China’s Metals Dominance Influences Global Supply, Says BofA

Bank of America (BofA) has published a report assessing the effects of geopolitics on global metals supply chains, emphasizing China’s pivotal role in green technology sectors.

The report indicates that China’s preeminence in producing electric vehicles (EVs), batteries, and solar panels poses a competitive challenge for companies outside the nation. As a result, developed markets are reevaluating their reliance on these supply chains due to geopolitical uncertainties.

BofA identifies three anticipated changes in global metals consumption patterns. Firstly, the movement towards re-shoring is expected to boost metals consumption in developed markets through increased fixed asset investments and manufacturing activities.

Secondly, China’s slowdown in investment in green technologies last year could lead to a decline in metals demand amid rising trade barriers. Lastly, technological advancements in developed markets may result in a different mix of materials being utilized compared to current practices.

Despite these changes, BofA remains optimistic about metals like copper and aluminum, especially with a continued emphasis on the energy transition. However, the report also highlights potential risks, including the consequences of an escalating global trade war on economic growth and metals demand.

Additionally, regional metal prices could experience significant fluctuations due to increasing tariffs. Investment in innovation may foster greater efficiency and substitution processes, potentially altering price trends for various metals.

The report points out that developed markets are actively working to decrease their dependence on China’s metals supply chains. This strategy comes in light of Europe’s experience with an over-reliance on a single energy supplier, leading to lessons learned about energy security.

With China’s industries grappling with structural overcapacities, there are implications for major employers in both the United States and Europe. As a result, there is bipartisan support in the U.S. and within the European Union for increasing trade barriers, including anti-dumping investigations related to the EV, solar, and wind sectors.

BofA concludes that while protectionist measures may not be the definitive answer, innovation could ultimately reshape the competitive landscape in the mining industry, leading to the emergence of new winners and losers.