyway because of the IRA but also what

their shareholders and stakeholders are

saying separately to that and then on

top of that uh you've got this parallel

uh concern about future manipulation of

price Andor provision of Supply uh if

there are geopolitical problems in the

future so I think that's why a number of

players out there are frankly engaged

not just theoretically but in a very

practical way with this discussion

doesn't overcome the immediate question

of price and governments are now

wrestling with this but I'm confident we

can land something

that's great to hear this this degree of

optimism you know you mentioned working

with Canada so I'm curious how do you

see and maybe this is in the other

pillars of driving higher Standard

Supply chains here as we start to

diversify a very very concentrated

supply chain not only for nickel but for

the other Commodities that you mentioned

that are needed for the clean energy

transition so how how is the

conversation with Canada on this going

are you talking to some of these African

countries that have sulfide deposit

nickel sulfide deposits as well where

they're trying to do this to a certain

standard is there a coalition of the

interested that are trying to work on

this I think the truth is that many of

our countries around the world have been

slow to realize the dimensions of the

challenge and this is no criticism of

any government in particular it's just

it's taken a while for everyone to

reverse engineer what's happening uh vis

a nickel what's happening with critical

minerals more generally where nickel

goes see that as a market leader for

where nickel uh for for where lithium

goes Vis A Monopoly and

monopsony uh and then uh look at what's

happening in terms of finish products

Vis A the EV Market itself and so for

those reasons countries have sort of

looked at the manifestation of the

problem with nickel uh companies

operating on ESG standards falling over

some lithium uh um uh mines and

processes finding the same problem and

then the emergence of problems in the

auto sector itself so here uh through

the critical minerals compact between

Australia and the United States signed

by the Prime Minister and prime minister

albanesi and President Biden last year

at the G7 at Hiroshima uh we've been

working like Trojans since then to turn

Vision into reality and the Canadians

are now engaged in separate

conversations through our resources

Minister meline King including just last

week uh in Canada and down here in

Washington I think you had amamos Hawkin

around the table here earlier today and

so amamos and the rest of the US

government team and ourselves wrestling

this to the ground we're very mindful of

alternative sources of um Supply around

the world we understand some of those

complexities we also understand the

complexity on the demand side which is

what do the oems do in the interim as

well but uh I've got to say there are a

lot of powerful minds at work on this as

we speak I I'm curious for those of you

who don't know Ambassador red was

previously prime minister himself of

Australia and so comes at this issue

with Incredible amount of leadership and

knowledge so I'm curious when you were

prime minister was this topic at all

percolating have we seen this coming

obviously as a as a mineral rich country

as a mining exporter with Incredible

amounts of expertise Australia cares

about these issues deeply but how did

this manifest when you were when you

were back in

Cur if at all

the truth I mean I by trade I'm a China

specialist I mean that's what I um cut

my teeth on I'm a Chinese linguist I've

worked in our Embassy in

Beijing um and uh before I started

sliding down the food chain of life into

politics um and uh and ended up as prime

minister um so um so I've looked at this

both through the national interest lens

uh what is China doing in the world lens

uh as well as the specifics of frankly

uh the benefit which Australia

represents to the world is having in its

possession uh nine of the 10 most

relevant critical minerals at scale

already producing and you add graphite

uh then our prospectivity and potential

is huge as well so we come to it with a

sense of national uh responsibility to

our own industry in terms of its wealth

generation capability but secondly we

have an emerging sense of global

responsibility I left office just on

about about a decade ago these uh trend

lines were barely emerging that's just

the truth of it and I think it's taken

us a while including those of us who are

specialist analysts of the Chinese

economy to understand the sheer impact

of the scale of the Chinese economy as a

purchaser and as a supplier particularly

if you have significant hands of State

actors in the middle of both and that is

why we are all wrestling where whether

it's with critical minerals uh whether

it's with uh energy uh whether it is

with uh energy more broadly uh whether

it is with finished manufacturing Goods

such as EVS but more broadly across the

Spectrum or look at the debate now

unfolding in relation to high technology

uh this is the same wrestling with

challenges to markets by an economic

actor of unprecedented scale and so part

of our challenge is to cause our Chinese

friends to fully embrac their Global uh

climate and sustainability

responsibilities part of the challenge

is for us to operate within the

realities of contemporary geopolitics

and to construct as to the greatest

extent we can reliable safe secure and

green Supply chains not just for nickel

but across the critical minerals

category for the economies of the world

uh in particular those who would be

vulnerable in the future so we have

about a minute and a half left here so I

want to give give you one last

opportunity to maybe send a message to

the audience we've got people from the

hill here we've got people across

critical mineral Supply chains Juniors

refiners processors we have oems in the

room we were just with under secretary

Fernandez who's up next behind stage

people who care about the multinational

Coalition building of these issues what

what do you leave them with you know

bring us back to maybe that optimism

will we have more nickel production in

Australia and Canada are we going to be

stuck with all these wonderful

Alternatives that we heard about

yesterday okay according to this clock I

have an hour and no it's a minute and 3

seconds to uh to make the P I was just

warming up the uh in politics who never

do things by half um I think the bottom

line is this one communicating the

reality of the challenge and the problem

that of itself uh begins to change

Consciousness and push us in the

direction of policy Solutions rather

than the permanent admiration of the

problem uh to give you one classic

example Beyond nickel lithium uh we have

one of the largest lithium mines in the

world in Western Australia uh green

bushes here is the Dynamics for the

whole industry worldwide one in four

devices in the world uh uh currently

uses lithium which can be sourced from

that single mine the world economy

therefore has an interest in us

sustaining uh an ESG

compatible um uh set of operations in

Australia Canada the US and elsewhere so

that we can be reliable suppliers to the

global economy for the future some will

say well don't know if we can all afford

a green premium I would say to you all

it ain't a green premium it's a Security

Premium security of Supply it also is

clean on the way through and also safe

for workers which I think is of of

importance to all folks around the world

or at least it should be that's a great

way of putting it thank you so much

ambassador for joining us today and

thank you guys for for standing with us

please join me in thanking Ambassador

[Applause]

[Music]

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