London has long been the world’s capital for raising capital and over the decades the mining industry has been one of the biggest beneficiaries.
Home to the world’s largest miners like Rio Tinto, the dual-listed BHP Billiton, and Anglo American, London is the epicentre of the world’s mining finance.
As Deloitte recently said, London is the “the major player for major players… long established as the financial capital for the global mining industry.”
Now, for ‘mining industry’ it is best to read ‘base metals and gold’.
London has not been the centre of the niche or speciality metals and minerals space.
Being a London-based business, Benchmark Mineral Intelligence can testify to this, having to travel far and wide to meet industry, investors and analysts interested in lithium ion battery raw materials.
Underpinning the city’s mining industry is the London Metal Exchange (LME) – a 140-year-old exchange where industrial metals are traded in ‘The Ring’, an open outcry trading system where deals are conducted via traders shouting across the floor to one another.
Think trading as it used to be done in the 1980s.
Deals secured in The Ring have been fundamental in the global trade of metals allowing buyers, sellers, traders and financial speculators a way in to a whole host of industrial metals from aluminium to copper to cobalt.
At the end of October each year, the LME brings together the global metals industry in a week of meetings, seminars and drinks receptions known as the LME Week.
The week sets the tone for the next 12 months in the global metals industry.
For Benchmark, this week has up until now been a very low priority. Understandably, the focus has always been on base and minor metals that drive the LME’s biggest contracts.
Minerals like lithium and graphite did not even make the many cocktail reception discussions.
But for LME Week 2017, this changed. Lithium was front and centre.
Not only was Benchmark Mineral Intelligence invited to speak on the opening panel session on electric vehicles in front of over 600 of the world’s miners, investors and press, but the energy storage revolution and the input materials driving it was specifically cited by the new CEO, Matthew Chamberlain.
“The LME will be working with the battery and electric vehicle industries over the coming months to deliver new contracts such as lithium and cobalt sulphate to bring price risk management to this rapidly growing market,” Chamberlain said at the opening of LME Week 2017.
It is a significant moment for the LME and for London.
Not only is the exchange seeking to launch new, bold contracts into rapidly emerging markets, but it is taking a risk (albeit a calculated one) that the organisation has previously shied away from.
With a few failed contracts from 2012 such as iron ore and steel billet futures, the LME had reverted to its traditional contracts that previous successes relied upon.
Five years on and with a new owner, The Hong Kong Stock Exchange, the LME’s appetite for new markets is back and the timing is about right.
While today there are still some that doubt the pending electric vehicle (EV) revolution, most participants that conduct even one evening’s worth of homework will see that its happening and at a much quicker rate than most would have called.
For Benchmark Mineral Intelligence analysts and its readers, there is little doubt that the impact of EVs on the critical metals of lithium, graphite, cobalt and nickel will be profound.
In charts presented at LME Week 2017, Benchmark predicted that the battery megafactory capacity in the pipeline will need 300,000 tonnes of battery grade lithium up from 75,000 tonnes in 2016, 103,000 tonnes of cobalt up from 48,000 tonnes last year, 180,000 tonnes of nickel up from 75,000 tonnes in the same period, and 440,000 tonnes of graphite anode up from 100,000 tonnes.
And this is just for 372GWh by 2021… estimates for 2025 take EV demand to well above 500GWh.
It is no wonder the further down the lithium ion battery supply chain you travel, the cries for procurement help get louder. And this is where the LME sees its way in – a sharing of the capital risk with the supply chain.
For the LME to draw its line in the sand now, sets the tone for not just the global mining industry but the city of London as the world’s leading financier.
It is also a bold call and a much needed one by a CEO that faced the risk of the exchange becoming irrelevant to the world’s biggest emerging markets such as electric vehicles.
With this shift in strategy, London has come of age and the LME is dragging it and the global mining industry into the 21st Century.