Gallium Price ($US/KG)
17 May 2024 : Price $805.90
1 January 2024: Price $755.80
The next derivative of the AI/ Data Center / Power infrastructure investment case blossomed into full view this week with BMO hosting their Real Estate Conference in NY. The BMO Global Metals & Mining Sales note highlighted some great points from the conference including the limited chance of over-investment in data centers and timeframes to get infrastructure permitted and built in North America. It is safe to say it looks like we have another decade of strong capex tailwinds ahead of us.
The discussion incorporates the hyperscalers (a type of large-scale data center) that offer massive computing resources, typically in the form of an elastic cloud platform. The “big dogs” in the field are Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP), IBM cloud, and Oracle.
This week also saw the Biden administration increase tariffs in their ongoing tweaking of trade with China and note the gallium price now has an 8 in front of it.
The EU is calling for projects to improve EU supply of critical minerals and hopes soon to begin joint EU purchases along the lines of its existing scheme for gas. The EU has a list of 34 critical minerals including 17 strategic raw materials including gallium.
Navitas highlights some potential customer wins coming down the pipe via a recent investor day presentation.
2 slides are provided below. Keep them handy for future reference!
Enjoy.
CRITICAL METAL = THE CRITICAL OPPORTUNITY
Transforming Power Electronics
- Creating smaller, energy-efficient devices
- Faster and more reliable 5G networks
- Boost efficiency and performance in data-hungry processes
- Expect broad integration, leading to a connected, energy-efficient, tech-advanced future.
Immense Market Opportunity
- 5G telecommunications
- Artificial Intelligence
- Internet of Things
- Electric Vehicles / Self-Driving Cars
- Global Semiconductor Market was U$574.6 bn in 2022 and forecast to grow at 8.8% CAGR to U$1,307.7 bn by 2032
Golconda
- Infrastructure
- Patented Claims
- Grade x Intercepts
- Advanced Geological Model
- Proximity to End Users
- Strategic Location
GALLIUM NITRIDE – MARKET ADOPTION
Potential Savings
For a typical major Tier One Data Centre Operator assuming 6 smaller and efficient GaN-based power supplies can perform the work of 10 Si-based units.
Servers p/rack go from 30 to 34. (Source: GaN Systems)
- Operational savings from energy: U$5,600 / server rack saves U$241 million pa
- Additional revenue from greater server density: U$5,100 / server rack adds U$1.1 bn pa
- Lower capex from postponing construction of further data centers: $840 million in CAPEX saving
BMO SALES NOTE
Data Centres -> Takeaways from BMO Real Estate Conference:
- BACKDROP: N.A. market is now 27GW capacity vs. 12GW in 2020. Split 50/50 between data centre operators and hyperscaler-owned. Given demand levels, speculative development is not a concern, with panelists noting that ~80% of new starts are pre-leased and in our PE panel, KKR noted that capacity needs to triple by 2030 to meet demand.
- RECORD LEASING: N.A. is poised to lease between 5.5-6GW of capacity in 2024, up from a record ~4GW in 2023 and versus 880MW in 2020 with 1Q24 leasing setting a new record. Vacancy is also quickly approaching sub-1% across most markets with NoVA at 0.67% and Dallas at 1.1%.
- POSITIVE PRICING: Datacenterhawk noted that prices have increased from $90/kW to $140-170/kW over the last two years and in its “bold prediction” suggested pricing can increase to $200+/kW in 2024.
- POWER CONSTRAINTS: According to Colliers, power procurement for a new development can also now take 3-10 years. With the industry grappling with power-related challenges, hyperscalers are increasingly assessing alternative energy sources that include nuclear energy (e.g., AWS deal with Talen Energy), natural gas, and Bloom Energy, though scaling alternatives can be difficult, with general agreement among panelists that the industry is in unchartered territory. Panelists also noted that hyperscalers will likely face tough choices between procuring power for AI and sustainability efforts.
US/CHINA RELATIONS ARE NOT THAWING ANYTIME SOON WITH NEW US TARIFFS ANNOUNCED
Barrenjoey in Sydney from their morning note dated May 15th “ US President Biden announced increased tariffs on Chinese imports, including chips, critical minerals, port cranes and medical products as well as steel, aluminum and EV’s with President Biden accusing China of “cheating” on trade.
The changes, to take effect between 2024 to 2026, are projected to affect ~US$18b in current annual imports. Beijing vowed to take action against the decision, said to expect a “resolute response”.
The tariff rate on lithium-ion electric vehicle batteries will increase from 7.5%% to 25% in 2024, while the tariff rate on lithium-ion non-EV batteries will increase from 7.5% to 25% in 2026. The tariff rate on battery parts will increase from 7.5% to 25% in 2024 and the tariff rate for certain other critical minerals will increase from zero to 25% in 2024, the USTR said….
Bloomberg -Biden Hikes Tariffs on China
Moreover, Bloomberg reported that the US tariffs on minerals leave out the markets that the US is most reliant on China for, including gallium, germanium and rare earths. In our view, the narrow scope of the tariffs on imported commodities further demonstrates the difficulties Western governments face in diversifying the battery supply chain and reducing dependence on China.
As a reminder, China instituted export license controls on gallium and germanium in August 2023. China produces 98% of the world’s gallium requirements.
A US PERSPECTIVE
- Imports of gallium metal and gallium arsenide (GaAs) wafers were valued at about $5 million and $220 million, respectively (2022)
- Circa 77% of the gallium consumed in the United States was in GaAs, GaN, and gallium phosphide wafers
- Uses of Integrated Circuit’s included defense applications, high-performance computers, and telecommunications equipment
- No US Government Stockpiles
WORLD RESOURCES
- The average gallium content of bauxite is 50 parts per million (50 ppm or 50 g/t)
- Some domestic zinc ores contain up to 50 parts per million gallium and could be a significant resource, although no gallium is currently recovered from domestic ores (US)
- Gallium contained in world resources of bauxite is estimated to exceed 1 million tons, and a considerable quantity could be contained in world zinc resources.
- However, less than 10% of the gallium in bauxite and zinc resources is potentially recoverable
GALLIUM SUPPLY
WORLD PRIMARY LOW-PURITY GALLIUM PRODUCTION
- China is the leading global producer of low-purity Gallium
- Globally, most of primary Gallium is recovered as a byproduct of processing bauxite and, the remainder produced from zinc-processing residues
- No domestic primary (low-purity, unrefined) Gallium has been recovered in the US since 1987
Estimated 2. U.S. Geological Survey, 2023, Mineral commodity summaries 2023: U.S. Geological Survey, 210 p., https://doi.org/10.3133/mcs2023
EU Supply of Critical Minerals
The European Commission will launch calls within days for projects to improve EU supply of critical minerals and hopes soon to begin joint EU purchases along the lines of its existing scheme for gas, a senior commissioner said on Wednesday.
The EU Critical Raw Materials Act is designed to guarantee a supply of lithium, copper and other minerals crucial for the EU’s green and digital transitions, to enable the bloc to produce its own electric vehicles or wind turbines and to reduce dependence on China. It enters force on May 23.
Commission Vice-President Maros Sefcovic said the EU executive would convene a first meeting of a board with EU members overseeing the act. “Within the days after that… we would like to launch the first call for strategic projects,” Sefcovic said on the sidelines of the EU Raw Materials Summit in Brussels. Processing, recycling or mining projects deemed strategic should be able to secure permits in 15-27 months, far faster than normal. Sweden’s Eurobattery Minerals AB has said it will submit an application for a mine in Finland to be strategic.
The EU has a list of 34 critical minerals including 17 strategic raw materials including:
- Aluminum/Bauxite/alumina
- Lithium
- Light rare earth elements*
- Silicon metal
- Gallium
- Manganese
- Germanium
- Natural Graphite
- Bismuth
- Titanium metal
- Boron
- Platinum group metals
- Tungsten
- Cobalt
- Heavy rare earth elements*
- Copper
- Nickel
Navitas Semiconductor Investor Webinar
G50 Corp attended a Navitas Semiconductor investor webinar this week hosted by MESH – an electronics-focused VC firm with offices in Taiwan and USA. A great update and insight into how Navitas (the only pure-play, next-generation power-semiconductor company, founded in 2014) is seeing demand for their products this year.
Below we highlight 2 slides from the presentation.
We would suggest you note the names on these slides, the size of the markets and put Navitas on your watch list. CEO Gene Sheridan was very optimistic of pending customer wins in 2024 and into 2025.
