Battery Metals

Precious metals move up on Thursday, mainly driven by the economic stimulus decision announced by the PBOC.

Palladium advances $6.91 or 0.36% climbing up to $1,943.23 per ounce, Gold scales $8.77 or 0.58% reaching $1,525.88, Silver raises 23 cents or 1.28% reaching $18.05, and Platinum soars $22.82 or 2.36% soaring to $988.10 per ounce.

Traders started this new decade with optimism, following data from China. Both the stock market and commodities are traded mostly bullish on Thursday, continuing the bullish bias of the second half of 2019.

The Popular Bank of China (PBOC) reported on Wednesday its decision to reduce the level of reserves required for banks by approximately 115 billion dollars.

This measure is oriented to stimulate the Chinese economy that has been showing signs of a slowdown in recent months. Moreover, China’s manufacturing PMI ended up in 2019 on the expansive side.

Analysts see with confidence the current export levels. Levels that could be touching their floor. However, analysts also expect an expansion in export levels in the second half of 2020.

Technical Overview

Palladium, in its weekly chart, shows the upward impulsive sequence that remains intact. The price action reflects the precious metal is developing a wave ((5)), labeled in black, which continues to create new highs.

The daily timeframe, on the other hand, shows the precious metal could have completed a wave (5) labeled in green, that peaked on December 17th, when it hit the $1,999.50 per ounce.

Palladium, in its 8-hour chart, could be developing a corrective wave labeled as B in green, which could correspond to a flat formation.

As can be noted, this pattern is still in progress, so it would be too soon to indicate the possible end of this B wave.

According to the Elliott Wave Theory, a flat pattern is a corrective formation that follows a 3-3-5 sequence. Additionally, wave B could move beyond the end of wave five.

Therefore, to conclude, we observe from the short-term structure of Palladium that the bullish trend is intact; however, the precious metal may be preparing a corrective move of the upper degree.

The design is free of cobalt, an increasingly controversial material, plus Mercedes-Benz is involved in the next phase of testing

Rechargeable lithium-ion batteries are – or could be – at the heart of many clean energy technologies, from more efficient mobile phones to better electric vehicles to decentralised power grid solutions. A report published last month predicts that the market could experience a compound annual growth rate of 22.6 per cent between now and 2025, fueled by those applications and others that haven’t yet been commercialised.

Some technical concerns still are associated with this technology – such as whether it can hold enough charge for heavy-duty applications including trucks or backup alternatives that last days, not minutes, without becoming too big and bulky. But aside from them, one common objection to the increased reliance on lithium-ion batteries of all sizes has been the long-term availability of the materials used to build them and the oft-questionable methods by which they are extracted.

The Silicon Valley arm of IBM Research, home to many breakthroughs related to semiconductor manufacturing, is trumpeting a materials science innovation that could strike a chord with companies worried about both issues. IBM scientists in the battery laboratory there say they have created multiple prototypes of a battery that uses a cathode free of both cobalt and nickel, which are in increasingly short supply.

Cobalt is particularly problematic. Close to 60 per cent of the world’s cobalt supply currently originates from the Democratic Republic of Congo (DRC), and it isn’t simple to figure out what’s coming from where. Indeed, a wrongful death and injury lawsuit filed in mid-December against technology companies Apple, Google, Dell, Microsoft and Tesla by International Rights Advocates accuses the five firms plus other defendants of buying cobalt from DRC mines that use illegal child labor.

In prepared statements, Apple and Dell denied knowingly buying from illegal miners and pledged to continue monitoring their supply chains for human rights abuses. But the controversy puts new pressure on companies that rely heavily on lithium-ion technology for current and future revenue to ensure the viability of their sourcing.

Enter IBM’s new discovery. In a blog about the experiments, Young-Hye Na, manager of material innovations for next-gen batteries with IBM Research, wrote:

“The materials for this battery are able to be extracted from seawater, laying the ground for less-invasive sourcing techniques than current material mining methods.

“Just as promising as this new battery’s composition is its performance potential. In initial tests, it proved it can be optimised to surpass the capabilities of lithium-ion batteries in a number of individual categories including lower costs, faster charging time, higher power and energy density, strong efficient and low flammability.”

That’s a symphony of benefits that sounds great. So it’s hardly surprising that IBM has lined up three companies to further its research: the Northern American R&D arm of Mercedes-Benz; battery electrolyte supplier Central Glass (a 20-year IBM partner); and manufacturing startup Sidus Energy.

“All three companies are working together to try to make this a commercial reality in as little time as possible,” said Bob Allen, senior manager of chemistry and materials research at IBM Research.

While IBM’s blog is light on technical detail, Allen said iodine is a key component of the new chemistry. The element is predominant in sea vegetables such as kelp, as well as scallops, shrimp and cod.

A key breakthrough is being able to use the combination of a cathode and electrolyte with a high flash point, meaning that lithium-ion batteries that use the materials theoretically aren’t as flammable.

Here are three other results of IBM’s tests on coin cell-sized versions of the chemistry:

Less than five minutes required for an 80 per cent state of charge
An energy density of more than 800 Wh/L, comparable to current state-of-the-art lithium batteries
Energy efficiency of more than 90 per cent – the measure of the rate of energy to discharge the battery over what’s required to charge it
To be clear, there’s a whole lot of testing to be done to probe the viability of these materials and where they might be appropriate to use – not just different sizes but also different formulations and different variables, such as what would happen under different temperature conditions. And no one’s talking timeframes. “Transformative technologies need to be able to scale,” Allen said.

But considering the history of this IBM testbed and its other inventions, such as the atomic force microscopy behind many semiconductor, solid-state physics and molecular biology advances in recent years, these experiments could strike the right chord with battery-technology skeptics.

Chinese copper stocks are returning to favor as the outlook for demand brightens, with a late spurt delivering the best annual gain in half a decade for the largest, Jiangxi Copper Co.

What has ailed copper for most of the year largely dissipated last month as the U.S. and China closed in on an interim trade deal that will steady the global economy, and as Chinese data demonstrated that growth in the top producer and consumer of the metal is stabilizing.

The benchmark London price, a barometer for the broader economy because of the metal’s wide usage in construction and power transmission, ended last week with a sixth consecutive gain, its best run in over two years. China’s manufacturing purchasing managers index, meanwhile, showed a second straight month of expansion in December.

Still, recent gains in the stocks may deter some investors, and the winners aren’t clear-cut. The prospects for miners that dig up ore could be healthier than for the smelters refining the metal, which are burdened by overcapacity and weak margins. Many of China’s big copper firms are active in both areas. While the smelting industry has signaled it will cut output this year to rescue treatment fees that have sunk to near seven-year lows, it’s the producers of the raw material that may be best placed to benefit from resurgent demand.

Stocks such as Jiangxi Copper, China’s no. 1 smelter and second-biggest miner, still have room to rally, said Wang Chen, a partner at XuFunds Investment Management Co. in Shanghai. “Copper prices have fallen to near cost and the downsides are limited,” he said. “Easing trade tensions and global monetary loosening are also going to boost demand and prices of the metal.”

Goldman Sachs commodities team is most bullish on copper for 2020, one of a cluster of banks that expects great things from the metal. After barely rising in 2019, Citigroup predicts that Chinese copper consumption will increase 2.6% next year, powered by gains in grid investment and demand from autos.

“The global economy is rebounding amid monetary easing, boosting demand for raw materials including copper,” said Yang Kunhe, an analyst at Pacific Securities Co. “Chinese PMIs are also bottoming out as anti-cyclical measures are working. There is still big room for stimulus. All these will benefit copper demand and prices.”

Yang recommends the mainland listings of miners including Jiangxi Copper, Zijin Mining Group Co. and China Molybdenum Co. He prefers them to pure copper smelters such as Tongling Nonferrous Metals Group Co., which are suffering from low profitability because the global supply of raw material can’t keep up with the country’s vastly expanded processing capacity.

Zijin Mining, also a big gold producer, is the most heavily favored by analysts, with 91% surveyed by Bloomberg holding buy ratings. Tongling Nonferrous is at 83% and China Moly at 60%, with Jiangxi Copper bringing up the rear on 47%.

Zijin Mining declined to comment. Spokesmen for Tongling Nonferrous and China Moly said they couldn’t immediately comment. A spokesman for Jiangxi Copper couldn’t be reached for comment.

Jiangxi Copper will also see significant returns from its interest in the Cobre Panama mine, part of its first overseas acquisition announced last month, according to Essence Securities Co. The broker has a buy on the stock, with a six-month target of 18.8 yuan, 11% higher than its end-year close.

Cautionary voices include Xiong Qi, the deputy head of research at Windsor Capital Management Co. in Beijing. “I am not comfortable chasing the rally in cyclical stocks including copper, lithium and cobalt,” he said. “They have surged a lot already and prices may face corrections.”

Soldier power experts will soon conduct safety tests on improved versions of the Conformal Wearable Battery (CWB) that are designed to dramatically increase the time between recharges.

Currently, soldiers get about 150 watt hours of power from these flexible battery panels, which fit behind body armor vests. But future soldier technology, such as the experimental Integrated Visual Augmentation System (IVAS), will demand even more out of battery technology.

“We are trying to raise [capacity] as much as we can; we know we can get to 240 watt hours,” said Lt. Col. Vince Morris, Product Manager for Ground Soldier Systems.

But to get there safely, the Army may have to compromise on the physical features of the CWB, he said, adding that the goal is to keep the battery’s weight at its current 2.6 pounds.

In the future, the CWB may lose some of its flexibility and get a little thicker, possibly going from .9 inch to one inch, Morris said.

But the real concern is whether these more powerful versions will catch fire if they are hit by a bullet, he explained.

“We are going to shoot prototypes in January,” Morris said.

The three prototypes have “high safety measures, medium safety measures and low safety measures, and they are all 240-watt batteries,” he said.

“The ones that are low safety mitigation — they are going to catch on fire,” Morris said. “We are shooting all three of them so we can actually get the data on them, and then we are going to take that data and make informed decisions.”

The Combat Capabilities Development Command also plans to test updated versions of the CWB made with silicon anode, which can deliver the same amount of power with a 29% reduction in volume and weight, according to July 23 Army news release.

Versions of these CWBs will be used in the third Soldier Touchpoint evaluation of IVAS scheduled for July 2020. The high-tech IVAS glasses are designed to equip close-combat soldiers with a head-up display allowing them to view tactical maps, as well as their weapon-sight reticle. Army modernization officials hope to field IVAS in 2021.

Battery life has become one of technology’s biggest hurdles as the adoption of smartphones and devices continues to skyrocket across the world.

The demand for longer-lasting devices and the increased use of electric vehicles has forced some of the world’s greatest minds to get to work developing something new.

The lithium-ion battery has been a dominating force since its introduction in 1991, powering the smartphone in your pocket and your laptop at home.

But these batteries lose power as they’re charged and are causing increasingly permanent environmental damage to South America’s Lithium Triangle, which encompasses Argentina, Bolivia and Chile.

Wood Mackenzie Energy Research & Consultancy estimates that in the U.S. alone, the total market value of the energy storage industry will be $5.3 billion by 2024.

Throughout the year, there have been dozens of announcements and investments in new battery technology that will change how we use energy in the next decade. Here are the five biggest battery innovations of 2019.

University of Illinois at Chicago’s lithium-carbon dioxide battery

In September, researchers at the University of Illinois at Chicago said they were the first to show that lithium-carbon dioxide batteries can be designed to operate in a fully rechargeable manner.

Amin Salehi-Khojin, associate professor of mechanical and industrial engineering at the school’s College of Engineering, and his team announced that they completed tests of a lithium-carbon dioxide battery prototype that was able to run up to 500 consecutive cycles of charge/recharge processes.

According to the University of Illinois at Chicago, the researchers used new materials like molybdenum disulfide to “encourage the thorough recycling of both lithium carbonate and carbon.”

“Lithium-carbon dioxide batteries have been attractive for a long time, but in practice, we have been unable to get one that is truly efficient until now,” Salehi-Khojin told the school’s magazine.

“Our unique combination of materials helps make the first carbon-neutral lithium carbon dioxide battery with much more efficiency and long-lasting cycle life, which will enable it to be used in advanced energy storage systems.”

IBM’s No Metal, “Sea Water” Battery

To close out the year, IBM announced that its research division has come up with a new kind of battery that officials say is made of never-before used components that can all be extracted from sea water.

Young-hye Na, IBM research manager for material innovations for Next-Gen Batteries, explained in a blog post that her team “has discovered a chemistry for a new battery which does not use heavy metals or other substances with sourcing concerns.”

“Discovered in IBM Research’s Battery Lab, this design uses a cobalt and nickel-free cathode material, as well as a safe liquid electrolyte with a high flash point. This unique combination of the cathode and electrolyte demonstrated an ability to suppress lithium metal dendrites during charging, thereby reducing flammability, which is widely considered a significant drawback for the use of lithium metal as an anode material. This discovery holds significant potential for electric vehicle batteries, for example, where concerns such as flammability, cost and charging time come into play,” she wrote.

“In initial tests, it proved it can be optimized to surpass the capabilities of lithium-ion batteries in a number of individual categories including lower costs, faster charging time, higher power and energy density, strong energy efficiency and low flammability.”

MIT’s Carbon Dioxide Battery

Researchers at MIT announced the creation of an innovative specialized battery that they have proven can absorb carbon dioxide from the air passing over its electrodes as it is being charged up and then release that gas as it is being discharged.

In October, MIT’s David Chandler wrote that the battery “could provide a significant tool in the battle against climate change.”

The battery is explained further in a detailed paper in the journal Energy and Environmental Science by MIT postdoc Sahag Voskian and T. Alan Hatton, the Ralph Landau Professor of Chemical Engineering.

“The greatest advantage of this technology over most other carbon capture or carbon absorbing technologies is the binary nature of the adsorbent’s affinity to carbon dioxide,” Voskian told Chandler.

Hatton added that his team has “been striving to develop new technologies to tackle a range of environmental issues that avoid the need for thermal energy sources, changes in system pressure, or addition of chemicals to complete the separation and release cycles. This carbon dioxide capture technology is a clear demonstration of the power of electrochemical approaches that require only small swings in voltage to drive the separations.”

University of Adelaide’s non-toxic zinc and manganese

Dongliang Chao and Professor Shi-Zhang Qiao from the University of Adelaide’s School of Chemical Engineering and Advanced Materials designed a new battery made of non-toxic zinc and manganese as well as incombustible aqueous electrolyte.

The two scientists signed a $700,000 research deal with a Chinese battery manufacturer, Zhuoyue Power New Energy, to work on their patented technology.

“I can imagine this battery being used on all vehicle types from small scooters to even diesel electric trains. Also in homes that need batteries to store solar power, or even large solar/wind farms,” Chao told South Australian newspaper The Lead in November.

“With more sustainable energy being produced – such as through wind and solar farms – storing this energy in batteries in a safe, non-expensive and environmentally sound way is becoming more urgent but current battery materials – including lithium, lead and cadmium – are expensive, hazardous and toxic.”

The two researchers said they wanted to bring the idea to market in the next 12 months and got a lot of traction because Australia has a copious amount of naturally found zinc and manganese.

According to Chao’s estimates, the cost of this new battery will be less than $10 per kWh compared with $300 per kWh for many current lithium batteries.

Nikola’s free-standing electrode automotive battery

Late last month, Nikola CEO and Founder Trevor Milton told Forbes that his company had created a new kind of battery that didn’t use nickel, cobalt and other dangerous metals while asserting it provided double the energy density and just 40% of the weight.

Milton was circumspect about the details surrounding the new technology but the Phoenix-based startup has been hard at work building new electric, hydrogen-powered semi trucks powered using hydrogen.

“It’s the world’s first free-standing electrode automotive battery. We went to a whole different type of chemical, with a lithium component. It’s hard to explain what it is without giving up the secret sauce,” Milton said in the interview with Forbes in November.

Milton said they will hold the first public demonstrations of the technology at their Nikola World technology summit in Phoenix in 10 months.

The year ahead promises to be an eventful one. It will, of course, be dominated by political headlines leading up to the 2020 election. It could also be a big breakout year for precious metals.

In the second part of Money Metals’ 2020 Outlook, we’ll drill down on the fundamental and technical setup for gold and silver…

However, in this first part, we’ll set the stage by digging into the macro forces at play in the economy, monetary policy, politics, and geopolitics.

Economy

Over the summer, the mainstream financial media ran hard with the “recession” angle. A manufacturing slowdown seemed to be afoot. But the main impetus for all the recession talk was an inversion of the yield curve – putting short-term bond yields below those of longer-term bonds.

Democrats were nearly gleeful at the prospect of a recession. But such thinking proved to be premature.

The economy does not appear to be headed into recession as we begin 2020. Official employment numbers continue to come in historically strong. And GDP growth, though modest at 2.1% as of Q3, is still indicating an overall expansion.

As for the yield curve inversion, the Fed got the message and drove short-term rates back below long-term rates. The inversion still serves as a possible precursor to a recession, but it may not actually hit until 2021 or later.

Continued global economic growth in 2020 could drive a late-cycle bull market in commodities, including the metals complex.

Leading up to a recession, the energy and materials sectors tend to outperform the broad market before rolling over. Gold and silver tend to peak later, with gold often rising counter-cyclically to economically sensitive assets.

Monetary Policy

In 2019, the Federal Reserve did a dramatic about-face on interest rates. Instead of hiking, as was widely expected by mainstream forecasters, the Fed paused… then cut rates three times.

By the fall, it was engaging in massive interventions to prop up the repo market and launching what is effectively a new Quantitative Easing program.

Nobody in the financial “mainstream” saw that coming at the beginning of the year!

The Fed is now back on pause for an unknown period. At his latest press conference Fed Chairman Jerome Powell indicated he would like to a see a significant and sustained rise in inflation before hiking rates again.

Higher inflation coupled with accommodative monetary policy would potentially be rocket fuel for precious metals markets.

A weaker Federal Reserve Note “dollar” versus foreign currencies isn’t necessary for hard assets to gain, but it certainly wouldn’t hurt. The U.S. Dollar Index peaked for 2019 in late September after a modest run-up. It has since retraced and will finish the year nearly flat.

The dollar has fallen in the fourth quarter along with the QE surge in the Fed’s balance sheet. The central bank’s net asset purchases are up by $400 billion already. Its balance sheet will likely rise to an all-time record by spring 2020, further cheapening the real value of the Federal Reserve Note in the process.

Politics

There is no shortage of opinion on who will, and who should, win the 2020 election. But we’ll stay out of the political “horse race” debate that fills the airtime on all of the cable news channels hour after hour, day after day.

We note only that political prediction markets currently give the upper hand to President Donald Trump. As long as the economy doesn’t dip into recession, the smart money seems to be on Trump to triumph over a weak Democrat field.

Should the economy falter or Trump get bogged down in a new controversy that erodes his support, the political dynamics could shift – and potentially roil markets.

Several outspoken billionaires – from Ray Dalio to Paul Tudor Jones to Stanley Druckenmiller to Leon Cooperman – have each warned that a Democrat victory over Trump could trigger a stock market meltdown (especially if the victorious Democrat is a Bernie Sanders or Elizabeth Warren-type anti-capitalist firebrand).

Such an event, in turn, would enhance the safe-haven appeal of precious metals.

So far during the Trump presidency, “fear trade” demand for physical precious metals has been mostly muted. The metals have made modest gains based on other factors. But before we see truly spectacular gains in gold and silver, we will likely need some sort of economic, political, or geopolitical black swan event to shake investors out of their complacency.

Geopolitics

The big geopolitical story of 2019 was the trade standoff between the United States and China. Every week, seemingly, brought us either one step closer or one step further behind a trade deal.

Much – perhaps too much – was made of the impact of trade wars on market trends. But a favorable outcome in 2020 would certainly go toward boosting manufacturing activity and demand for industrial metals.

Other geopolitical threats loom in 2020 as well.

As the U.S. continues to ramp up economic sanctions on Russia, the Russians continue to look for ways to retaliate. One if its long-term strategic aims is to secure international trade deals outside the Federal Reserve Note dollar system. It is finding willing partners in U.S. adversaries who have been hit or threatened with sanctions.

The U.S. has shown in the past that it is willing to go to war to defend its fiat dollar.

A possible war with Iran, North Korea, Russia, or China – or a shutdown of oil production from the Middle East – would be extremely disruptive to markets and could send safe-haven demand for precious metals skyrocketing.

Barring an unforeseen black swan event or crisis, the big picture backdrop for precious metals looks constructive for another year of significant but not necessarily spectacular gains.

At some point, though, whether next year or in future years, mounting risks will propel gold and silver higher with explosive force.