Trade War Turbulence Masks China’s Long-Term Metal Demand

The U.S.-China trade war has cast a shadow over China’s metal markets since 2020, with tariffs, export controls, and supply chain disruptions creating volatility. Yet beneath this turbulence lies a resilient narrative of long-term demand growth. China’s urbanization, decarbonization ambitions, and industrial expansion are anchoring a metals boom that transcends geopolitical headwinds. For investors, the key is to look beyond short-term noise and focus on the structural forces at play.

Copper: A Barometer of China’s Structural Growth

Copper, the “metal of modernity,” has been hit by trade tensions and China’s property slump, which accounts for 40% of its domestic demand. BMI Research’s revised 2025 price forecast of $9,500/ton reflects this near-term gloom, driven by weak property sales and construction delays. However, the metal’s long-term outlook is brighter.

Renewable Energy’s Role:
The shift to low-emission technologies is a game-changer. Solar panels, EVs, and smart grids require vast amounts of copper. For instance, a single EV uses 40 kg of copper, compared to 20 kg in a conventional car. China’s goal of 30% non-fossil energy by 2030 and its dominance in global EV production (75% of global sales in 2024) will drive demand. Analysts at ING estimate that renewable energy projects could add 1.5 million tons/year to copper demand by 2030.

Data Point:

Steel and Aluminum: Overcapacity vs. Infrastructure Stimulus

The steel and aluminum sectors face dual challenges: U.S. tariffs (25%) and China’s overcapacity crisis. Steel production dipped 1.5% in early 2025 due to weak property demand, while aluminum’s operating rates remain high (95%) due to stimulus-driven downstream demand.

The Silver Lining:
China’s ¥200 billion stimulus package for energy-efficient infrastructure (e.g., railways, smart cities) could boost steel demand by 1.2 million tons quarterly. Moreover, the push for carbon neutrality by 2060 is accelerating investments in electric arc furnaces (EAFs), which use less coking coal and more scrap metal. While EAF adoption is still low (10% of production), this shift could reduce reliance on imported iron ore and create new demand patterns.

Critical Metals: Geopolitics and Green Tech

Rare earth metals (e.g., neodymium, dysprosium), lithium, and cobalt are strategic for EV batteries, wind turbines, and defense systems. China controls 90% of rare earth processing and 60% of lithium refining, giving it leverage in trade wars.

• Export Controls: Beijing’s restrictions on rare earth exports have disrupted global supply chains, forcing buyers to pay premiums. This could inflate domestic consumption as Chinese firms prioritize local projects.
• Battery Metals: Despite U.S. tariffs on lithium-ion batteries, China’s dominance in manufacturing ensures steady demand. EV sales are projected to grow 8–10% in 2025, supported by subsidies and urban electrification.

The Trade War’s Hidden Catalyst

While tariffs and sanctions have disrupted trade flows, they’ve also accelerated China’s diversification strategy. Companies are relocating production to Vietnam and Malaysia to bypass U.S. barriers, creating new regional hubs. This “supply chain reshoring” doesn’t reduce China’s metal consumption—it redistributes it. For example:
- Solar Panels: Over 30% of Chinese production now occurs in ASEAN, but China still supplies 90% of the polysilicon.
- EV Batteries: Global demand for lithium and cobalt remains tied to China’s mining and refining capacity.

Data-Driven Insights

Conclusion: Why Investors Should Bet on China’s Metals

The trade war has created short-term pain for China’s metal markets, but it has not altered the fundamentals driving long-term demand:
1. Urbanization: China’s 55% urbanization rate (vs. 65% in the U.S.) leaves room for millions more city dwellers, requiring infrastructure that consumes steel, copper, and aluminum.
2. Decarbonization: Meeting its 2060 carbon neutrality goal will require $16 trillion in green investments, much of it in metals-heavy sectors like solar, EVs, and grid upgrades.
3. Global Dominance: China controls 50–80% of the supply chain for critical metals, giving it pricing power even amid trade tensions.

The Numbers:
- Copper demand from renewables could grow 50% by 2030, per ING.
- China’s infrastructure stimulus could add 0.5% to GDP growth in 2025, directly boosting metal consumption.
- Rare earth prices rose 40% in 2024 due to export controls, signaling sustained scarcity.

Investors should focus on companies exposed to China’s green transition (e.g., lithium miners, copper smelters) and those benefitting from regional supply chain reshaping. The trade war may rattle markets, but it cannot derail the structural forces propelling China’s metals demand forward.