3 minute read
Bl.2.1 Changes in the composition and intensity of industrial commodity demand
68 CHAPTER 1 COMMODITY MARKETS
FIGURE B1.2.1 Changes in the composition and intensity of industrial commodity demand
Over the past 25 years, China's share of global energy consumption more than doubled, while its share of global metals consumption rose more than sixfold. The pace of China's commodity demand growth was much stronger than in India and other fast-growing, large emerging markets. Today, China accounts for more than half of the world's consumption of coal, metals, and iron ore. China's energy intensity has continued to decline, in line with the rest of the world; however, its metal intensity, which fell until the late 1990s, has since trended upward.
A. Share of commodity demand B. Coal intensity
C. Copper intensity D. Iron ore intensity
Sources: BP Statistical Review of World Energy 2021; British Geological Survey; International Historical Statistics; U.S. Geological Survey; World Bank; World Bureau of Metal Statistics; World Steel Association. Note: Intensity of a commodity is defined as the ratio of material used per unit of output. EMDE = emerging market and developing economies; kg = kilogram; ToE = tonnes of oil equivalent. A. Share of country or country group in world total. Latest data for iron ore is 2019. B.-D. GDP in constant 2015 U.S. dollars.
Industrial commodity demand since the nineteenth century
To place China's structural shift of industrial commodity demand in a broader and longer-term context, this section compares its recent industrial ascent with three historical episodes of industrialization.
• Industrial revolution in the United Kingdom, which began in the late 1700s and continued throughout the 1800s. Coal fueled the industrial revolution through its use in factories, railway locomotives, and steamships. An efficient fuel, it was essential for turning iron ore into the iron, and later steel, that
COMMODITY MARKETS CHAPTER 1 69
was used to build ships and railways (Clark and Jacks 2007). The advent of electricity in the late 1800s heralded a vast increase in copper demand for electrical wiring. The smelters in Swansea, Wales, processed much of the world's copper ore because of Britain's superiority in smelting technology (Evans and Saunders 2015; Radetzki 2009).
• Industrialization in the United States, which began in the mid-18OOs and accelerated in the 1870s, after the Civil War. Innovations in mining and smelting techniques developed in the United States resulted in a dramatic expansion of the global copper market. The first half of the 1900s featured electrification and mass production of steel, automobiles, telecommunications, chemicals, and mechanized agriculture.
• Post-WWIIreconstruction of Europe and Japan. The postwar reconstruction in
Europe was assisted by financing through the U.S. Marshall Plan (Eichengreen and Uzan 1992). The recipient countries underwent similar rapid growth in construction, infrastructure, and manufacturing as experienced earlier by the United Kingdom and the United States.
The remarkable trends in commodity consumption brought about by these industrializations are clearly evident in figure Bl.2.2, which shows country shares of global demand dating back to the 1800s for coal, iron ore, and copper.
Copper. During the industrialization cycles described above, the share of global copper demand peaked in the United Kingdom at 60 percent (the late 1870s), the United States at 58 percent (1945), and the combined shares of Western Europe and Japan at 40 percent (early 1990s). Although it took many decades to reach the peaks in the United Kingdom and the United States, the expansion in Europe/Japan was shorter. In contrast, China's share of global copper demand rose at unprecedented speed, from less than 10 percent in the 1990s to 58 percent in 2020. This share is broadly similar to the peak shares in the United Kingdom and the United States, suggesting that China may also be near its peak. Its consumption, however, shows no sign of plateauing.
Coal. The United Kingdom's share of global coal demand exceeded 60 percent in 1850 and has since steadily declined toward zero. The U.S. share peaked at 50 percent in 1918, whereas the combined shares of Western Europe and Japan hovered around 20 percent until 1970. Both have since declined, but coal remains a sizeable component of electricity generation in both areas. In contrast, China's share of global coal demand surpassed 50 percent in 2013, up from 20 percent in 1986. Its coal consumption has broadly plateaued in recent years, and the country intends to start phasing out coal beginning in 2026.
