Fireside Chat with Ambassador Kevin Rudd
Summary
TLDRIn 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
- π 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.
- π 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.
- π 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.
- π 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.
- π‘ 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.
- π 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.
- π 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.
- π€ 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.
- π 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.
- πΌ 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
π 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.
π 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.
π€ 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.
πΏ 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.
Mindmap
Keywords
π‘Nickel
π‘Market challenges
π‘Pricing challenges
π‘Supply chains
π‘Resilience
π‘Electrification
π‘ESG
π‘Monopoly
π‘Monopsony
π‘Transparency
π‘Green premium
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]
red
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