3 min read

Blowing the electric-car revolution

How Chile blew its lead in lithium production; Canada is winning at all the wrong things; and comparing superannuation funds is difficult leaving retail investors to get screwed.
Blowing the electric-car revolution
Photo by Roberto Sorin / Unsplash

1—Blowing the electric-car revolution

Image from the WSJ showing lithium production and electric vehicle sales.
Australia is now the world's leading lithium producer after Chile dropped the ball. Source.

We've got more on lithium for you today, after the Wall Street Journal ran a long feature digging into all of the issues Chile – a country home to more than half of the world's known lithium supply – is having extracting it:

"At a time of exploding demand that has sent lithium prices up 750% since the start of 2021, industry analysts worry that South America could become a major bottleneck for growth in electric vehicles."

Chile produced the most lithium in the world until Australia overtook it a few years ago but it "hasn't opened a new mine in about 30 years", despite being a comparatively cheaper place to mine it:

"In the region, lithium is found in salty, underground water that is evaporated by the sun after being pumped into large man-made ponds. South America's lithium is less expensive to produce, but miners say the drawback is it takes far longer to build a mine—about eight years."

The evaporation process comes with large environmental impacts, not to mention indigenous rights issues – in June, the Chilean Supreme Court ripped up a government contract to mine lithium because "the government failed to consult with indigenous people first". Lithium is also regulated differently in Chile compared to other commodities in which it excels, such as copper:

"Chile lost its global lead on lithium in part because the state has maintained tight control since the 1970s, when Gen. Augusto Pinochet's military dictatorship declared it a strategic resource because it is a component in nuclear bombs.

The two lithium miners that operate here rent their land from a state agency, which limits how much they can produce. Export also requires a special permit from the government's nuclear agency."

Chile has the world's highest royalty rates for lithium, requires miners to set some aside (at a reduced price) for companies processing it locally, and a new mining royalty bill is currently working its way through parliament. It all adds up, for now at least, to an inability to scale its lithium production in a responsive manner.

You can read the full WSJ feature here (~8 minute read).


2—Winning!

Tweet showing Canada winning at a bunch of things no one wants to win.
Australia must also rank highly on most of these metrics (although our container ports are slightly better).

3—Unlisted assets

How do you value a superannuation fund's performance? It's complicated:

"The performance of super funds are rated in the new heat map. But ahead of June 30, some super funds have chosen to write down unlisted assets while others have not. And that could make a material difference to their relative performance.

Given the heat map was deliberately created to show savers which funds did well or did poorly after the Productivity Commission's expose of woeful returns, this is highly unsatisfactory."

The Australian government wanted superannuation transparency, so it created an annual performance heat map. Great, right? Pick and choose from the best performers, get more bang for your back (ignoring the old mantra of past performance not necessarily being indicative of future performance!).

But it hasn't worked out that way because of how each fund values unlisted assets, which creates a "cloud of doubt as to who was the best-performing fund", with the more proactive funds punished. It has also enabled arbitrage – because super fund members can transact daily, "smart investors would potentially sell down what they know isn't marked in line with the markets and buy listed assets".

Combine that with Australia's relatively poor fund disclosure laws which makes it somewhat of "a guessing game on the actual risk exposures underlying" local super funds, and you end up with many retail investors almost certainly getting screwed.

You can read Ticky Fullerton's full story in The Australian here (~4 minute read).


4—Further reading...

🏜️ The "Hunger Stones" in some Czech and German rivers are becoming visible again as water levels drop to "desperately low" levels.

🕵️‍♀️ Hard pass. Amazon plans to use footage from its 'Ring' doorbells "to share that very same footage with you in a new, 'fun' reality streaming series".

🦠 The pandemic is over: The US Centers for Disease Control and Prevention relaxed almost all of its COVID-19 restrictions, including isolation requirements for close contacts.

🔭 Chile is going to get the Giant Magellan Telescope, poised to be the most powerful telescope ever.