China’s Energy Transition: Copper’s Rise and Steel’s Fall Signal a New Era for Commodities

China’s rapid shift toward renewable energy and electric vehicles (EVs) is reshaping global commodity markets, creating a stark divide between “green metals” like copper and aluminum—critical for EVs and solar infrastructure—and traditional industrial materials such as steel and coal. Despite signs of economic moderation, the structural boom in clean energy and EVs is driving a demand surge for copper, positioning it as a top investment opportunity. Meanwhile, declining demand for steel and coal signals an irreversible shift in China’s industrial landscape. Investors should pivot toward copper plays and industrial metals tied to the energy transition while avoiding traditional steel and iron ore exposure.

The EV Boom: Copper’s Growth Engine

China’s new energy vehicle (NEV) sales surged 47.1% year-on-year in Q1 2025, accounting for 41.2% of all car sales. This growth, fueled by policy support and consumer adoption, is set to accelerate further. By Q2 2025, NEVs are projected to overtake traditional fuel vehicles in sales, driven by new models and extended subsidies. Each NEV requires nearly four times more copper than a conventional car, with battery systems alone consuming 80 kg of copper per vehicle. Plug-in hybrids (PHEVs), which dominated 38.9% of March 2025 NEV sales, are also copper-intensive. With annual NEV sales expected to hit 13.3 million units in 2025—a 20% increase—copper demand from this sector alone could grow by 500,000 metric tons this year.

Renewable Infrastructure: Solar and Wind Power Copper Demand

China’s renewable energy capacity additions in Q1 2025 were record-breaking: solar installations hit 23 GW (up 80% year-on-year), while wind added 13 GW (up 110%). These figures are just the beginning. The China Photovoltaic Industry Association forecasts 215–255 GW of solar capacity additions in 2025, while wind could reach 105–120 GW. Each GW of solar requires ~4,000 tons of copper, and wind turbines consume ~5,000 tons. Combined with EV demand, these projects could boost global copper consumption by 2 million tons annually by 遑, outpacing supply growth.

The Decline of Steel and Coal: Structural Shifts

While green metals thrive, traditional industries face a bleak outlook. Steel demand is weakening as China’s property sector—once the backbone of construction—contracts. Steel’s role in renewables is minimal compared to its dominance in real estate, and its carbon-intensive production clashes with climate goals. Meanwhile, coal consumption is falling as renewables displace thermal power. In Q1 2025, coal-fired generation dropped 4.7% year-on-year, contributing to a 2% decline in power-sector CO2 emissions.

Investment Strategy: Position for Copper, Avoid Steel

• Buy Copper Miners and Processors: Firms with low-cost, long-lived reserves (e.g., Freeport-McMoRan, Southern Copper) or those expanding in politically stable regions are poised to benefit.
• Industrial Metals Linked to Renewables: Aluminum (critical for solar panels and EV bodies) and nickel (for batteries) also present opportunities.
• Avoid Steel and Iron Ore: Falling demand and oversupply from legacy projects will pressure prices.

Risks and Catalysts

• Policy Uncertainty: China’s June 2025 deadline for renewable pricing incentives could delay projects post-Q2, creating volatility.
• Global Trade Dynamics: U.S. tariff policies and China’s export strategies for green tech may affect supply chains.

Conclusion: The Transition Is Irreversible

China’s energy transition is no longer a “story”—it’s a structural reality. Copper demand from EVs and renewables is set to eclipse supply growth, creating a long-term bullish cycle. Meanwhile, steel and coal are relics of the old economy. Investors ignoring this shift risk missing the next commodity supercycle. Act now: position in copper plays and green metals, and exit exposure to traditional steel and coal.