put Europe on ropes

• This April, China’s copper reserves are approaching 500,000 metric tons.

• This week the price of copper reached its highest level in the last fifteen months, approaching €9,000 per tonne.

In the current month of April stock China’s copper production is approaching 500,000 metric tons, far exceeding the 300,000 metric tons accumulated over the same period in previous years. This increase, of course, This is not the result of chance. This is a response to a very well-calculated move by the Chinese government, which is seeking to stockpile as much as possible of one of the metals most in demand in some strategic industries, such as electronics, electric vehicles or renewable energy.

China is hoarding copper beyond its needs. And presumably he does this to control the global supply chain associated with this chemical element. Moreover, as one would expect, in the current situation, when the production of this metal is slowing down and China is hoarding it, its price is increasing significantly. In fact, it has risen by 10% in 2024 and this week reached its highest in fifteen months, thus touching €9,000 per tonne on the London metals market.

Xi Jinping’s government knows very well what it has on its hands. In fact, this is not the first time that it has accumulated essential raw materials for numerous industries to control the entire global supply chain. Probably under these circumstances The big loser in the medium term will be Europe. The old continent is undergoing a transition to support its energy infrastructure with renewables, and this Chinese strategy is likely to increase Europe’s already heavy dependence on the giant Asian country in this area.

China Applies Same Rare Earth Strategy to Copper

The plan that the Chinese government is implementing to control the copper market is similar to what it has been pursuing for more than a decade in the field of rare earth metals, which are also in high demand. And China dominates the rare earth metals industry with undeniable force. Over the years, more than 90% of this valuable resource has been mined here, according to the USGS. However, he not only controls production; It also dominates the processing industry, which requires rare earth elements to be processed before they can be used.

With production of 70% of the world market and control of 90% of the rare earth metals processing industry. China completely controls this market

. On December 21, the administration led by Xi Jinping decided to limit the export of some of its rare earth metal processing technologies, shaping a clear maneuver aimed at protecting its strategic interests in the midst of a confrontation with the United States and its allies. And in the current situation, the US, Europe, Japan or Australia do not seem to want to maintain this dependence on China any longer.

One strategy being considered is to reduce the use of rare earth elements as much as possible by replacing them with other raw materials. This is not easy to implement, but is possible in some use cases, although it usually requires a large investment in R&D. Tesla, for example, has confirmed that its next generation of electric motors will include magnets that won’t contain rare earth elements (though we still don’t know how it managed without them).

However, this is not the only path that the United States and its allies can take. Another option is to simply enter into agreements that allow them to marginalize China by removing it from the alliance’s supply chain. Actually, this plan is already being implemented. In early January 2023, Swedish state-run mining company LKAB identified a rare earth deposit in the north of the country that it estimated contained more than a million tons of the material. If exploitation of this deposit finally proves viable, Europe will take a very important step forward in its independence from Chinese rare earths.

Image | Omid Roshan (Unplash)

Additional information | Financial Times

In Hatak | The US and Japan are joining forces against China: they want to end its absolute dominance in these critical technologies.