Our Australia Materials Analyst Rahul Anand discusses why
critical minerals may be the Achilles’ heel of humanoids as
demand significantly outpaces supply amid geopolitical
uncertainties.
Read more insights from Morgan Stanley.
----- Transcript -----
Rahul Anand: Welcome to Thoughts on the
Market. I'm Rahul Anand, Head of Morgan Stanley’s Australia
Materials Research team.
Today, I'll dig deeper into one of the vital necessities for the
development of robotics – critical minerals – and why they're so
vital to be front of mind for the Western world today.
It's Wednesday, June 25th at 8am in Sydney, Australia.
Humanoid robots will soon become an integral part of our daily
lives. A few weeks ago, you heard my colleagues Adam Jonas and
Sheng Zhong discuss how humanoids are going to transform the
economy and markets. Morgan Stanley Research expects this market
to reach more than a billion units by 2050 and generate almost
[$] 5 trillion in annual revenue.
When we think about that market, and we think about what it could
do for critical minerals demand, that could skyrocket. And the
key areas of critical minerals demand would basically be focused
on rare earths, lithium and graphite.
Each one of these complex machines is going to require about a
kilo of rare earths, 2 kgs of lithium, 6.5 kgs kilos of copper,
1.5 kgs of nickel, 3 kgs of graphite, and about 200 grams of
cobalt. Importantly, this market from a cumulative standpoint by
the year 2050, could be to the tune of about $800 billion U.S.,
which is staggering.
And beyond that market size of $800 billion U.S., I think it's
important to drill a bit deeper – because if we now consider how
these markets are dominated currently, comes the China angle. And
China currently dominates 88 percent of rare earth supply, 93
percent of graphite supply and 75 percent of refined lithium
supply. China recently placed controls on seven heavy rare earths
and permanent magnet exports in response to tariff announcements
that were made by the U.S., and a comprehensive deal there is
still awaited.
It's very important that we have to think about diversification
today, not just because these critical minerals are so heavily
dominated by China. But more importantly, if we think about how
the supply chain comes about, it's now taking circa 18 years to
get a new mine online, and that's the statistic for the past five
years of mines that came online. That number is up nearly 50
percent from last decade, and that's been driven basically by
very long approval processes now in the Western world, alongside
very long exploration times that are required to get some of
these mines up and running.
On top of that, when we think about the supply demand balance, by
2040 we're expecting that the NdPr, or the rare earth, market
would be in a 26 percent deficit. Lithium could be in a deficit
close to 80 percent. So, it's not just about supply security.
It's also about how long it will take to bring these mines on.
And on top of that, how big the amount of supply that's required
is really going to be.
I know when you think about 2040, it sounds very long dated, but
it's important to understand that we have to act now. And in this
humanoid piece of research that we have done as the global
materials team, which was led by the Australian materials team,
we basically have provided 34 global stocks to play this thematic
in the rare earths, lithium and rare earth magnet space.
It's also very important to remember and keep front of mind that
as part of the London negotiations that happened between U.S. and
China, no agreement was reached on critical military use rare
earth magnets and exports. Now that's an important point because
that's going to play as a key point of leverage in any future
trade deal that comes about between the two countries.
This remains an evolving situation, and this is something that we
are going to continue monitoring and will bring you the latest on
as time progresses.
Look, thanks for listening. If you enjoy the show, please leave
us a review and share thoughts on the market with a friend or
colleague today.
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