Ep 28 Energy transition in China with Cory Combs

Hello everyone, I'm Ben. And I'm Hio. Welcome back to Sustainable Energy Asia Podcast. Hio, it's definitely time to bring Cory back on the show because when it comes to the energy transition, all eyes are on China. That's right. China is moving at an unprecedented pace across so many sectors. And I can't think of anyone better suited to discuss this than Cory. With leading the research on critical minerals and supply chain at Trinium China. We cover the right range of topics. For a market we form the explosive EV markets, battery materials and the latest developments on critical minerals. It was incredibly valuable to get his insights. Yes, definitely. And to our listeners, please take a moment to read, comment, and share the episode with your friends. It's the best way for new listeners to find us. Cory, good to have you back on the show yours. First guest to come back and we spoke three years ago. And I think a lot of things has happened in two years. But maybe you can just reintroduce yourself and tell us what you do regarding energy and China. Yeah, well, it was a pleasure to be back. Thank you so much for having me back on. Long time fan as well. So I am at Trinium China, which is a political economy research consultancy. Based in China teams in Beijing, Shanghai and also across the world now. I lead a couple of teams basically on one side. We have the climate energy and resources group. And that's why I manage that practice. And it's really looking at China's energy and industrial transitions. So there are many pieces of the industrial transition. We also collaborate very closely with our tech team looking at semiconductors and all looking at AI upgrading and all that side. We're looking at the hardware and infrastructure behind a lot of that. And we started with a focus on decarbonization, obviously. That has now become a much bigger part of China's entire economic upgrading paradigm. And so there's a lot of interplay there. On the other side, I'm now largely thanks to two recent geopolitical trends. Working a lot on export controls and critical minerals, which again, came about because we had been tracking various minerals for the energy supply chains for years and years. I'm talking about tungsten. We're talking about gallium and germaneium in 2018, 2019. And it was kind of niche at the time. 2023 rolls around and then China and poses export controls and gallium germaneium in that summer. Suddenly, everyone needs to know about it. We're like, hmm, maybe it's time we've rolled us out as a broader, more formalized practice area. And so now we're doing that as well. And just for a bit of background about myself, I originally trained in physics that as astrophysically, oh, then they moved to something a little bit more terrestrial. I really wanted to work on again, the climate transition. And so I went back on degree in economics and I'd focused on China. I moved to China in 2014 initially. And from there, I was engaged in local environmental work and to understand how our transition happens. After that, I was briefly at the United States Department of Energy's Learned Programs office working on energy technology commercialization. I quickly came back to the China space where I work on a lot of US China and China's domestic transition issues. Fantastic. We spoke two years ago and a lot of has happened in three years. According to you, what was the top three trend that you have observed in China energy transition over the last three years? Yeah, I would. I'm going to separate out COVID because that's a whole thing, obviously. And deserves all of the attention, but I think it's gotten it. I think for me, focusing on the transition, the first thing to me is the incredible acceleration of the electric vehicle transition, the electrification and transportation. A couple of years ago, I mean, Beijing had, you know, what at the time seemed ambitious goals for electric vehicle adoption, that the country completely blew past. I mean, way over exceeded. They were looking at getting it to 20% penetration, meaning all of all new sales, how many electric vehicles are looking at 20% by 2025? A couple of years ago, we're already at 30%. We're currently well over 50%. For the last, I think it's seven months, for the last many months, more than half of all vehicles in China have been new energy vehicles. And of those, most of those are actually now electric vehicles, not even plug in hybrids anymore. So that's been incredible to see that progress. Obviously, the flip side is obviously we have this nature and this evolutionary pressure, this, you know, really kind of bloody battle in the markets. And so there was, there was a kind of, you know, the industrial and commercial downsides to how this transition has occurred, but from a climate perspective, terrific news. Right. The second and third are very closely linked. Let's say the second to me and probably the single, most important story to my mind for even a global climate transition is China's power market reform. And can you get the power system to be lower carbon? Can you do that sustainably with reliable access to energy that is low cost and lower carbon than the current, you know, coal-backed power, so coal-based power system? The good news on that front is that, you know, as slow moving as this stuff is, a lot of power market trends we can talk about, I mean, CFDs contracts for differences, a whole set of provincial, you know, policies rolling out. Basically, you can get into infinite amounts of weeds with that. But the big picture is that power emissions are plateauing for now. I say that, let's put a pin in that for number three. The large reason that they're plateauing is not just because of a massive build out of renewables, which has happened, but coal is still in play. A large part of the plateau is because heavy industry power hungry at heavy industry, that growth has plateaued, which might be a good or bad thing depending on your perspective. Obviously, the kind of all out of the property sector has crushed cement and concrete, very high emissions, steel production is, you know, still demand is plateauing, even this production is still a bit high. And we're seeing, you know, chemicals, petrochemicals, a lot of these industrial sources of demand are leveling out, which again, has huge implications for the economy, but also great implications for the overall emissions of the power system. So now kind of looking at those as a unit, those two and three trends, what I'm really watching for and many, many excellence are experts in China, are watching right now is, can China move to the next level of the transition of the power markets? And what I mean by that is right now there's a philosophy of Shanli, a coal pour, right? So first build the new and then later after the new is built, then destroy the old. The new is renewable energy, basically, and the old is, you know, you coal-bired, basically power. And right now we have the first, we're building a lot. The question is when do you actually start reducing the coal portion of demand? That is a lot more complicated and progress is being made, but it's very slow. So positive and negative. It was interesting where we were doing some trend about energy transition in Asia, right? And everything was about China. When you compare, for example, India and China and other countries, actually even coal share in the generation mixes, decreasing. But you don't really observe that in other countries. Even though it's not perfect, but compared to other big economies in Asia, actually China is really, really progressing quite well on its vast to decabinize. So really interesting, the three trends that you mentioned, we're going to talk about a couple of them actually. So I want to focus first on power market reforms, you know, under the 14, five years plan, one of the focus has been, for China has been to build a new energy system. And China has been implementing a certain number of reform. What I understand is this year, China has started to move away from my fight for wind and solar and basically all those renewable projects are now basically being sold to the world's end market and being having a merchant exposure. It would be interesting if you could explain what was the reform that China has made into reforming the power markets over the past couple of years. And what has been the impact on the renewable IPPs operating in China? Yeah, absolutely. The state of play basically is, or go kind of what has happened up until recently and then what happened this year, right? And conceptual terms, not just the policy names as well, because there's a lot of policies that are all into linking, but there's really a couple of key ideas that are driving us. The first goal, as you mentioned a minute ago, is to build the new, right? And one of the ways you can do that very effectively is make sure that those building the new have a very clear financial incentive. And so if you built a solar, onshore wind, or offshore wind, or a plant, a generation of facility, you would have certain amounts of guaranteed offtake and you would have, you know, a reasonably attractive rate of return. And you'd be able to sell into the market reliably. So that's great for building new solar power. It worked. It worked really, really, really well. And so China has this absolutely massive explosion of new renewable energy capacity. David Fishman does excellent work on this. He's Atlanta group among others. And in noted that I believe it was last year, China's new capacity was, you know, on this scale of Germany, right? The stales are massive. And so what those incentives though did not help with was actually absorbing all the generation of the renewable energy capacity into the system. And there's a few issues there. Obviously the intervention season issue in those power markets in China just really, and frankly, most places are not really designed to handle that. Ancillary service market development, we needed a long way to go. Storage as a function, you know, storage is not generation. It works differently. So how do you back to that in? Who bears the cost? Transmission issues remain. And so at the end of the day, what you ended up with was a significant amount of curtailment, of basically waste. And Beijing then had to ask the question, how do you make this new energy base, as renewable energies in particular, effective and viable and sustainable? And so now what's happened this year, the big reform is exactly what you mentioned, moving away from guaranteed prices, basically in the feed and terrace, to a market-oriented approach. And basically what this does is expose most renewable energy projects to directly, to market power prices. Now, if you're a developer, you don't like that because you just had a very attractive guarantee to the price that you see. And that's now gone away. We've seen power prices go to near zero, we've seen negative prices in a couple cases, right? And so you have to deal with that as a developer. But what that does is it tamps down on over-investment. No longer is there simply an incentive to build, if it doesn't know where to go. The other side though is that it puts a lot of pressure on the system to start being able to absorb that energy more effectively. And this is where, to the earlier point about, how do we get from building the new to actually remove the old, right? How do we get to that stage? And the answer is basically make it so the new can serve the same functions as the old. And right now that's not quite there. We don't have the level of storage build out. We don't have the level of integration in those markets. And so the marketization of power prices is basically the first step toward rationalizing how the supply side works with the demand side and actually has a price formation that makes sense. But then there's going to be a lot of effort from here to start building more into the Zanzibar Services and other market reforms to rationalize the supply and demand sides. - It's very interesting. Exactly the same thing has happened in Vietnam where in 2020, Vietnam is still 20 gigawatts of solar and a little bit of wind. With a FIT regime where everyone had to rush to get to COD by the deadline. And it created a amount of cut-elmen. Some of the product was cut 30% of the time. And EVN, so the local UTTs, today they're still having a lot of issue dealing with renewable generation because the grid is centralized for coal power plants, et cetera. It's not a grid where you can really dispatch efficiently renewable energy and you don't have any storage. And that's very topical issue, I think, for many countries in the region. - Yeah, and absolutely, it's something that's, sometimes I'm guilty of this, I know. We talk about China because it's at the center of peace for this, along with the US as the other top of midter. Every country is going to have to deal with this. Now every country is coming from a different place, but ultimately everyone's markets were built around fossil fuels. And that includes the transportation system. As we electrify, you add load to the grid. When you are working on getting more renewables in, the idea you can generate with renewable resources at solar and wind are rich and transport that power to where it's needed. Oftentimes, that's very far away. Where industrial hubs are, where kind of your open land is like in a Mongolia full of solar and wind farms, and that has to get sent to Jiangsu. - Where we're in the street. - Yeah. - How do you do that? Every country is going to have a slightly different situation, but the fundamental problem is the same. And so I think it's essential that we start doing more integrated comparative assessment. So we can learn from various countries' experience. And so we can advance other countries to transition more smoothly, if possible. - What I want to discuss was regarding what demand and the development of data centers. What we've seen is that, especially in the US, you have a very big drive to increasing your bore energy, because it's a huge investment in data center, with high power demand, and a lot of hyperscares have commitments to procure green electricity. And that's really pushing installation of renewable energy in the US. - Do you observe the same trend in China? And what are the impact that you see of the development of AI in the power system in China? - You know what's interesting to me comparing the US and China when it comes to AI and energy. Is I find that in the US, and tell me if I'm wrong on this, this might be my perspective, I focus more on China on the, on the US, but my feeling is that in the US, you have data center demand kind of as the driver, and then they try to figure out energy solutions around it. It's kind of AI first, and then energy kind of deal with it. And so this is why Virginia, in particular, with a lot of data centers, plus to there is very quickly running at the very high power prices, because that was not, that was not the deciding factor in where those centers were cited. In China, obviously there were a lot of existing data centers, serving local load, et cetera. But the Eastern data, Western computation strategy, where you have these, you have some coastal data centers serving load, especially where high speed financial and other applications are essential. But those are really costly, because the energy prices are so high there. And so what Beijing stepped in and says actually, let's intentionally build new nodes, new clusters of data centers, particularly for inference, less, into some extent training too, actually. In the hinterlands, where power prices are much cheaper. So it's moving that specifically, in terms of the energy comes next, and saying, hey, power prices are cheaper. It's a lot more renewable energy out there. We actually have too much renewable energy in many areas, that is being curtailed. So let's move the AI there, the data centers there. And so it's not an exact contrast, but I think it reflects a difference in the thinking and approach. It's very interesting to me. >> Are you spoke a bit about one of the key trends that you observe was the development of EVs in China. And China is the largest EV market globally. And domestically, what was really interesting is the Thurkin-Habrid's PhDV had had for a long time quite fast growth compared to EV domestically in China. And I think it was very Chinese-specific trends. Can you maybe expand a bit on what are the drivers of the growth of PhDV compared to EV? And also recently, comment on all the sales of PhDV in China as compared to the sale of EV. >> Absolutely. So for a long time, plug-in-hydrogen electric vehicles had done very well, probably because the infrastructure was still being built out. And so to set the scene, the central government has supported NEV adoption through a bunch of different measures. But easily the most impactful is the tax break. For a long time, you didn't pay taxes on an NEV. And then it was cut to half, so 5% instead of a 10% vehicle tax. And there were various other incentives too. And so that drives adoption of vehicles approved as quote unquote NEVs. And then within that though, if you're a consumer, if you are not next to a charging station, or if your workplace doesn't have a charging station, or you don't have other easy access, which type of vehicle are you gonna go with? Not hard to see. I think what has happened recently is, the build out of infrastructure, specifically charging and battery swapping, has significantly expanded. At the same time as the range on vehicles has increased. And so you also have the batteries, there are also an integral part of the story, where seeing a transition from NMCs to LFP batteries and other batteries converging on LFP, well, the issue with LFP was lower range. You can know how many other great qualities. Well, that problem, that technical problem is also now being resolved. So the cheaper, lighter, better batteries are also now increasing long distance. And so basically the downsides of a pure electric vehicle are rapidly diminishing. And I think that's reflected in the last several months, where the offerings in general have been great in terms of what Chinese brands are designing for the Chinese consumer. The electric vehicle space has taken off because consumers no longer face nearly the bottleneck or trade off that they used to. It's been absolutely a wild trend. Obviously, companies have been upthroated in competing on price. When they ran out of margins, they competed on tech. But then they wage brand wars and other incentives. And companies offering to buy your insurance for you. Everything you can imagine to compete for market share, right? But what they're doing is dramatically pushing forward adoption. At the end of the day, the climate story is adoption. And it's going very well. Maybe moving a bit more towards the battery materials and critical minerals. One of the very significant trends in this space has been the evolution of battery chemistry mix. And China has really moved towards the LFP chemistry. And that's had a huge impact on the price of cobalt and nickel and I can see it in Indonesia, for example. Do you expect this trend to continue and do you see real structural demand for NMC chemistry in China? Yeah. So I think the way we look at this is by industry or by sector. And really, we're looking at electric vehicles. We're looking at consumer electronics. And we're looking at fixed energy storage. So not in cars, but grid side energy storage, et cetera. Power walls, not that. Within electric vehicles, probably the most interesting space in many ways, absolutely. I see a continued trend toward LFP. It certainly will first off, there's a continued trend toward LFP in China, which means the rest of the world will fall out if China is still the main supply. What's interesting is the LFP and just to lay up with those who are less familiar. NMC has dominated for a long time because of the high energy density and long range. Where LFP comes in is it has a much longer lifetime. So one of the key questions is, how many times can you recharge it? It matters a lot if you charge it every single day. It's a charge, discharge cycle, such a cycle of life. And LFP can be as much as twice the lifespan in some cases. It's also safer. It's also low cost. So the real question was technological to start with. And that's going to be the reason. Can you bring LFP up to an energy density, meaning how much charge can you have per unit weight? Obviously the heavier your battery, the more energy you spend moving it around. So I mentioned that because this will and choose a contrast with fixed energy storage, right? versus energy storage from ability. As those technological bottlenecks have been overcome, the question becomes, can LFP's reach a range at which the slightly lower range is no longer a trade-off? If yes, it kind of obviates NMC in some way in many ways. And I think we're getting closer and closer to that. And there's really no world in which, in my mind, in which NMC comes back in less people start demanding 1,000 mile range or something like that. Obviously with heavier vehicles is a different story. And the real question with orders right now is of course the experimental plays somewhat experimental in some cases that various battery makers are making with solid state and sodium ion batteries. Will those eat into LFP's market share in orders? I'm skeptical in the near term. I think both have their place. Obviously sodium ion is huge because it doesn't use a lot of the critical minerals of concern at all, right? And so olipic is from your coal bulk, you know, out. But sodium ion is even better in terms of supply to your resilience. But you know, we're ways away from that. More quickly though, I'd like to turn to the other two sectors because I think, you know, with premium, with consumer electronics, what's really interesting is you have this bifurcation. We have the premium electronics, right? Which are really valuing energy density. And then you have the kind of, you know, lower ends where maybe that's not as much of a concern. So maybe it's some low grade cell phones and stuff, but also things like children's toys that are rechargeable, the other stuff, you know, the mid-range tablets and stuff like that. We're going to forward a bit heavier. LFP is great for those lower end applications because you don't require quite as much energy density. But the flagship Samsung or Apple, you know, adds going to be really hard until LFP completely catches up on energy density. It's going to be really hard to substitute those in. And so we're looking more at solid state versus NMC, right? NMC for now still maintained dominance there, I think, for a while yet in the premium sector. But then to energy storage systems, you know, not from mobility, you know, how you could use Vanadium Redox slow batteries, which I still think are underutilized, basically a big data liquid. You're not going to use that for mobility. But if you're not moving it around, you know, the form factor doesn't matter. The energy density basically doesn't matter. And so LFP with a safety characteristics, terrific, right? So we have this different diversification. I think NMC's market is going to narrow significantly to within specific parts of consumer electronics, ultimately. That's very interesting because it's really driving and the code industry. And we can see the transition has already started. I'd like to move towards a bit rare errors where-- I think you have a lot of things that are recently of the base. I guess it's some new, the good for business, maybe, but for-- Not for mental health. Good for business. Exactly. But maybe if we stack back a little bit on rare errors, I think it would be interesting if you can just start by defining what are rare errors, what we're talking about and describe. So historically, China became the leader in the sector, in the mining and also in processing. And also, the US, we used to have a leading sector has lost its lead. Yeah. There are 17 elements with very desirable magnetic and other properties. That's what unifies them. Yes, the Lanternite series, there's a lot of other things that people like to fight. But basically, they are niche, really useful materials that are very chemically similar. Now, why matters that they're so similar is because they're found clumped together in certain deposits where you don't end up getting-- you can't extract one. You extract a group of them, typically light rarets or heavy rarets, it's kind of a bifurcation within them. It's really, really important. This is not a miles technical issue. This is a fundamental issue with regard to supply and now geopolitics. And so what ends up happening-- and I want to kind of paint a picture here-- is you pull this-- you pull this bass and zyte or monella zyte or heavy rareth rich or ionic clays, you pull this material out of the ground. And then how do you get to industrially useful stuff? Well, the reality is you send it through dozens to hundreds, depending on which type of earth you're dealing with, of highly, highly caustic acid baths, basically, and other chemical transformations and flotation and all this processes. And you end up with a tiny, tiny amount of some specific rareth oxides that will become something useful. And massive amounts of highly toxic, often radioactive waste. So I hope I've painted a picture of this is not a super attractive industry in general. Now let's make it even more unattractive before we get to a strategic value. Now we have the issue of-- I mean, like many mining operations, the actual stuff you pull out of the ground is not super high margin, typically, those some exceptions. But generally speaking, the minerals in themselves are not super high margin. Where you make up for that is very high volume. If you're selling millions of tons of the stuff, it adds up. Rare earths are also a tiny, tiny industry. But you need very tiny amounts for a lot of things, but they're tiny amounts. So just put it in perspective. Iron ore, we count global production in billions of tons, copper, in tens of millions, cobalt, cobalt we count in hundreds of thousands of tons, rare earths in tens of thousands of tons annually. Right? So the scale is just dramatically different to many of these other key industries that we talk about. Is it worth it? You have to think of it as a question. So that's the kind of background. For a long time, the US had-- through much of the back after the 20th century in particular-- the US had a major mine called Melton Pass, many probably not familiar with if they're reading headlines on rare earths. And it is one of the two best deposits for light rare earths in the world. The other one, the best one, is in Mongolia, by an oboe of Urina in Balthal, is the city closest. And that's the rate of its capital of the world today. Well, the US had this rare earth operation in Melton Pass, California, not for where I am right now, actually. And ultimately, there's a lot of-- there's a whole lot of drama here. So I'm oversimplified this story dramatically, but a few key pieces. Basically, a lot of regulation was in place, and there's certainly a regulatory issue around, hey, you're producing massive amounts, highly toxic waste. Is it worth it? And a lot of places, a lot of other countries as well, China was trying to develop its industry at the same time, and a lot of business just moved there, because they're willing to do this and handle the cost, specifically local governments. This isn't yet a geostrategic issue in the way it is today. It was largely Balthal, OK? This is where it's up. And being willing to process in a handle this, and then doing it efficiently. And so ultimately, between the environmental regulatory side and then the economic side, mountain passers couldn't keep up. And that operation went under. Then you have a concerted efforts, as where it's become more of a strategic value, of a lot of central support, as well as local support in China, Beijing's in Vol, Balthos, and Vol. And then you get Gangzhou and these other southern cities and provinces investing heavily in heavy births. Again, why this distinction matters? The US doesn't have heavy roots in any meaningful concentration. China does. Myanmar does. And of course, note there's an ongoing active civil war right now that China's playing a sound suit to negative. It's involved in both sides on diplomatically on one half and on behalf of the junta, and then also practically to make sure they still have access to Myanmar's heavy roots, which are currently controlled by the KIA and opposition groups, the Garntair groups. And so it's really hard to deal with heavies, but China had built that out. And the rest of the world is really going to compete. And so now at this point, no one can compete on cost, no one can compete on technology. This is no longer just a story of the environment. I mean, China's done a lot to clean up the industry, as well, and to consolidate it. There have been a lot of governance issues for years. Now it's not the main driver anymore. Now it's China's been doing this and is really, really good that something is very, very hard, and the government is supporting it. So now tying it all together, how do you diversify? And for a long time, the business case answer was, why should you? You can get cheap, reliable, high quality supplies from China. Why would anyone else want to invest in this space and try to compete? And the answer is until recently, no one did. Well, no, and Linus was acting. Most people voted not. And then we have these geopolitical tensions in the US in particular targeting China's access to tech. If you're in Beijing, the question was clearly, how do we push back? I think if you're a Chinese leader, you're asking, the US is basically attacking what it uses Chinese interests. So if you're a leader in China, you're asking, well, how do we push back? The US has a lot of leverage when it comes to trade and alliance structure is everything. And Beijing realized, probably very early on before they deployed this. We have a lot of critical mineral choke points. In particular, rare earths, there are used in small quantities, but they're used in everything. They're used in tiny quantities in every strategic sector from orders to military to aviation to petrochemicals, use this catalyst. That is leverage. And so now the question is, how do you diversify away from it? My answer at the time was, if you think you're going to take an action-- if you're planning an action, such as inhibiting kind of access to critical tech, that hamstrings is a bit of economic. like we upgrade. There are certain actions that China could predictably take. Not only was it predictable, it was publicly predicted that China would target for Earth because it is a great source of leverage. If you think that your action might lead to this kind of reaction, maybe try to diversify before the action occur. That did not happen, right? And so now the West in general, particularly the West is scrambling to do something very difficult. And the short answer is there is really, the way I put it is, there's a big difference between the financial value of something, what people will pay for it, which is not much with Earths. Despite the strategic value, the strategic value is astronomical. It brought the US to the point where it was willing to backtrack and undo major policy because it was so important. But the financial value and the strategic value are not aligned. And that means governments are now having to pay literally a price premium to get people to invest in this space. That's what's happening today. - It all game theory position. It's been very widely covered in the news. And I think some of the action that Chen has took ahead of the trade discussion into US, there was a little bit of confusion and maybe also helped a little bit by the communication from the White House as well. But could you give a summary of the latest measure that was implemental without by China on warehouse? - Yes. So first thing to know is April was the first round of rare earth export controls. They targeted seven mostly heavy rare earths used in permanent magnets that go into everything from motors to defense. These in particular were critical because heavy rare to get are critical choke points or the hardest piece to overcome. And so targeting those was a way to not target the entire rare earth ecosystem, but really fundamentally get the most important stuff in one false swoop, significant leverage. Those controls remain in place. Basically you have to secure a license. An expert Chinese X-Forder has to secure a license for the Ministry of Commerce, Moffcom in order to expert to a particular client overseas. That remains in place. October 9th, what had happened to the end of September, 29th specifically was the US had imposed what's called ultimately the 50% rule, the affiliates rule. Basically a BIS is a part of the Department of Commerce. A rule that effectively was billed as a tweak to an existing policy on how, on how basically sanctions list of work, what ended up actually happening was about 20,000, 22,000 companies I think it was, Chinese companies would lose access to the market. So this is obviously a big deal. And this was right before the Golden Week holiday or the National Week, this issue Golden Week. And so the day that Beijing comes back online, day after the holiday, right? This happens, the holiday happens, the day they're back. They announce sweeping, they announce six separate policies that targets, they impose export controls on cathodes and battery technologies and the things you use to create those, they targeted five additional rear-earths in addition to the seven that were previously targeted. They target even extraterritorial jurisdiction, saying that if you make products, use Chinese rear-earths in another country, those exports are also subject to Chinese controls, right? So there's a lot of legal questions and practical questions about enforcement, right? But this is a huge sweeping set of retaliatory controls. And it made very clear how big a deal this was to Beijing and that the US really did not perhaps in what's the word I'm looking for, anticipate how big a deal this would actually be. The US came to the table. I mean, I think the first thing to note is that there is a detente. We are now in a more stable state. The two sides have lowered temperatures, right? There was interest in from both sides, genuinely, I believe, in lowering the temperature. And so there were talks, the president's, she and Trump met in Busan and came to terms basically to ratchet things down. It would be nice if that were the end of the story and things were not super complicated from there, but what I touched on earlier, evidently, the US and China did not agree on exactly what they agreed on. And I will go ahead and bluntly say that this, in my view, is an issue on the side of the US. The US had announced in a White House statement on November 1st, US time. Everything that had been agreed to, first issue, and I don't want to, you know, kind of rehash ancient history in some ways, but it is really essential to understand kind of how important are some of these details that were not carefully handled with the R. First, the White House statement made illusions to, or an illusion to October 22, October 2022 controls from China, there were no such controls, right? So that first of all, kind of set off alarms to everyone who's reading this as the definitive statement of what the two sides agreed to. Maybe it's a typo, maybe it's someone misread. That's not encouraging when this is the letter of what the agreement is. The second piece was that it characterized the deal as a de facto removal of Chinese controls. I want to be super clear, it is not. It is no such thing. All of the prior controls prior to October 9th remain, and all of the, there was a ratcheting down from prohibition down to just the licensing requirement for certain materials, gallium included, and there was, there were other things that were factually accurate. But the big issue was that what Beijing says it has agreed to is to not implement the October 9th controls, which is huge. That is great progress, right? That should not be downplayed. This is a very significant de-escalation. And the idea is that Beijing has not fully cancelled the October 9th controls. It said it will not implement them for an extra year. And if things go well, maybe they still want to implement it, right? And they can kind of keep moving it down the line. And that's kind of, again, a way for China to keep leverage and make sure the US continues to play nice, basically. But again, there was a whole saga over. And this is actually the third version of the saga. There's also deals, you know, conversations in London and Geneva about what exactly is the size of the gringes. So long and short, it's already a difficult situation diplomatically and technically. But the communication side has further complicated this entire saga. And it seems it was also a bit of political communication. And I think that didn't help to clarify things that was agreed. And Trump administration has also indicated that they could move away from its dependence on China for rare supply in a very cast fashion. I think the timing was 18 months, which is quite short. In your view, what is maybe a realistic timeline to rebuild entire supply chain? And what are the key challenges that the US or Western country needs to overcome to achieve this? The Secretary's Secretary of State, the US, had had announced very shortly after the recent saga. But the US could diversify within 24 months. And later, they've been various estimates around that. All of those, I think, are wildly ambitious. And that's not a-- if you try really hard and spend enough money, you can get it. I don't believe that's reasonably possible for a meaningful scale of diversification. Briefly, here's why the US has no capabilities with heavy rare earths. There was some SEG+, for those who know they know, if you don't know, basically it's a low concentration amount of multiple heavy rare earths. They can get a little bit out of the mountain pass. But the US does not have its own technology capable of producing separator birds at scale. The only non-Chinese entity that does have proven capabilities at commercial scale is Linus, specifically its operations in Malaysia. Linus is supposed to be building a facility in Texas. But that is now under-- basically, that's as a huge question mark on that for various reasons, relating to engagements with the US governments right now. And they'll invest elsewhere. But Linus is the single non-Chinese source right now. There are recycling recovery efforts, but those are also incredibly technically complex and unproven. So there are a lot of good possibilities. But the only proven option is just not big enough. The scale isn't large enough to diversify certainly the whole US private sector, much less the rest of the world that it's applying. And I would note that the top off-taker from Malaysia is Japan, because Japan is making most of the magnets, right? And so let's tally that together. The US has magnet makers that typically rely on China or Linus. Europe is now solving other magnetic material producers are supplying material to magnet makers like Noveon and others in the US and elsewhere. They also, ultimately, depend on either China or Linus for the heavy-weir earth and maybe mountain pass in China for light-weir earths and others. But we did a bit of digging. And as far as I can tell from the text we've read, and these are engineering texts. The fastest China has been able to bring online a new heavy-weir earth processing facility is a matter of a year and a half to two years at best. And that is notably for geological deposits that you already know that you already have experience with and that you have talents like engineers who have been operating in the space for a long time. Now we'll say, this is not building a Lego set. This is an instruction manual and you can just do it. There's a lot of trial and error, a lot of tests and a lot of finagling of chemistries that take time, literally just take time to calibrate and to reach an equilibrium. There's a lot of time that goes into that. And if you're starting from scratch, there was no way you were doing that at scale within two years. So I think part of the information that these optimistic estimates have probably been building on is that there are a lot of magnet makers coming out of the woodwork, sintering as possible outside of China. A lot of the motor manufacturing all these other downspirial patients. Yeah, they can be scaled up as our China. But the fundamental source remains very, very limited in scale. And until you overcome that bottleneck, the entire downstream industry is basically dependent on a couple of projects. And it's just not enough. Now, the positive, I do think that if the US has a, another country, this isn't just a US war. I mean, everyone else is also subject to these licensing controls, which has been a huge problem, for example, for Europe. Europe is like, hey, we didn't do it, right? We're still, our companies are still suffering from delays and everything. And I'll straight out others as well. Japan and career, and royal, then this, of course. But one of the key pieces here is, how do you target how much diversification you need? So for example, if the US were only to say, we just need military supplies. Every magnet that goes to the military needs to have non-Chinese sources. It's a rough estimate because obviously we don't have good data on military consumption for obvious reasons. But we'd estimate much less than five percent of US war earth demand and magnet demand comes from the military. You can diversify that. But you're not going to diversify the entire consumer electronic supply chain, all of petrochemicals, all of aviation, all of all the motives, all of other parts of industry, right? So having targeted aims, I think, would make this a lot more practical in the near term. That's fascinating. Maybe just to conclude, looking to world 2026, what would be your top prediction, both trends in the energy transition space in China? I think we can't touch the arms. It's just a tie a few threads together. I mean, we're seeing, we're seeing the slowdown in traditional heavy industry. The property market is part of that. Are there many other drivers of that? It's obviously steel and cement or kind of the two big ones that there's others as well. We're seeing a heavy migration, especially the 15th, five-year plan will double down on efforts to move the economy up the value. That means producing less heavy machinery and more digital components and services based things that have higher value ad, basically. What that does from a climate perspective, what that means is the basis of the economy will be less inherently carbon intensive over time. I think that's not going to be a one-year fix. I think that's the trajectory. We don't know exactly when it's going to peak. I think it's close to it. It hasn't already. But that's a good trend line, the carbon intensity of economic growth, basically, in China. But the other kind of constraint there is and the power markets. I say markets because, I mean, effectively, you have all these provincially locked regional markets and some sub-provincial. In this trading, of course, but it's not an open unified market by any means. That's the long-term vision. That's going to take a long time to get there. In the meantime, while this fragmentation, will we be able to see a reduction in emissions intensity per unit energy, right, production? That's an explicit target. Beijing has been very clear about moving from dual energy controls, meaning how much total energy do you use and how intense is your output in terms of energy usage to dual emissions, dual carbon controls. That's a great shift. That's absolutely needed and should be applauded. The question now is how effectively can both the supply side in terms of the power markets move renewable energy more efficiently, more effectively? How can it absorb more low carbon power? And then on the actual demand side from a power perspective, can we reduce the emissions intensity of the specific applications? A good example of this is aluminum. Yunnan was not a traditional major player in aluminum smelting, as opposed to like Shandong, and now they're one of the biggest sources in the country, specifically because they invited smelters to move into a region rich in hydro power. And so now we have massive amounts of aluminum, which aluminum is commonly called solid electricity because it is so ridiculously electricity intensive, right? That's a good way to decarbonize that. Other industries, like cement, it's really hard to take out the pure emissions of that production. So we have different sides. You change what you're producing, you can change how you're producing it, and then you have can you use cleaner energy to produce it? To all those pieces, that's what I'm looking for. And I think we're going to make incremental progress over the next couple of weeks, including that show. Thanks so much, Kaurifur, coming back on the show is good to have you. Thank you so much. It's always a pleasure to chat.