Setting the Stage – Global Trade Situation
In the past few years, there has been a seemingly heightened microscope on the interaction of global leaders and their approach to trade negotiations. In the age of social media, headlines and press conferences are shared instantly if not live and political messages have a far deeper reach than it ever could have before. More specifically, there have been increased tensions and complexity in debates between major partners in North America and between the US and China. This coupled with the pending Brexit situation, and turmoil in the UK, have made the political landscape extremely interesting and increasingly uncertain.
The Trump administration has been noticeably tougher on trading partners, not shying away from conflict with those normally considered allies in both China and Canada. The conflicts with China are well documented and have been in the spotlight for months now, often with headlines from the negotiations having a near immediate impact on investor’s confidence in the US market. Specific companies have been dragged into the drama, such as Huawei, a Chinese technology company, who has been ridiculed for its “potential harm to US national security”, says some US officials. Tariffs have also been a talking point of the negotiations with the Trump government instituting such escalators on steel and aluminium, amongst other items. This strategy can be worrisome as global players must raise prices or re-evaluate their interest in working with the US, while also possibly provoking “responsive” tariffs from other countries, raising prices globally on the world stage for basic materials.
Why is this Important?
We believe that the team at HPQ Silicon is certainly watching these trade negotiations with a careful eye as it could impact the supply and attractiveness of their core offering, high purity silicon. The Company has invested heavily in its PUREVAPTM technology and is currently completing the Gen3 Pilot Plant. HPQ Silicon (TSX-V: HPQ), in partnership with Pyrogenesis (TSX-V: PYR), hopes to dramatically redefine the process of silicon refinement, which would offer the global industry of a stable, high quality supply which is less expensive than Chinese sources.
Currently, China remains far and away the leader in production of high-grade Silicon Metal for use in key industries such as solar energy and electric vehicles which are cornerstones of the drive for energy independence. Therefore, Silicon Metal is considered a strategic metal and the global trade war between the US and China has an important impact on the aspiring Quebec producer: HPQ Silicon. China produces an estimated 4.8M tonnes of silicon, as compared to 430K tonnes for the US; Canada does not even crack the top 10 in the most recent data available.
Interestingly, despite their production domination, China remains a top importer of silicon, with Germany being one of the top exporters. Whether tariffs are ever imposed on silicon or related goods remains to be seen but would certainly have an impact on the potential for high quality silicon to replace materials such as graphite or lithium in clean tech applications.
Potential Use Cases
HPQ Silicon tests of production have come back positive and reaffirming which is the only thing that an R&D company wants to see from its large investment. It is expected that they are in the process of lining up potential buyers for the coming years when commercial production takes off and the vision for the PUREVAPTM technology begins to come to fruition.
Producers, whether North American-based or internationally based, will be keen to tap this valuable supply and secure agreements for silicon as potential use cases of the product continue to grow even beyond the initial plans of the management teams of HPQ Silicon and Pyrogenesis. Two use cases that are most commonly brought up are both focused on green energy production: solar panel cells and the replacement of graphite in battery packs predominantly for electric vehicles.
For decades, silicon has been the input material of choice in producing solar cells although at current prices, the industry is losing money. HPQ’s technology is aiming to cut global production costs about 40% and estimates that they will cost 90% less than other facilities to build.
Price is a key factor in any product, but especially in green products where consumers may know that they are the “right” option to choose but price will still play a role. HPQ hopes to reduce the price of solar cells to be more competitive and help consumers choose greener options.
Contrary to solar panel production where silicon is the norm, recently experts have touted silicon as a much more efficient input in battery packs, stating it could “store up to 10 times more energy than graphite anodes in conventional lithium-ion batteries.'' Obviously, this means that electric cars could drive further, for less money, thereby accelerating the transition of the market to now potentially more capable electric vehicles.
It is certainly an exciting time to be following HPQ silicon as they near the completion of their Pilot Plant and begin discussions with major end users. Investors must keep an eye on global trade news as some of the political moves may prove to be extremely important to HPQ Silicon and the near-term demand for their products and their contribution to energy security and independence.
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