Near Yellow Mountain

Friday, November 20, 2015

Around the World One Hundred Times - Part Two

A few days ago I was settling into my latest circumnavigation. Now I am in the last thirty-six hours. All transit now except for a fifteen hour mini visit in Hawaii. This trip will be the fastest I have ever gone around the globe. Although I will have been away from home eight days; I will actually have gone around the world in six days since I started in Charlotte spent two days in LA and then turned east and stopped in Chicago and Frankfurt on my way to Bangkok. I left LA five days ago and have spent 30 hours in flight since then. My total air time over the eight days will be about 54 hours. Total actual miles just under 21,000. Total frequent flyer miles just under 100,000 with bonuses.  My average trip is 12 days – I have never had one last more than 18 days. The logic of a 12 day trip is two working weeks with only one weekend away from home.

Yesterday and today I was on the Shinkansen (Japanese “bullet” train) to Osaka for a meeting and dinner and back to Tokyo. I rarely fly inside Japan – I love the bullet train.

The best flight of the trip was the ten plus hour flight from Frankfurt to Bangkok on Thai Airways. Thai’s first class is still real first class from Dom Perignon and caviar at the beginning of the meal to the Johnnie Walker Blue at the end.  The amenity kit is a mini Rimowa case not some “pleather” schlock served up by the US airlines.  The crew seemed to like their jobs which made for a pleasant experience from beginning to end. Actually the service started before I boarded when a uniformed Thai agent met my United flight in Frankfurt and escorted me to the lounge Thai uses. After I landed in Bangkok I got the same treatment. Are all the niceties necessary?  Of course not, but some things in your life should be special and I decided a long time ago, for me, flying is one of those things. Unfortunately it is almost impossible to have a true first class experience flying a US carrier. The US airlines for the most part have dropped any semblance of true service and moved to a “Greyhound bus in the sky” model. How do I know the Thai flight was the best when I still have four flights to go? Trust me I know – my remaining flights are on United. United’s first class isn’t terrible – the seats are pretty good now and the entertainment is almost world class but most of the flight attendants do not appear to enjoy what they do – to put it as kindly as I can. I will cross the two million mile barrier of actual flight miles on United on my way home so I know of what I speak.

Thai Airway First Class

Twenty years ago when I began flying to Asia and experimented with non US carriers, I quickly learned that flying Singapore Airlines, Cathay Pacific, Lufthansa, Thai, Swiss and ANA were the better way to go on long hauls. The difference between the best foreign carriers and the best US offering is greater now than it was then. The Star Alliance and OneWorld based RTW tickets have enabled me to experience the best carriers and make gratuitous stopovers all under the well-worn guise of “saving money”. When you are spending over $10,000 a ticket no money is being saved but the idea sounds good to bean counters. Since I work for myself now, I am spending my own money and I continue to fly first on international trips. I am a “spoiled traveler” who often stays in $400 a night hotel rooms but washes underwear and workout clothes in the sink to avoid hotel laundry charges. “Value” is in the eye of the beholder.

I have spent much of my adult life on airplanes but I never “rode in the front” until I was thirty years old. I liked it enough that I began to study how to “hack” the airlines rules without breaking any laws. Once I started flying internationally, I spent time reading about how to get the most for spending the least. I also picked the brains of experienced travelers like my seatmate who told me about RTW tickets. Most people that use RTW tickets miss a key point. The ticket is mileage based with enough miles to go about 1.5 times around the world but ends once you return to the city where you started. If you go around the world but land near your starting point you can buy a cheap connector ticket to “home base” and continue to use the ticket to fly thousands more miles. Early in my RTW days, I wrote the tickets starting in Charlotte, NC but would fly back to Atlanta and connect back to Charlotte on a separate ticket. To continue using the ticket I would fly back to Atlanta and then I could fly to the west coast (or even Hawaii on one occasion), back to Buffalo to see relatives and then to Charlotte to finally end the ticket. I almost always go 1.25 around the world on one ticket. There are rules about how many total stops – I think it is 14 now but that gives you a pretty long travel leash.

Since 2000 I have started all my RTWs in Japan. I lived in Japan then but have lived in China and the US the past ten years. Even still due to an anomaly in the Star Alliance pricing model it is still cheaper to buy tickets in Japan in Yen than in USD no matter what the Yen/$ exchange rate is. Japan is not famous for bargains but this is one.

On night five of this trip, I had dinner with a friend in a sushi restaurant off the beaten path in Tokyo. The place was a 25 minute cab ride from my hotel. My friend, well aware that I enjoy “local things”, took me to a place that doesn’t see many non-Japanese customers. Clearly most of the patrons knew each other. In central Tokyo, a gaijin (foreigner) doesn’t get a second look but in this place I think anyone from outside the neighborhood would have been noteworthy and seeing a gaijin was kind of like a bald eagle sighting. The meal ended with a brief chat with the owner and some of the customers who were extremely tolerant of my limited linguistic ability – another reason why I love Japan. For the most part I avoid western food when I am in Asia. I love to eat local wherever I am so the RTW ticket has broadened my food “world view”. The only dish I ever rejected was in Sichuan province China. I would not eat “cat in a pig’s stomach”. My host laughed and said “we won’t eat it either but wanted to see if you would”.

Time to board a flight to Honolulu. 

Sunday, November 15, 2015

One Hundred Times Around the World

Over eight days in November I will complete my one hundredth “Around the World” trip. Flying around the world in a few days requires no skill but, on the other hand, it is something that most people on the planet have not experienced.
One of my favorite sights in Asia
I began traveling to Asia in 1995. On my second trip I happened to be seated next to a loquacious rock concert promoter on my return flight. Apparently he viewed me as a “international travel virgin” so he decided to educate me as we made our way over the Pacific. He handed me his business card which included only his name, phone number and “United States of America”.   No business title, no address and, in that era, no URL or email address. I wasn’t sure what to make of my seatmate but since I was a captive audience it seemed like I might as well listen. I honestly only remember one thing he talked about – the first class “around the world ticket”.  When we parted I thanked him for his insights and was determined to find out if the “around the world” thing was real.

As it turned out my seatmate was correct. Six weeks later I made my first – first class around the world trip but not before I spent some “quality time” with my company’s controller who had to approve anyone except the CEO buying a first class ticket. My justification was simple – if I went first class around the world it would save the company a couple thousand dollars vs a business class round trip from Charlotte to Tokyo or Osaka.  I had to fly more hours but would accept that trade-off for first class. I got a letter from the controller authorizing me to “save the company money”. It was “win – win” and though I did spend more time in the air, it was on company time (getting paid to fly) and being in first class greatly increased my comfort and volume of frequent flyer bonus miles. The difference between first class service and business class was night and day. The RTW (“round the world”) also opened up access to Asian and European airlines via global alliances. I soon learned that almost any foreign airline in Asia or Europe had better international service than the US carriers. It was true in 1995 and still true today – even more so.

My current trip looks like this:

On Friday I flew from Charlotte NC to LA. After spending two days with my daughter, I reversed directions and headed to Chicago. Tonight I will fly to Frankfurt, Germany. After a shower and some quality time on email, I will board a flight for Bangkok, Thailand. One meeting and five hours in Bangkok will suffice and I move on to Singapore for another meeting and a dinner. At 5am the following morning I will head to Changi Airport for a flight to Tokyo. After a meeting, a dinner and an overnight in Tokyo I will take the bullet train to Osaka for 24 hours and then head back to Tokyo for a flight to Honolulu. After less than a day seeing relatives in Honolulu, I will fly back to Charlotte via LAX and ORD – which makes about 1.25 around the world (more than 21,000 actual flight miles) in eight days.

More later……………….

Monday, November 2, 2015

The Lithium Market - What's Next?

This post is a departure from the norm since it is work related and was first posted on my Linked In page. So with "full disclosure" you can either read on or move to another blog post.

I have spent the majority of my career in the lithium business. Twenty years ago if someone asked me what business I was in and I said “lithium” – it usually generated a quizzical look and a shrug or a question about bi-polar disorder. In 1995, lithium certainly wasn’t mainstream. Today it is easy for people to relate to lithium since it powers IPhones, tablets, and Tesla. Although the average person in 2015 is familiar with lithium, 99.999% of the people on the planet can’t name a lithium company nor do they care where the lightest metal comes from.
On the other hand, the .001% of the population who knows or cares about lithium, generally speaking, has limited access to meaningful information about the main players or their competitive positions and future prospects.
Consumers of lithium chemicals have long complained about the “secret club” they imagine controls lithium supply from proverbial “smoke filled rooms”. The major lithium suppliers which until recently were called the “Big 3” clearly did not work together effectively to control price for most of the past fifteen years. In my opinion their arrogance and short sightedness often caused them to sub optimize their obvious market power.
The predictions of a green energy driven “lithium boom” almost a decade ago led to dozens of projects that resulted in well over 1 billion (US) dollars of investment in completely failed or minimally productive assets around the world. The failed lithium projects (think: Canada Lithium, Qinghai, Tibet Zabuye, Galaxy,etc) as well as projects that lingered but never got adequate financing to produce (think: Nemaska, Western Lithium, LAC, Simbol, etc) in addition to botched expansions of existing resources like FMC’s left the industry in a situation where there is currently insufficient capacity to support the now nascent lithium boom. The obvious result - price is moving up.
Since the “lithium boom” did not occur when predicted and is now only in its infancy , the failed capacity additions are just beginning to be felt in the market. The industry is approaching a full blown shortage situation - especially since lithium is not necessarily a fungible commodity like gold or sweet crude oil. All lithium is not created equal even if it meets a similar chemical spec. If you don’t believe me, ask a cathode producer who looks at morphology and stability of impurity profiles not just assay. In total supply seems to stay in balance with demand to 2020 but mix issues will cause short term pain and higher prices. You are likely to see some major lithium consumers on future episodes of "Hoarders". Check your local listings...
So where do we go from here? Some of it you have heard before. Let’s take a quick look:
SQM – is the only member of the former “Big 3” with a clear strategy that is being executed. Despite a plethora of issues with the government and a down cycle for their core ag related businesses, SQM continues to be a major force in the lithium industry. SQM knows who they are and will continue to run a very profitable upstream lithium business while they sort out their long term issues. The run up in carbonate and hydroxide price will go straight to their bottom line.
Albemarle – what I have called the “lithium superpower” seems on the verge of turning their proverbial lithium “sword” into ploughshares. For non-native English speakers this simply means it looks like they are losing their strength by choice (or bad decisions). Yes, it is hard to understand especially after they have bet the future of the company on the Rockwood acquisition. Rockwood will continue to be very profitable short term but not profitable enough long term in my opinion to overcome the high acquisition cost and things like an expansion that will not produce significant volume until 2017 . The flawed hydroxide tolling strategy from high cost suppliers is designed to bridge ALB until their curious plan for a 50,000 MT LCE spodumene based plant is on-line. According to ALB's CEO, the new plant isn't likely to produce until the next decade. Time's wasting.
ALB is in the process of cutting loose most of Rockwood’s key management and technical talent developed over decades. That would be ok if they had a team to replace the departed talent in kind. They don't.
Good luck ALB as you appear to be transitioning from the Lithium Superpower to the “Roman Empire of the Lithium World”. 
The Chinese Power Players – Tianqi and Ganfeng: The Chinese market is the largest in the lithium world and these two companies are the leaders in the Middle Kingdom which make them defacto “majors”. Tianqi owns 51% of Talison which solidifies their position as a major factor in the global upstream market. Ganfeng is the world’s largest lithium metal producer, a major supplier in the Asia downstream lithium market and increasingly important as a global upstream player.
FMC Lithium – The sad story of a great franchise being decimated with each passing year by continual missteps. This is a “Frog Prince” tale with no one on the horizon to break the spell. FMC Lithium is now a stepchild that could potentially flourish with a supportive adoptive parent. FMC's 3rd Quarter earnings call on 10/29 continued to have the standard "happy talk" about the future of lithium while they delivered $1.8 million in earnings on $57 million in sales. Results speak louder than words. 
It is hard to function as a "noncore" business in a company whose stock has fallen from the mid-$80s to mid-$30s in the recent past.  FMC should sell but likely wants too much for a  damaged asset.
Orocobre – very late to market, over budget and with higher costs than anticipated yet the lithium world yearns for another brine based major. ORE could be the star of 2016 if they can produce more than 10,000 MT economically. No other lithium company has  had the opportunity ORE currently has - to enter the market at time when the capacity addition will not lower price. ORE - the biggest question mark in the lithium world.
Two of the companies listed above are looking to ORE for "third party" sourcing but why supply your neighbors when you can achieve a higher yield going directly to customers? 
Juniors – Western Lithium and LAC. The merger is still 2+2 = 3 in my opinion. Simbol – is the “better mousetrap” that will likely never be built. Projects in Argentina lack investment due to political chaos. Tesla’s two virtual suppliers (the names that shall not be named) on “contingent contract” are unlikely to produce. Et Tu Elon…..
In any case, Chinese suppliers will keep expanding and despite their high costs, lithium supply will be, for the most part, adequate to bridge the supply gap at much higher prices until lower cost capacity comes on-line early in the coming decade.
There is one project  I believe has excellent prospects to supply by 2018 but that is a story for another day.