“There are three traditional drivers of commodity demand – continued economic growth, urbanization and industrialization. Where that industrialization happens is one of the big questions,” Stausholm told delegates at the seminar on Monday September 30, part of the exchange’s LME Week event.
“One of the unforeseen consequences of decades of globalization has been the decline of manufacturing in the West,” he said. “If we take aluminium production as an example, there has been a stark drop in Western smelting capacity over the past 20 years.”
According to the International Aluminium Institute, aluminium smelting production in western and central Europe totaled 2.7 million tonnes in 2023, while China’s estimated production was 41.6 million tonnes.
Two decades earlier, western and central Europe produced 4.2 million tonnes of primary aluminium, while China only made 6.6 million tonnes.
Stausholm noted that Europe’s deindustrialization has been further exacerbated by recent geopolitical and civil challenges across the continent.
“The Covid-19 pandemic, the war in Ukraine and the rise of populist politics have exposed some of the cracks caused by chronic deindustrialization. Many governments are now seeking to reverse that trend,” he said.
As a result, Stausholm said that “reindustrialization is an opportunity for mining and processing companies.”
Reindustrialization alongside energy transition
“With the right support and partnerships, we can provide a secure supply of materials that are critical for economies to grow, while supporting the energy transition,” he said.
Stausholm highlighted low-carbon aluminium as a prime example of a commodity that is smelted in Western nations while simultaneously supporting the energy transition.
Fastmarkets most recently assessed the aluminium low-carbon differential, P1020A, Europe, at $0-30 per tonne on September 6.
Hydro-power-rich nations such as Canada, Norway, Iceland and New Zealand were all leading the charge to low-carbon aluminium produced outside of China. These low-carbon solutions can be promoted through the shift toward industrial policies that create green jobs while also strengthening energy security, such as the Inflation Reduction Act in the US and the European Green Deal.
But Stausholm said that these have not yet resulted in any “significant increase in output” and that “there is currently not enough evidence to suggest that Western reindustrialization has taken hold.”
Learning from China
But lessons can be learned from the successes of the Chinese industry.
“The reality is that China, and increasingly other Asian economies, are continuing to strengthen their competitive positioning and outpacing the rest of the world,” Stausholm said.
“The upshot is that there is plenty of demand to be unlocked from reindustrialization, not least if Western economies can learn from China’s example of replication at scale, delivery at speed, and a tightly integrated supply chain with supporting infrastructure,” he added.
More specifically, China is an “outlier” when it comes to the electrification of its industry.
“Addressing climate change is about electrifying society, it’s a very physical transition,” he said, and it necessarily means a heavy reliance on the grid and an increasing demand for copper, aluminium and lithium – to name a few.
According to the International Energy Agency (IEA), China’s electricity production in 2022 totaled 8,950,643GWh, up by 560% from 2000. Its consumption per capital has shown similar strength, rising by 516% over the same period.
“If the world was pushing harder to fight climate change, there would be much more demand for our materials,” Stausholm said.
Demand for copper in China rose to 15.4 million tonnes in 2023, from 1.8 million tonnes in 2000, according to Fastmarkets’ analysts.
Fastmarkets’ weekly copper concentrates TC index, cif Asia Pacific, was most recently calculated at $2 per tonne on September 27, up from the all-time low of $(5) per tonne on June 21.
“Once the world hits its stride to achieve its net zero target [for carbon emissions],” Stausholm said, “we are confident we will see even greater demand.”
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