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Welcome to Thoughts on the Market. I'm Rahul Anant, head of Morgan Stanley's Australia materials research team. Today I'll dig deeper into one of the vital necessities for the development of robotics. Critical minerals and why they're so vital to be front of mind for the Western world. Today, it's Wednesday, June 25th at 8:00am in Sydney, Australia. Humanoid robots will soon become an integral part of our daily lives. A few weeks ago, you heard my colleagues Adam Jonas and Sheng Zhong discuss how humanoids are going to transform the economy and markets. Morgan Stanley Research expects this market to reach more than a billion units by 2050 and generate almost 5 trillion in annual revenue. When we think about that market, and we think about what it could do for critical minerals demand, that could skyrocket. And the key areas of critical minerals demand would basically be focused on rare earths, lithium and graphite. Each one of these complex machines is going to require about a kilo of rare earths, two kilos of lithium, six and a half kilos of copper, one and a half of nickel, three kilos of graphite, and about 200 grams of cobalt. Importantly, this market, from a cumulative standpoint by the year 2050 could be to the tune of about US$800 billion, which is staggering. And beyond that market size of US$800 billion, I think it's important to drill a bit deeper because if we now consider how these markets are dominated, currently comes the China angle, and China currently dominates 88% of rare earth supply, 93% of graphite supply, and 75% of refined lithium supply. And China recently placed controls on seven heavy railroads and permanent magnet exports in response to tariff announcements that were made by the US And a comprehensive deal there is still awaited. It's very important that we have to think about diversification today, not just because these critical minerals are so heavily dominated by China, but more importantly, if we think about how the supply chain comes about, it's now taking circa 18 years to get a new mine online. And that's the statistic for the past five years of mines that came online, that number is up nearly 50% from last decade. And that's been driven basically by very long approval processes now in the Western world, alongside very long exploration times that are required to get some of these mines up and running. On top of that, when we think about the supply demand balance, by 2040, we're expecting that the NDPR or the rare earth market would be in a 26% deficit. Lithium could be in a deficit close to 80%. So it's not just about supply security, it's also about how long it will take to bring these mines on and on top of that, how big the amount of supply that's required is really going to be. I know when you think about 2040, it sounds very long dated, but it's important to understand that we have to act now. And in this humanoid piece of research that we have done as the Global Materials Team, which was led by the Australian Materials Team, we basically have provided 34 global stocks to play this thematic in the rare earths, lithium and rare earth magnet space. It's also very important to remember and keep front of mind that as part of the London negotiations that happened between US and China, no agreement was reached on critical military use, rare earth magnets and exports. Now that's an important point because that's going to play as a key point of leverage in any future trade deal that comes about between the two countries. This remains an evolving situation and this is something that we're going to continue monitoring and we'll bring you the latest on as time progresses. Look, thanks for listening. If you enjoy the show, please leave us A review and share thoughts on the market with a friend or colleague today.
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