Quotulatiousness

December 7, 2012

No, we’re not running out of phosphorus (phosphate) and potassium (potash)

Filed under: Economics, Environment, Media — Tags: , , , — Nicholas @ 09:58

The most recent outbreak of the-sky-is-falling, we’re-at-peak-whatever panic mongering is debunked by Vaclav Smil:

Jeremy Grantham, a well-known presence in the financial world, recently published a World View column in the journal Nature in which he concludes that, “simply, we are running out” of almost all commodities whose consumption sustains modern civilization. There is nothing new about such claims, and since the emergence of a vocal global peak oil movement during the late 1990s, many other minerals have been added to the endangered list. Indeed, there is now a book called Peak Everything. What makes Grantham’s column – published under the alarmist headline “Be Persuasive. Be Brave. Be Arrested (If Necessary)” – worth noticing, and deconstructing, is that he puts his claims in terms more suitable for tabloids than for one of the world’s oldest and most prestigious scientific weekly magazines.

His direst example is “the impending shortage of two fertilizers: phosphorus (phosphate) and potassium (potash). These two elements cannot be made, cannot be substituted, are necessary to grow all life forms, and are mined and depleted. It’s a scary set of statements…. What happens when these fertilizers run out is a question I can’t get satisfactorily answered and, believe me, I have tried.” Well, he could have tried just a bit harder: an Internet search would have led him, in mere seconds, to “World Phosphate Rock Reserves and Resources,” a study published in 2010 by the International Fertilizer Development Center (IFDC) and funded by the U.S. Agency for International Development.

This detailed assessment of the world’s phosphate reserves (that are the part of a wider category of resources that is recoverable with existing techniques and at acceptable cost) concluded that they are adequate to produce fertilizer for the next 300 to 400 years. As with all mineral resource appraisals (be they of crude oil or rare earths), the study’s conclusions can be criticized and questioned, and the statement by the Global Phosphorus Research Initiative is perhaps the best document of that kind. But even the most conservative interpretation of IFDC’s assessment shows that phosphates have a reserve/production ratio well in excess of 100 years, higher than that of many other critical mineral resources.

November 24, 2012

Tim Worstall: Cosmic fun-spoiler

Filed under: Economics, Space, Technology — Tags: , , , — Nicholas @ 11:42

Writing in The Register, Tim Worstall brings his evil economist gaze to the SF fan’s irrational belief that asteroid mining is the way of the future:

Isn’t it exciting that Planetary Resources is going to jet off and mine the asteroids? This is every teenage sci-fi geek’s dream, that everything we imbibed from Verne through Heinlein to Pournelle is going to come true!

But there’s always someone, isn’t there, someone like me, ready to spoil the party. The bit that I cannot get my head around is the economics of it: specifically, the economics of the mining itself.

In terms of the basic processing of what they want to do I can’t see a problem at all, just as all those authors those years ago could see how it could be done.

Asteroids come in several flavours, and the two we’re interested in here are the ice ones and the nickel iron ones. The icy rocks, with a few solar panels and that very bright 24/7 sunshine up there, can provide water. That’s the first thing we need in abundance if we’re going to get any number of people up off the planet for any appreciable amount of time. And we’d really rather not be sending the stuff up out of the Earth’s gravity well for them.

It’s also true that those nickel iron asteroids are likely to be rich in platinum-group metals (PGMs). They too can be refined with a bit of electricity, and they’re sufficiently valuable (say, for platinum, $60m a tonne, just as a number to use among friends) that we might be able to finance everything we’re trying to do by doing so.

All terribly exciting, all very space cadet, enough to bring tears to the eyes of anyone who ever learnt how to use a slide rule and, as the man said, once you’re in orbit you’re not halfway to the Moon, you’re halfway to anywhere.

Except I’m not sure that the numbers quite stack up here. I’m sure that the engineering is possible, I’m certain that it’s all worth doing and most certainly believe that we want to get up there and start playing around with other parts of the cosmos over and above Gaia. But, but…

April 25, 2012

Identifying the potential profits from asteroid mining

Filed under: Economics, Space — Tags: , — Nicholas @ 09:06

In his Forbes column, Tim Worstall spins a tale that is worthy of Dr. Evil or other movie bad guy multi-billionaires:

We’ve now had the announcement of the business plans of Planetary Resources. Enough to excite everyone who read Heinlein or Jerry Pournelle as a teenager. But the big problem is how might they actually turn a proft? To which the answer is manipulation of the futures markets.

[. . .]

So, imagine that they have reached one of the nickel iron asteroids, it is high in the platinum group metals, they can mine it and they can deliver those pgms to Earth. The moment everyone knows that there is some hundreds of tonnes of these metals on the way down the price will collapse. The answer? Sell the metals in advance, through the futures markets. Get today’s price for delivery in the future.

In fact, sell many more futures than the amount of metal which is to be delivered: go short. As an example, say platinum is $2,000 an ounce (not far off the real price, $62 million a tonne). Planetary Resources is going to deliver 100 tonnes. But instead of selling $6 billion’s worth of platinum for delivery in three months, sell 10 times as much: $60 billion’s worth*. When that 100 tonnes splashes down, in fact when the market knows that the 100 tonnes is likely to splash down, then the market price will fall. Substantially but for illustration we’ll say to $200 an ounce.

The company then delivers that 100 tonnes for which it is paid the $6 billion agreed on those futures deliveries. It still owes the market another 900 tonnes but it can now cover its short at $200 an ounce having sold the futures at $2,000 an ounce. Use the $6 billion that’s going to be incoming to do so and what do we have at the end?

The company has $60 billion incoming from having sold futures. It has delivered 100 tonnes at $6 billion and covered the short for that $6 billion. Net profit $54 billion minus the cost of the space program. Which is pretty good really.

But it gets better … and more Bond-villainous.

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