🔋Under The Sea
🔋Under The Sea
Norway isn't shy to supplying resources to the world, could there latest proposal for deep sea mining be a critical material solution for the energy transition?
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Anyone following the energy transition knows that there are a number of critical materials needed to build out the technologies that are presented most often including solar, wind, and batteries. Current supply minus recycling of most of these minerals are expected to be in deficit in the coming years which is why there have been policy pushes like the inflation reduction act to try to secure scarce supplies. These minerals include lithium, copper, nickel, cobalt, manganese, rare-earths, industrial metals, and more.
One of the issues is the overall reluctance to build new mines in the US. With costs and regulation proving extremely difficult for companies, the approval (and application) to mine in the US has been decreasing since 2011. You can see clearly the hurdles the Thacker Pass lithium project had to endure to get approved and that is with one of the ‘hotter’ commodities in lithium. This follows a major trend in recent decades I have mentioned before, where the economy has neglected the natural resource sector broadly. It is my belief that the falling interest rate environment compounded by the globalization of industry has convinced many in the US through recency bias that commodities are cheap and do not provide good return on capital. This underinvestment, debt saturation of major countries, and reversal of globalization trends all point to a return of commodity prevalence.
While the US does recognize the challenges to the materials needed for their energy transition, other countries are trying to become the answer. Perhaps surprising, perhaps not, Norway is one of those countries. Last week I discussed their discovery of the largest phosphate rock deposit in the world and its potential to secure the fertilizer supply to politically aligned countries like the US. Led by Norway’s oil and energy minister, the government is proposing seabed mining off the coast in which resources of copper, cobalt, zinc, and rare-earths have been located.
For context, Norway’s biggest industry is oil and gas exports, but also things like seafood, and tourism rank high on the list. It also exports a lot of industrial metals like aluminum, nickel, iron, steel, and other chemicals. Now they are looking at deep sea mining to add to their arsenal. With the global energy transition push, Norway is looking to capitalize on the opportunity, just as they have benefited from their oil and gas exports over the years making them a wealthy country. It is ironic that Norway’s largest industry is fossil fuels even though it has lower emissions as a country due to its vast hydro infrastructure as well as a country with some of the highest electric vehicle adoption. In contrast to some of their neighboring countries, electricity maps shows Norway has low emissions while supporting fossil fuel exports as a nation, where others like Germany have poor emissions and have little to no fossil fuel exports.
Norway has no issue taking advantage of their resources to supply the rest of the world with what they want, and the desire to operate seabed mines for critical materials is no different. Whether it be oil/gas, land mining, or seabed mining they are there. It is not guaranteed that this proposal will go through, and I wouldn’t be surprised if it doesn’t, but it at least shows there is willingness to capitalize on these resources.
One of the issues with deep sea or seabed mining is the extreme depths and efforts it takes to extract the materials. This means more expensive equipment and extraction techniques are implemented, making the economics of these operations more questionable. The economic assessment for the Norwegian proposal has not been calculated yet, adding another potential snafu. There are three main areas of interest in seabed mining and each have particular materials in high quantities. Polymetallic nodules contain manganese, cobalt, copper, and nickel useful for steel, batteries, wind turbines, solar, and wiring. Further, sulfide deposits and seamounts/crusts contain similar useful materials.
Perhaps more importantly for the permitting of such projects, the environmental impact of these operations is somewhat unknown. There is extreme biodiversity in the ocean, and at depths so deep, the incompleteness of the ecosystem exploration is staggering. Basically little is known, and studies on the impact these mining operations will have are only in early stages since no commercial operations are active. If you’ve ever been to the Natural History museum, you may have been aware that there is extensive ecosystems surrounding the hydrothermal vents deep in the ocean that release hot water loaded with various chemicals. The deposits of these vents are of key interest to mining operations and would no doubt have an impact on surrounding life. Here are just some of the species that will be impacted by seabed mining, which is actually just fascinating to see some of the crazy creatures out there. Of course there is a tradeoff between anything in life, and taken to the extreme, you have single species of rare fish blocking entire projects bringing water to draught stricken areas.
While I can’t tell you whether these operations will become economical or the magnitude of the environmental risks, seabed mining has the potential to rise in the not too distant future to meet critical materials needs. If commodity prices rise again over the years as I suspect, and if regulators step out of the way because they need some of these resources, then we could certainly see the rise of this emerging technology as part of the answer.
Does the US have the capability to do seabed mining? The US has impeccable geographical advantages most other countries do not share, and with that comes vast coastlines. There are legal challenges to seabed mining that would need to be overcome. Over 200 miles past shore is considered past the “exclusive zone” where much of the deposits lay, especially the most desirable nodules. Political relationships and the United Nations/International Seabed Authority (ISA) in which the US is not a current member are key in controlling the industry. The Metals Company, a prominent Canadian deep sea mining company and one of the major players in the space has tested their extraction techniques and claim they are better for the environment than traditional mining. They are not allowed to sell product until their application to the ISA is approved however. The regulatory body is meeting this very week to put forth their all important guidance on seabed mining. It is reported that any approvals will likely be delayed at the meeting which wouldn’t be good for these companies, but it is ultimately unclear from what I’ve seen. Speculators may have another view, as TMC stock price has been exploding in recent weeks. All in all, the small ISA has outsized impact on the industry as a whole, so stay tuned because I will provide updates if some material information arrives.
In general, while seabed mining is already facing major pushback from environmental groups, prepare to hear more about the industry in the future. Until next week,
-Grayson
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