Almost a yearlong bull run between industrial metals is stumbling this month as the unwinding of an extensive stimulus in China reduces demand, underlining the increasingly pivotal role its state-led economy plays in global commodity booms.
China last year placed some $500 billion in state investment to prop up its epidemic-pummeled economy. The stimulus-induced massive imports of everything from crude oil to steel.
With Beijing aspiring to be a global leader in clean energy, many in the resources industry observed the boom as the source of a yearslong growth arc, or “supercycle,” particularly among metals crucial to electrification and batteries.
The imports pushed profit in global mining
A nascent global economic improvement supported the rally. But China, which estimates for as much as 60% of the world’s resource consumption, has in recent weeks drew back from its investment-led playbook as policymakers refocus on holding distressed loans and restoring the economy onto a consumer-led footing.
Among fresh concerns that some battery-making metals could be globally oversupplied, benchmark metals dropped in March from records a month earlier—nickel by 18%, cobalt 13%, and copper 9%.
Chinese investments had driven rallies in many metal markets from 12 months to late February, increasing some prices from epidemic lows.
Copper imports last year increased by 34% year-over-year to a record 6.7 million metric tons. Cobalt imports were up 45%. The broad shipments rocked other parts of the world, with home-appliance makers in India, for example, struggling to find copper.
Electric-vehicle producers outside China worried about battery supplies. Japan maxed out its power plants as it went flat on natural-gas imports.
The imports pushed profit in global mining. BHP Billiton Ltd., the world’s biggest miner, last month posted a record half-year dividend. LG Chem Ltd., the battery supplier to electric-vehicle producer Tesla Inc., stated its 2020 profit almost tripled year over year. China produces half of the world’s electric vehicles.
But unlike bulk resources such as iron ore and crude oil, China is much less reliant on global markets for the construction blocks of battery technology. China regulates the accumulation and processing of metals for mobile electrification.
It is massively investing in finding options for the conductive material it lacks, such as practicing aluminum—China has plenty—in place of copper.
It is heavily reliant on imports. Beijing is forcing for carbon neutrality by 2060 and has built up overseas resources, particularly in cobalt, lithium, and nickel—the essential trio for batteries.