One of the characteristics of liquid hydrocarbons that made them technologically revolutionary was their energy density and storage stability. Eight gallons of gasoline occupy about a cubic foot of space, can be stored under normal ambient pressure and temperature, and when combusted can propel a typical passenger vehicle about 300 miles. That’s a staggeringly convenient energy soure. But whatever the timeline, hydrocarbons are unequivocally on the way out as vehicle fuel — that writing is on the wall, and already being incorporated into energy sector stock valuations.
Many concerned citizens are cheering this shift. But one ramification that not many of them are considering is the effect that the transition will have on demand for battery metals, particularly manganese, nickel, and cobalt. Put simply, a lower-carbon economy is an economy that uses these metals more intensively. Demand and consumption will increase rapidly as the demand for electricity storage solutions increases (at first largely for transportation, but also for grid storage).
We suspect that the necessary consequences will be unpalatable to many of those who will be happy to see the demise of an economy fueled by hydrocarbon energy. Mining for these minerals is highly environmentally disruptive due to emissions from mine activity, the production of toxic mine tailings, the destruction of ecosystems through surface mining, and so on. Additionally, critical reserves of these minerals are disproportionately found in regions of the world prone to political strife, where resource revenue often becomes a prize for warring factions whose conflict creates misery for local populations. All of these are problems to solve, but we suspect that under the pressure of rapidly rising demand, solutions will be less than perfect, and the positive environmental effect of decarbonization might begin to look more questionable in reality than it does on paper.
One solution to the conundrum? Deep-sea mining — which is really more akin to deep-sea harvesting.
Polymetallic Nodules From the Bottom of the Pacific Ocean
Source: Golder Associates
Over tens of millions of years, metal hydroxides, washed into the world’s oceans through weathering, precipitate to the ocean floor — the abyssal plains that account for about half the earth’s surface area. They end up in vast areas covered with potato-sized “polymetallic nodules,” comprised on average of 1–1.5% nickel, 0.2% cobalt, and 30% manganese. The 3000–6000-meter depths where these nodules are found are some of the least explored areas on the planet, but in zones surveyed by some sea-mining startups, nodules are found at a density of more than 10 kg/m2. One startup, DeepGreen, projects eventual annual collection of 5 million tons. The recovery and processing of these nodules will be far more environmentally benign than the expansion of surface mining capacity to meet rising demand. The areas of the ocean where they are found are without light or oxygen, and therefore are almost entirely without life.
Although undersea mining is not likely to provide more than a few percent of total production of these critical minerals, given the dynamics of supply and price for commodities, that few percent will be very significant.
Investment implications: As the push for decarbonization becomes more intense, and demand for battery minerals rises, keep your eyes on new startups that will help meet that demand with less environmental and social impact than conventional surface mining.
