Geopolitics Impact on Global Metals Supply Chains

China’s Dominance in Green Technology

Bank of America (BofA) Analysis

Bank of America (BofA) recently released a report delving into the impact of geopolitics on global metals supply chains. The report sheds light on China’s prominent role in green technology industries, particularly in the production of electric vehicles (EVs), batteries, and solar panels. This dominance has posed a competitive challenge for companies operating outside of China, prompting developed markets (DMs) to rethink their reliance on these supply chains due to geopolitical risks.

Expected Changes in Global Metals Consumption

Three Key Trends

The report outlines three significant shifts in global metals consumption patterns. First, there is a movement towards re-shoring, expected to boost metal consumption in DMs through increased fixed asset investment and manufacturing activities. Second, China, which curtailed its investment in green technologies last year, might witness a decrease in metals demand as trade barriers escalate. Third, technological advancements in DMs could result in the utilization of a different materials mix compared to the current norm.

Market Outlook and Risks

Bullish Stance Amid Uncertainties

Despite these transformations, BofA remains optimistic about metals like copper and aluminum, especially with a continued focus on the energy transition. Nonetheless, the report foresees potential risks, including the repercussions of a growing global trade conflict on economic growth and metals demand. Regional disparities in metal prices could also arise due to rising tariffs, while increased innovation may lead to unexpected shifts in price trends for certain metals.

Initiatives to Reduce Reliance on China

Pursuit of Diversification

DMs are actively working to lessen their dependence on China’s metals supply chains, driven by Europe’s past struggles with reliance on a single energy provider, Russia. This awareness has led to bipartisan efforts in the United States and the European Union to erect trade barriers, including investigations into industries like EVs, solar, and wind power. The aim is to bolster energy security and safeguard against overreliance on any single market.

Embracing Innovation for Industry Evolution

Redefining Competition in Mining

BofA concludes that while protectionism is not the ultimate solution, continuous innovation is poised to reshape the competitive landscape in the mining sector. This dynamic shift presents opportunities for new players to emerge and for existing giants to adapt to evolving market demands.