Presentation to the International Conference on Magnesium

Global Market Strategies for Magnesium
by Matt Lorin, Galaxy Trade and Technology
presented at the 7th International Conference on Magnesium
November 20, 2020

In my role as Vice President for Strategy at Galaxy, I bring together two areas of interest that are a metaphor for our company: the importance of global environmental security and the power of civil society.

As we all know, metals are not just at the core of China’s domestic and export markets, but also at the heart of the world economy. Metal prices are not only important to manufacturers and end-users but have long been used as a tool for monitoring global economic and market conditions.  Metals, therefore, are a powerful representation of our global interdependencies, starting with China’s relationship with the world.

Since we believe magnesium is a greener metal, we want to know how to help bring magnesium to market? What will governments, banks and private enterprise have to do for magnesium to become a major metal?

The simple answer is — absolutely nothing.  We do not have to do anything. It will happen on its own. The forces of nature are on our side.

What we are really asking is; what can be done to bring this greener, lighter metal to market faster, more efficiently and sustainability?  The answer is that there are many things we can and should do. Some are about human behaviour and systems, others about human emotions and perceptions.

We need to fashion the ways we mine, fabricate and trade this green magnesium to model the human behaviour and system processes that will strengthen our relationships with each other and with our planet. In short, we want more trust-building, less fear and suspicion; greater stewardship and strategic thinking — less exploitation; and wider partnership and collaboration — less isolation.

As we all know, prices of metals, like prices for any commodity, are essentially determined by supply and demand. It is, theoretically, quite simple. However, to assume that information on supply and demand are available and accurate would be a mistake. In general, the less information available, the greater volatility. Volatility as a characteristic of markets is not good for good actors. In this time of uncertainty, the more stability we can bring to markets, the better.

More mature metal markets are characterized by more transparent price discovery, as well as option and forward contracts that reflect what stakeholders expect metal prices to be in the future. By storing and publishing data, markets can provide some degree of risk reduction for buyers and investors. Attracting stakeholders to magnesium and its potential, without asking anyone to take on more risk.

So, first things first: civil society and governments should focus on enhancing transparency and accountability. Transparency is an essential strategy to prevent fraud, waste and to build trust.

Transparency plays a critical role in ensuring the efficient allocation of resources by allowing a market to evaluate and impose discipline on policy. By providing stakeholders with access to information relating to financial transactions, transparency can effectively deter bad behavior and build confidence in the marketplace.

So, step one: we ask everyone to join us in committing to identifying practices and approaches for leveraging new technologies to promote information transparency.

Another aspect of building trust through transparency is confronting the fear of unsure “access” to the commodity itself. How do we reduce the perception (and current reality) that access to high quality magnesium is in question?

Since one of the greatest challenges of bringing magnesium to market today stem from a lack of confidence in supply. Indeed, supplier performance (in terms of risk, reliability and quality) and ensuring sufficient supplier capacity to meet demand rank as a top challenge.

Here, we believe that “trust” is a powerful tool against fear. Trust is not only information transparency; it is also about proximity. The closer we feel to and the closer we actually are to things, the more confidence we have that we can get to them.  The perception is that if I can reach it, I can have it… What can be done to move our magnesium closer, literally and figuratively, to people who want it and need it?

First, we create physical “reserves” in places closer to our stakeholders.  We need to move quantities of our asset from China’s mining centers to ports of commerce in the rest of Asia, Europe and North America.  Tonnes of our asset need to sit in places like Rotterdam. Maybe even the Native American, sovereign deepwater port of Annette Island just miles off the coast of Alaska.  When things go wrong, they are everyone’s insurance against supply chain and political risk.

Second, we improve our logistics and supply chain management such that people feel they have more reliable access, even if the asset lives over the horizon.

We need to learn lessons of the past and make corrections in light of more weather, terrestrial and pandemic uncertainty.  Few stakeholders have a holistic view of their entire supply chain network. Such a view considers all supplier and customer flows simultaneously. Instead of perpetuating a piecemeal approach, we need to manage logistics holistically. This means:

Managers must determine which modalities (truck, rail, and boat), over which routes and junction points, optimize the flow of goods. They must assess trade-offs and implications for inbound and outbound logistics, including potential synergies with supplier and customer optimization.

Managers must consider the number of warehouses and distribution centers and where they are located.

Finally, perhaps most importantly, we should endeavor to return to our roots, when the world was driven more by people-to-people power than by government. As in the foundation of our company, we believe in citizen diplomacy: the concept that every individual has the ability to engage across cultures and create shared understanding through meaningful person-to-person, enterprise-to-enterprise interaction. The concept is not a terribly academic one; it’s not confined to universities or governments. It is how we make the world work better and more sustainably. We create greater and greater interdependencies while building trust and reducing risk.

If we are going to take advantage of this moment, then the challenge is not really economic, nor cultural, not even political. It is for people to get together and to leap ahead of governments — to work out, not one method but thousands of methods by which we can gradually learn how to work better together.

In the context of the global magnesium trade, this means we will all need to increasingly focus on building partnerships with customers, suppliers and even competitors in order to achieve innovation, improve supply chain efficiency and maximize growth and profitability

At the end of the day, having an asset is both an opportunity and a responsibility. Whatever is done, no single actor can go it alone.  Government to government, enterprise to enterprise, people to people. These concepts are deeply rooted in Chinese tradition.  We need leadership measured in longer terms.

In the face of complexity, we need clarity.

In the face of instability, we need continuity.

In the face of isolation, we need cooperation.

The human touch.

This is what Galaxy stands for.