Half a century ago, the commodities industry was in a flap about whether new, less-polluting automotive technologies would cause the world to run out of rare metals.
It wasn’t about electric batteries, but catalytic converters. Introduced in the mid-1970s in the U.S. to remove carbon monoxide and toxic hydrocarbons from car exhausts, their most important ingredients were some of the rarest elements on earth: platinum and palladium.
The so-called platinum group metals occur in large quantities in only four places. Then and now, about 90 percent of output comes from what were then apartheid South Africa and the Soviet Union. With technology moving toward widespread adoption of catalytic converters in the late 1960s, metallurgists began to worry supply would simply be insufficient.
Dealer prices of platinum, which had run as low as $98 an ounce in 1964, hit $230 an ounce by 1967, and then $300 an ounce the following year; palladium rose from $24 an ounce to $56 an ounce over the same period.
Amid fears of a squeeze, London-based metals refiner Johnson Matthey Plc was a voice of calm. There was no need for concern, it told a 1969 conference in New York: In South Africa alone, underground reserves were sufficient to produce 200 million ounces over the next 30 years, equivalent to about 12 times all platinum in circulation at that point.
How did that prediction turn out? Remarkably well: The world in fact mined some 223 million ounces between 1969 and 1999, and has since produced another 213 million ounces. Far from running out, the latest estimates by the U.S. Geological Survey indicate there’s still another 2.2 billion ounces of economically recoverable reserves out there.
That history follows a long-standing dynamic in the commodities industry.
When there’s a novel use for a minor element, demand can spike well ahead of supply. Fears of a global shortage develop, fueled by the slow pace of bringing new deposits to production and uncertainty, given the newfound interest, about just how much material is out there.
Then industrial consumers develop fresh ways to use the element more efficiently, and the slew of projects approved during the price boom finally start churning out product. The result is a glut that eventually develops into an equilibrium as producers and consumers get a better handle on global supply and demand.
There’s no reason to think this pattern will be any different for battery materials such as cobalt, lithium and graphite. All three are abundant in the earth’s crust compared to the truly rare platinum-group metals, or even elements like copper, lead, tin, gold, silver and mercury, which have been mined since antiquity. There’s about 400 tons of lithium for every ton of platinum, according to the U.S. Department of Energy’s Jefferson Lab.
Graphite provides a vivid illustration of just how quickly these expectations can change. As recently as 2012, the U.S. Geological Survey estimated that global reserves were just 77 million metric tons. Four years later, exploration has lifted that to 250 million tons.
Mineral resources become reserves when they’re economically recoverable at current long-term price estimates, so were graphite to become more costly, as platinum did in the 1960s, that total would rise further. At Syrah Resources Ltd.’s Balama project in Mozambique, only 19 million tons of a 129-million-ton resource currently count as reserves.
Even where mineral endowments don’t move around so much — global reserves of cobalt, for instance, have been stuck at about 7 million tons for 15 years, and lithium has barely moved since 2010 — it’s worth considering how the mineral-reserves sausage is made before declaring a global shortage.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.