Why China holds all the secrets for the energy transition

The global energy transition is reshaping commodity markets, and Australian investors would do well to monitor China’s actions closely.

With the rise of electric vehicles (EVs) and renewable energy, demand for key metals like copper, lithium, and nickel is set to skyrocket, and China is at the heart of this transformation.

Speaking on the future of commodity markets, Robin Griffin, vice president of research at Wood Mackenzie, explained how energy and metals markets are becoming increasingly intertwined.

“Metals markets are tending to track energy markets more closely,” Griffin said. “As metals really become sort of energy commodities, the synchronisation has been increasing over time.”

China’s dominance in the EV sector is undeniable, with the country’s government subsidies and policy-driven initiatives propelling EV penetration rates to 45.8 per cent, with expectations of reaching 80 per cent by 2035.

“China really is going extraordinarily well,” Griffin said, adding that China’s aggressive policies are driving global EV adoption.

Globally, China accounted for nearly 60 per cent of new electric car registrations in 2023, while Europe accounted for just under 25 per cent and the United States just 10 per cent.

This rapid growth is expected to quadruple battery demand by 2035, creating a massive surge in demand for battery raw materials.

“There’s a huge impact still on the demand for metals,” Griffin said.

China’s influence extends beyond EVs to renewable energy, with the country’s leadership in solar power production being driven by reduced production costs and overcapacity in solar module manufacturing.

“China is a real standout in terms of its competitiveness in solar and wind,” Griffin explained.

For Australian investors, these dynamics present a dual opportunity and challenge.

China’s dominance in green technologies underscores its ability to shape global demand for metals. Simultaneously, Australia’s vast reserves of battery materials position it as a key supplier in the clean energy transition.

The message is clear: as “low-carbon tech is very metals intensive”, Griffin said, the mining industry must rise to meet the surging demand.

Watching China’s policies and market developments could offer Australian investors critical insights and potential advantages in this rapidly evolving landscape.