There are all sorts of wars, a shorthand term beloved by politicians, economists and journalists. There is the trade war, the diplomatic war, the new Cold War, the war against the pandemic.
Yet another one is on the horizon – the infrastructure war – and it goes a long way to explain why commodity prices are soaring, with some of them, including copper and iron ore, hitting record prices in recent days. The war could trigger a new commodities “super cycle,” if we’re not in one already.
The infrastructure war is as much geopolitical as economic. It pits America against China, each of which is trying to lock up the resources required to rebuild their infrastructure and ramp up the transition to a clean economy, which will require vast amounts of copper, cobalt, nickel, zinc and steel to produce everything from electric vehicles (EVs) and wind turbines to “smart” power grids and solar panels.
CRU, a London metals consultancy, estimated that an EV requires 84 kilos of copper, 30 kilos of nickel and eight kilos of cobalt.
The problem for America and the rest of the Western world is that China probably has a decade-long lead in securing the supplies of these metals.