Commentary on Political Economy

Wednesday 19 July 2023


Rio Tinto chief says west recog­nises need to match China on min­eral sup­ply

Developed coun­tries are real­ising they must do more to secure min­er­als and metals as the west attempts to rep­lic­ate China’s sup­ply chain for resources, Rio Tinto chief’s exec­ut­ive has said.

China was ahead in hav­ing integ­rated sup­ply chains for many min­er­als, said Jakob Stausholm, but he detec­ted a more pos­it­ive atti­tude in the west towards min­ing, with more talks on how to accel­er­ate mine devel­op­ment.

“When China builds industry, they build a robust sup­ply chain. [The west] has relied on a mar­ket and a just-in-time prin­ciple. That’s a very good strategy until it is not a good strategy any more,” he said in an inter­view with the Fin­an­cial Times.

“China is in a good pos­i­tion because they have planned for it. The west is now start­ing to do what China has his­tor­ic­ally always done.”

Gov­ern­ments from Wash­ing­ton to Brus­sels are racing to secure mater­i­als required for clean and green tech­no­lo­gies. China dom­in­ates the sup­ply chain for many of the mater­i­als under­pin­ning the pro­duc­tion of elec­tric car bat­ter­ies and solar pan­els, with Beijing work­ing to hit peak green­house gas emis­sions by 2030.

“People real­ise there is a need for it. You will simply not be able to build a new-energy sys­tem and reduce the world’s CO₂ emis­sions without get­ting suf­fi­cient access to a num­ber of min­er­als,” Stausholm said of the shift in atti­tude towards min­ing.

“Min­ing ulti­mately comes down to soci­etal choices . . . in a num­ber of west­ern coun­tries, it has been very dif­fi­cult to get per­mits for min­ing. But there’s a lot of dia­logue these days on how to shorten the per­mit pro­cessing.”

In recent dec­ades min­ing and pro­cessing capa­city has shif­ted to devel­op­ing coun­tries, includ­ing China, where labour is cheaper and envir­on­mental reg­u­la­tion less strin­gent. That has led to the dimin­ished role of min­ing in many advanced eco­nom­ies, though Rio and other large miners includ­ing BHP derive a huge share of their out­put from Aus­tralia. The Inter­na­tional Energy Agency last week noted that more than 100 policy and reg­u­lat­ory inter­ven­tions tar­get­ing min­eral sup­plies have been enacted over the past few years, includ­ing in the US and Europe.

In one example of the change, Rio is try­ing to secure per­mis­sion to build a cop­per mine in Ari­zona that the com­pany believes could meet a quarter of Amer­ican demand for dec­ades.

West­ern gov­ern­ments are push­ing to reduce their reli­ance on China in the midst of increas­ing con­cern over Beijing’s mil­it­ary assert­ive­ness over Taiwan and crack­downs on civil rights and eth­nic minor­it­ies.

Rio’s largest share­holder is Chin­alco, the Chinese state-owned alu­minium pro­du­cer. The miner is one of the world’s biggest pro­du­cers of iron ore and cop­per and depends on sales to China, where it gen­er­ated 54 per cent of its $55.6bn of rev­en­ues in 2022.

Stausholm, inter­viewed at Rio Tinto’s Oyu Tolgoi cop­per mine in Mon­go­lia, which sup­plies the Chinese mar­ket about 80km away, said Rio had not faced pres­sure from west­ern gov­ern­ments to reduce expos­ure to China des­pite rising geo­pol­it­ical ten­sion.

The US gov­ern­ment estim­ates that demand for crit­ical min­er­als includ­ing rare earth ele­ments, lith­ium and cobalt will surge by as much as 600 per cent over the com­ing dec­ade. China cur­rently con­trols most of the pro­cessing and refin­ing of such min­er­als.

Global demand for refined cop­per alone is expec­ted to double to about 50mn tonnes annu­ally by 2035, accord­ing to fore­casts pub­lished by S&P Global and Rio Tinto.

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