Meanwhile, green development continues to be a priority for Beijing, with the Third Plenum calling for the promotion of green development through carbon reduction, pollution reduction, and improvement of environmental governance systems and low-carbon development mechanisms.
With China’s goals to hit peak carbon by 2030 and carbon neutrality by 2060, the green economy will likely remain a major long-term area of growth.
We believe that metals that are linked to green energy, like copper and aluminium, will benefit from the transition that China is going through as Beijing moves its focus to the new three growth drivers – EV, batteries, and renewable energy.
Beijing’s supportive policies for the electric vehicle sector have pushed the EV market share of total vehicles sales to an all-time high of 41.1% in June and sales up 32% year over year between January and June, according to data from the China Association of Automobile Manufacturers.
Copper is used in everything from EVs to wind turbines and power grids. EVs use more than twice as much copper as gasoline powered cars do. Copper has also no substitute for its use in EVs, wind and solar energy.
Aluminium is also vital in the clean-energy transition. The lightweight metal is used in wind power, energy storage and hydroelectricity. Around 30% more aluminium is used in EVs than in internal combustion (ICE) vehicles.
Looking further ahead, we believe that, as demand from the traditional sectors, like property and construction, stagnates, the increasing adoption of EVs and clean power, will drive demand growth for green metals, including copper and aluminium.
However, in the short-term, risk remain to the downside for both physical demand and sentiment, particularly related to China and the slowdown in the country’s property and construction sectors. This also means, that prices for the two metals are likely to remain volatile, responding to any changes in Chinese policies.