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……………….

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.

Testing "Out"

When my family arrived in Shanghai in August, 2005 I was firmly planted in the third quarter of both my expat and work life. China was in the midst of its historic rise to economic might and I was wondering what I was doing there. Per standard operating procedure, my wife assessed our situation and made a “to do” list. She got on with the task of getting our home life up and running. At least one of us understood what they were doing. I had a “big picture” idea of my goals but seemed to need a lot more help than my better half. The devil is, as they say, in the details.

My first office was rented from a serviced office company which meant that I was, for the most part, surrounded by people who had come to Shanghai to work on a short term project, start their own business or, like me, worked for a division of a large foreign company that was just beginning operations in Shanghai.

On my third day in Shanghai a smiling middle aged American woman appeared at my door and introduced herself. As it turned out, she worked for a testing company that wanted to introduce their personality testing products in the Chinese market. I became her first customer. Actually, she tested me for free in the hopes that I would use her service to help assess my local hires. I took the rather lengthy test that afternoon. I would get the results later in the week when I was back in the office.

The test I took was a little more complicated

Personality test results were not high on my mental list of concerns as the days passed. The life I had in systematic Japan was a memory in the “wild-west” environment of China. Rules were more like “nice ideas” but not necessarily something you needed to follow. For a foreigner, the first test was figuring out which rules needed to be followed and which were “conceptual”. It would more than six months before I would be chastised by my driver Philip for stopping at a red light the day I got my China driving license and decided to get behind the wheel. “Why are you stopping?” said an eye rolling Philip. “The light is red” was my reply. “So what, nobody is here, just slow down but no need to stop – it’s a waste of time”. Our first three months in China would have been much easier if Philip had been with us from the beginning to provide his unique perspective on how the locals behaved.

One benefit from life in Japan that did transfer to China was that I had already learned to ask for help any time government bureaucracy reared its ugly head.

The government was holding my passport (never a comfortable feeling) pending a work visa being issued and my household goods clearing customs. A customs officer requested a meeting at my office to “discuss” my shipment which sounded a bit ominous. I wanted a local and native Chinese speaker with me during the meeting so I requested the GM of the serviced office company help me out.

There were a lot of little tests getting settled in Shanghai

 “Janifer” was the name on the English side of her business card. I think she intended to be Jennifer but a typo got in the way. She became my hero in short order as she guided the man in an ill-fitting customs uniform into my office. The unsmiling bureaucrat began in rapid fire Mandarin and seemed to have some sort of complaint with my household goods shipment. Janifer locked eyes with the guy and took on the appearance of a Shaolin warrior monk. She listened, nodded, deepened her glare and nodded some more. She seemed to struggle discerning what the complaint was but finally figured it out. She turned to me and said “he wants to know why you have 57 teddy bears and other toy animals in your stuff”.  My response: “I have two daughters – they like teddy bears”. Janifer went on to say that he wanted to disallow them because I didn’t “need them”. Feeling relieved that the issue was minor; I took the offensive and said that toys were not on a list of banned articles so I didn’t feel he had the right to complain. It seemed to me maybe the guy wanted the stuffed animals for his kids. Janifer said she “completely agreed” with me and unleashed a torrent of high decibel verbiage at the suddenly squirming official. Long story short – Janifer apparently told the guy to “get out and clear the shipment by tomorrow or else”. That was exactly what happened. I never found out what “or else” was. The experience of watching Janifer take on the official was important for me.It showed me a lot about how China "works” and paid dividends later on. I would never have thought a young lady could challenge someone in an official role and win but I saw it time and time again. First China “crisis” averted.

Later in the day still basking in the glow of Janifer’s victory over customs; I went down the hall to get tea and saw my American friend - Anne. “I have your test results. They are quite interesting. If you have a few minutes we can discuss them”.  Her use of the word “interesting” got my attention.

A few minutes later we met in my office. Anne started by revisiting my current situation – wondering aloud how long I had worked for worked for a “big company”. I told her that I had been with the same company for 16 years, had worked in multiple locations and been promoted on average every 2.5 years. She smiled and said she was very surprised that I could survive let alone thrive in a corporate environment. By now I was curious to hear more details about results and her conclusions. She explained that normally someone with test results like mine had trouble functioning in a big company. I told her I wasn’t necessarily convinced that the kind of testing her company did was a great predictor of success. She suggested that I spend a few minutes reading my results and then we could discuss what they “normally” meant in more detail.

After reading the results and conclusions – I thought most of them represented my personality and mindset reasonably well. We reconvened to continue the discussion. “Well normally someone who shows the combination of an extreme need to get things done and a very low tolerance of bureaucracy has trouble functioning in a large organization especially at a senior level”. “Your profile looks more like someone who prefers entrepreneurial activity.” I smiled and said “Well Anne – I think the test results are valid.” She gave me a quizzical look. I continued: “Well, my boss is 7,000 miles away and cares more about my results than the details of how I get them.” “Most people in my company think Asia is all ‘third world’ and couldn’t imagine living here which created an opportunity for me.” She looked surprised at my candor. “Honestly, as a young man I was very risk averse, clueless and too chicken to start my own business. My first job after grad school was with an oil company – I wanted security. It wasn’t until I had been in the corporate world a few years that I began to feel like a ‘drone’. I targeted assignments that gave me as much independence as I could have and still work inside big organization. The ex-pat assignment gave me maximum freedom plus a higher pay package because of the perception that living in Asia was a sacrifice”. We were silent for a minute. Finally I said: “I knew when I left the US for Japan that the odds of me successfully repatriating were slim. The company pushed me hard to come to China and I leveraged the situation to maximize the benefit to my family”.   

I spent five wonderful, frustrating, complicated and interesting years in China but in the first week I was there my interaction with Anne validated the belief I already had in the back of my mind that my corporate life was not going to last long after I repatriated.

I was fortunate to hire several people that taught me invaluable lessons about doing business in China and learning to think outside my comfort zone. Learning to operate in China was great preparation for what I am doing today.

This week is the third anniversary of getting fired by my employer of almost a quarter of a century. My experiences getting things done in Japan and China with limited support from my employer plus the relationships I developed overseas gave me the confidence to do in my 50s what I wished I could have done in my 20s – start my own business. My daughters are in their 20s and both seem to have the same desire to work independently. I hope they can do from the beginning of their work lives what it took me until late in the “3^rd quarter” to accomplish.