The global trade war will shift from fossil fuels to metals and raw materials. Russia’s invasion of Ukraine highlighted the risk of relying on autocratic states for energy. Even if Europe’s gas crisis eases, Western manufacturers’ focus will switch to reducing China’s dominance in materials key to a cleaner economy.
Europe needs to cumulatively spend $5.3 trillion on clean energy projects by 2050. That requires a six-fold increase in the global production of copper, lithium, graphite, nickel and some rare earths by 2040, International Energy Agency estimates show. Yet China dominates the processing, and to a lesser extent the extraction, of many critical industrial ingredients. It refines 58 percent of lithium produced globally, 65 percent of cobalt and over one-third of nickel and copper. Ostracized Russia is also big in nickel, palladium and cobalt. Europe, which imports between 75 percent and 100 percent of most metals, looks particularly vulnerable.
In response, Western companies can strike deals with suppliers in friendly countries, open mines at home, or boost recycling. The first approach is the fastest and is underway. In 2022 carmakers have ramped up partnerships with mines and invested directly in mining projects, data from Fitch Solutions shows. General Motors (GM.N) took a stake in Australia’s Queensland Pacific Metals (QPM.AX) to secure nickel and cobalt for green SUVs.