The Elements of Power
How minor metals are mined, traded and hoarded.
Summary
David Abraham worked as a rare metals trader and as a policy official, and this book explains the supply chains for the minor metals that modern technology depends on: rare earth elements, indium, gallium, tantalum, cobalt, lithium and others.
His argument is that these markets work differently from major commodity markets in ways that matter. Volumes are tiny, so there are no futures markets, no transparent pricing and no reliable data. Most are produced as byproducts of other mining, so supply does not respond to their own price. Production and processing are geographically concentrated, frequently in China, and the processing capability is a larger constraint than the ore. Substitution is difficult because these materials are chosen for specific physical properties. And demand can change abruptly when a new technology adopts a material, which a byproduct supply chain cannot accommodate.
Abraham traces specific supply chains from mine through processing to component manufacture, and covers the 2010 episode when China restricted rare earth exports and prices rose by multiples before collapsing. He also covers the environmental costs of processing, the recycling difficulties, and the policy responses attempted in the United States, Japan and Europe. The book was published in 2015, before the electric vehicle and battery expansion that transformed lithium, cobalt and nickel demand, but its structural analysis of why these markets behave badly has been confirmed by events since.
Key takeaways 7
- Minor metals markets have no futures trading, no transparent pricing and no reliable production data, which makes them unlike major commodities.
- Most of these materials are produced as byproducts, so their supply does not respond to their own price.
- Processing capability rather than ore availability is the binding constraint, and processing is geographically concentrated.
- Substitution is difficult because these materials are selected for specific physical properties rather than for cost.
- Demand can change abruptly when a new technology adopts a material, which byproduct supply chains cannot accommodate.
- The 2010 rare earth restriction produced a price spike and then a collapse as substitution and new supply responded.
- Abraham argues that stockpiling and recycling policies have consistently failed because the economics do not support them at normal prices.
Who should read it
Investors and operators exposed to technology and energy supply chains who need to understand why minor metals markets behave unlike commodity markets.
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