Podcast: Space raiders - the extraterrestrial hunt for commodities

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[00:00:07.930] - David Brett

Welcome to the Investor Download the podcast about the themes driving markets and the economy now and in the future. I'm your host, David Brett. Welcome back to the second part of our two part series on the new space race. In the first show, we covered what's driving the new space race, who's leading it and the pros and cons of it. In part two, we're going to be discussing the potential conflicts and how they might be resolved. That'll come later in the show. Tim Marshall, author and journalist, will again be our guide to space.

[00:00:49.710] - News clip

This isn't just a first for India, it's a first in lunar exploration. No one successfully landed near the Moon's south pole before and it's a place of real interest for space science and also space exploration. It's one of the coldest places in the solar system where water and other important chemicals are frozen in deep, shaded craters.

[00:01:11.190] - David Brett

India's recent historic first landing at the Moon's south pole has paved the way to a part of the moon which scientists believe is rich in water and helium three. So in the first part of the show, we'll be discussing the race for commodities in space. And I'll begin by asking Tim just how important that commodities race in space is.

[00:01:35.310] - Tim Marshall

It's an important part of it. I mean, NASA is already giving out licences for to go there and get X out of the ground as an experiment. And forgive me, I haven't got the facts and figures to my hand, but they're like paying some private companies, all right, we'll give you a dollar a tonne. It's symbolic. It's because the private companies are prepared to take that risk. Some Japanese companies who are very good at developing potential space mining equipment, who have said, yes, we'll go up there, we'll spend all that money, we'll get X amount of rocks or whatever, and we will bring them back and you'll only give us a dollar. Because it's worth it for... NASA pays for them to get up there and then just gives them a dollar. It's worth it to them for the expertise, and it's worth it for the private companies for the expertise, as they then try and work on the proper economic modelling of it. So they're very much a part of it. I mean, everyone's heard now of SpaceX, but there are still the big companies. Boeing is still involved in space. Airbus, Lockheed Martin, Thales.

[00:02:52.220] - Tim Marshall

Thales Alenia is a French Italian co-venture. Well, separate, obviously, to the American bid for space. China's got something called One Space,a big Company, and Space Pioneer is another of their big companies, and they have more than 100 startup space companies China. Some of them will be as big as SpaceX, obviously, we don't know which ones. And they are working hand in glove with the Chinese state as well. So, as we mentioned earlier, this is the big change, basically, the nation state, other than China, possibly Russia, they wouldn't do it on their own anymore. I don't know the exact breakdown, but it's pretty much 50 50 when it comes to Americans.

[00:03:49.110] - Announcer

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[00:03:56.570] - David Brett

Okay, so if we've got companies offering their services to go up to space and go and get these raw materials, what is standing in the way? Or what will prevent what's happening here on Earth, where we've got these political tensions over who owns the rights to what?

[00:04:11.970] - Tim Marshall

Yeah, those tensions are already mirrored very much in space. I mean, you've got for example, I mean it's a great example, the Ukraine war. Russia knocked out some of the base stations for Internet in Ukraine. Musk flew in thousands of dishes and terminals to connect the parts of Ukraine that had lost Internet to his satellite constellations and got them back up and running. Russia then tried to dazzle his satellite constellations and in veiled terms said they were military target. So we've already seen the... And so there's an American private company helping, because that's what happened the Ukrainian military course harnessed this Internet access to target Russians. So you've got an American company, private enterprise, helping the Ukrainian state to fight the Russians who fire dazzling equipment back up. It's fascinating. There's one of the tensions. Another one is the inability of the great powers to come to an agreement to stop testing hitting satellites with ballistic missiles, because that has happened with their own satellites to test. Russia, China, USA and India have all fired ballistic missiles of their own satellites and hit them. They can't get an agreement to stop doing that. That's pretty negative.

[00:05:41.320] - News clip

China and Russia have the weapons to target America's most valuable assets, our satellites.

[00:05:48.010] - News clip

Well, the United States has put both countries on notice announcing that attacks on satellites could provoke a military response.

[00:05:56.330] - Tim Marshall

And then when we come to the big romantic picture of humanity venturing out into space, it isn't it's the Americans and allies venturing into space, and then it's the Chinese led alliance venturing into space, worlds apart, literally. And I think that's going to be the template for the rest of the decade, because given the tensions on Earth, there's no way they're going to work, except in rare examples, they're not working together. And of course, that will increase tensions. And the moon is a good example. The Artemis Accords, led by the states have got this clause where you can declare a safety zone on the moon. After all, you've spent all that money getting there and finding the right place to mine and starting to dig, and then someone rocks up next to you and says, I'm going to dig there as well. Fine, but that's not a law. That's a bunch of guys that have agreed something, but they haven't agreed it. So, yeah, you can just see these tensions being replicated.

[00:06:59.190] - David Brett

Yeah. So are these talks about the rules of law within space ongoing at the moment?

[00:07:04.180] - Tim Marshall

Well, they are, but they're just not making any progress. I mean, we have the Outer Space Treaty 1967, but it's 50 years out of date. There were no such things as lasers, laser weapons, and there are laser weapons now, directed energy beams, dazzling equipment, et cetera. So we don't have the treaties where we've agreed. We will do X, but not Y, which are fit for purpose for 2023. That's a serious problem. And I mentioned the Artemis Accords in this idea of safety zones. Congress bans NASA from working with China, so there is no chance of cooperation there. The Russians are hardly about to join the Artemis Accords or indeed be invited. So I would argue that we are at a standstill. Of course, everyone's aware of the new tech, aware of the problems that they're bringing, looking at ways to get solutions to this, but they're not actually going anywhere. I mean, the United Nations has a space office and its office is a chocolate block full of very worthy papers about how to solve all this, and they're all gathering dust. So as long as we have the tensions here until they subside and we reach another detent, I'm afraid I don't see much progress on that.

[00:08:28.530] - Tim Marshall

I liken it to the Klondike Gold Rush. Nobody stopped as they were scrambling across the ice with their pickaxes to say, actually, hang on a minute, let's just take this slowly. And how big is your pickaxe? Well, okay, I won't have a bigger no, no, you just get there. And I'm afraid that's what's going on now.

[00:08:46.870] - Announcer

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[00:08:53.710] - Speaker 5

We struggled on Earth to get along nicely and play together nicely. And that comes into play when we're talking about all these rockets that are being built and the space stations and whatever ports are going to be placed on the moon. These are going to be kitted out by various different countries. I mean, how difficult is that going to be with supply chains? Supply chains with various different countries contributing to all these buildings being made?

[00:09:18.790] - Tim Marshall

Yeah, because you need a lot of lithium and you need a lot of super semiconductors. Actually, that's an interesting super semiconductor is an interesting one. Because as you'll know, the Dutch and the Taiwanese are the world leaders in that technology and they both just agreed with the Americans they're not handing that tech to the Chinese. There's a new law gone through Congress about it. They are ten years ahead. So that's potential problem again, in the, I think, unlikely event of a war over Taiwan, I think there'll be an immediate economic crisis globally and well, it'd be about a lot of things, including shipping trade, but it will also be about the semiconductors because we saw what happened during COVID. I mean, I'll give you a small example I've got a Volvo car. It's got those the wing mirrors have those lines that flash if someone's coming up when you're inside. Well, mine don't because that particular chip wasn't available during COVID and you can't apparently put it in afterwards. So I have the little lines, they just don't do anything. That's the sort of thing that would happen in the space race. I mean, I suspect many of your listeners don't care because they have far more important things to worry about in the supply chains for, let's say, well, Volvo or the German car industry or everything else that we're doing.

[00:10:48.670] - Tim Marshall

Nevertheless, it would have a massive knock on effect because these things have thousands of semiconductor chips in them. I mean, just I think a ballistic missile has something like 74 chips in it. That's just one ballistic missile. So that's a problem. Obviously, the competition for things like lithium on Earth is heating up. So if you don't get your supply chain of that and all the other stuff you need, it'll be very hard for you to be a leader in the space race. But that's the simple economics, the way it is with the car industry. I don't know if you saw, but I thought the Germans pulled off a blinder recently. Schultz went to Argentina and said, stop sending all your lithium to China to be processed. We'll build your factories for you and then you'll give us a guarantee of lithium. It's one of those things that's so blindingly obvious when it's done. So, yeah, they need the supply for the same reasons as we all need the different supply chains here on Earth.

[00:12:04.230] - David Brett

Actually, that brings us on nicely to the last question.

[00:12:06.570] - David Brett

What technological advancements are necessary to make space exploration more accessible and sustainable?

[00:12:15.050] - Tim Marshall

Accessible is already happening. We discussed the miniaturisation of various things. There's more efficient fuels, there's the Reusable rockets, there's the idea of solar panels in space. All that is sustainable and reducing the costs. But no, I think we have to go through that period where it's not a very environmentally friendly industry before you can get to the part where it is an environmentally friendly industry. I mean, you can make the argument with an electric car. A car maker has to make and have enough profits of petrol cars before it can have investing in electric cars, which I know are also polluting, but not as bad. And then they move towards making things more and more efficient and you go through that transition. The space industry, I think, will have to be the same.

[00:13:18.670] - David Brett

Hey, Tim, actually, just one final, final question. In your view, when do you see it, that we might see regular space launches for people going onto the moon, spending a few weeks out there, coming back with some raw materials and that being just a regular thing rather than an absolute newsworthy thing?

[00:13:35.460] - Tim Marshall

Not this decade. In this decade, we will see more and more very, very wealthy people going all the way out into space and hopefully back. Like Musk said, I want to die on Mars, just not on impact. Twenty-thirties, ten years. I think even that's a bit optimistic. I don't see how you can make it economically viable for mass space tourism over the next 20 years. But I am remembering Kitty Hawk or the Wright Brothers Flyer One, as it's properly called, 1903 it took off from memory. And it was about 35 years later that more Americans were travelling by plane than by train. Just from that one kitty Hawk taking off, 35 years later millions and millions of people. So things can happen. So if we get technological breakthroughs, then, yeah, sure, 2030s. Otherwise think we're looking at 2040s.

[00:14:51.880] - David Brett

And i presume if you sell a couple more books, you'll be on the Virgin Galactic fire very soon.

[00:14:57.150] - Tim Marshall

If you want to lend me that money for 50 years, actually I've not got that long. Yeah, I'll pay you back in 30 years.

[00:15:05.250] - David Brett

Lovely. I'll take it. Tim Marshall, thank you so much for joining us.

[00:15:08.150] - Tim Marshall

Thank you.

[00:15:14.810] - David Brett

Well, that was the show. We very much hope you enjoyed it. If you want to find out more, please head to Schroders.com/insights. And we're endeavouring to record as many of these shows in the studio on video. And if you want to watch them in their full, unabridged version, then go to Schroder's YouTube channel. If you want to get in touch with us, it's schroderspodcast@schroders.com. And remember, you can listen, subscribe and review the Investor Download wherever you get your podcast. New shows drop every Thursday at 05:00 p.m. UK time. But above all, keep safe and go well. Cheers.

[00:15:51.190] - Announcer

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