The view from Perth: battery makers will be the technology winners
On November 2, 1920 Pittsburg radio station KDKA — which claims on that day to have become the first licensed commercial station in the United States — broadcast the results of the presidential election between Warren G. Harding and James M. Cox. Only about 1,000 people listened to the radio broadcast. The station had made an arrangement with the morning daily, the Pittsburg Post-Gazette, to be supplied with the results as they came in during the evening. Those 1,000 people were the first in Pittsburg to learn that Harding had won: they did not have to wait for the thud of morning newspaper at their front door the next day.
It signified the first dent in the monopoly held by newspapers on the news. By 1922, only one in 400 U.S households had a radio; by 1933 it was more than sixty per cent. Then came television, then the internet.
Why this story of something that happened nearly 95 years ago? Well, it all comes back to being about technology and the speed of change. Newspapers are still with us 95 years later, but now change is so fast. For example, London’s The Financial Times reports that work is under way to find a replacement for the lithium-ion battery. The idea is to do away with the battery concept as it stands now and instead use a capacitor that stores energy in an electric field.
Following up my Tuesday post about how we should remember the present low prices do not affect the general thrust of the technology metals story (or, more accurately) stories, I came across an interesting note called “The Future is Closer Than You Think”. It is included in the weekly client note from Peter Strachan who runs the advisory firm StockAnalysis based in Perth, Western Australia. It is all apropos of battery technology.
But before we get to Strachan’s take on that, he sums up the speed of changes to which we all have to adapt. As he notes, “Kodak went from a Fortune 500 company making a profit of $1.3 billion a year to bankruptcy in 12 years”. Similarly to my radio story, the proportion of American families who owned an automobile had risen to 56% by 1927. As Strachan comments, “renewable energy is coming fast and the days of the internal combustion engine are numbered.” He predicts that by 2030, all new vehicles will be electric and mostly robot-driven.
Strachan is a well-known analyst of the resource sector, particularly of the oil sector. He is not one to hide behind platitudes and his client notes usually present strong (and strongly worded) opinions, and he does not flinch from forthright statements about management teams of companies. So he is always worth listening to.
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He admits that trying to make predictions is a diabolical business. “Who would have guessed that the aviation industry taken as a whole would never make any money and it would be the ticketing companies and airport operators that cleaned up?” he notes.
That said, he does pick a winner, but with qualifications. “My guess is that battery makers will be the winners, but what type of battery will be the killer app? There are flow batteries, liquid metal batteries and lots of other storage solutions such as pumped water hydro and flywheel adoptions,” he writes.
“There will be room for all, as well as new technologies incorporating capacitors with batteries as well as sodium-based batteries. But lithium-ion has front running today and these puppies use a lot of lithium carbonate and graphite.”
But Strachan has a word of caution, too. “Remember rare earths? The price of these metal oxides was set to rise forever, but most of the hopefuls have left the industry or gone bust.” Well, not entirely: as I mentioned on Tuesday, the more advanced REE players (and those with the heavies) have been delayed, not derailed.
However, Strachan is correct to raise the question. Even for those companies that have stuck to the rare earth story, the level of potential profitability is a good deal changed from what it appeared to be in 2011. That challenge will no doubt confront the lithium and graphite producers in the short-term with the prices they can command during this present down-dip in the commodities cycle.
What does seem surer is that the pace of change is unlikely to slow down.
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