Bl.2.3 Consumption of industrial commodities per capita and income per capita

72 CHAPTER 1 COMMODITY MARKETS

BOX 1.2 Industrialization of China and commodity demand in historical context (continued)

FIGURE B1.2.3 Consumption of industrial commodities per capita and income per capita

The growth in China's per capita consumption of copper and coal has been similar to the run-up in other industrializing nations. However, the pace and scale of China's per capita consumption of iron ore—a key raw material in steel production—is unprecedented, reflecting China's rapid economic development, industrialization, and urbanization. The primary sources of demand for steel in China are residential property construction, public infrastructure, and manufacturing.

A. Copper in China, the United Kingdom, and the United States B. Copper in Germany and Japan

C. Coal in China, the United Kingdom, and the United States D. Coal in Germany and Japan

E. Iron ore in China, the United Kingdom, and the United States F. Iron ore in Germany and Japan

Sources: Maddison Project Database 2020; World Bank; and sources for figure B1.2.2. A-C. GDP per capita in constant 2011 U.S. dollars. Lines show the evolution of income and commodity consumption per capita. When consumption is not available, apparent consumption (production + imports exports) is used. When data are missing, especially in the earlier years, linear interpolation is applied. A.B. Data from 1820 (A) and 1850 (B) to 2020. C.D. Data from 1820 (C) and 1872 (D) to 2020. ToE = tonnes of oil equivalent. E.F. Data from 1855 to 2019. China's iron ore consumption based on gross weight.

COMMODITY MARKETS CHAPTER 1 73

been used as an anticorrosion material to galvanize steel. Zinc is also used as an alloy in the manufacturing of electrical components, and to produce zinc oxide, which is used for rubber manufacture and skin ointment. As with other metals, China accounts for half of global consumption owing to its vast steel production. Zinc is mined in many countries, and, like other metals, production has shifted from AEs to EMDEs. The expansion has been most notable in China in the 2000s. The country currently produces more than one-third of global mine output, with Australia and Peru the next largest producers (chapter 4).

The price dynamics of zinc are broadly similar to those of lead, although price peaks have been sharper. Early cartel behavior influenced prices, and there have been several attempts at cartel action since (Stuermer 2018). For example, some European producers in the 1960s attempted to form a cartel but ultimately failed to stabilize prices (Tolcin 2012).

Nickel

Nickel has been known since ancient times, but it was not available for use until technological improvements during the industrial revolution made its separation from other minerals possible. The first commercial nickel smelting facility was developed in Norway in 1848. Nickel's resistance to corrosion makes it an important alloy, especially in stainless steel, which accounts for about 70 percent of nickel demand. Nickel is also used as an alloy for nickel steels, nickel cast iron, brass, and bronze. Other uses include rechargeable batteries and lithium-ion batteries, used in electric and hybrid vehicles.

Real nickel prices experienced a broad decline during the 1900s. Post-WWII demand helped lift prices through the 1970s, but the recession of the early 1980s and the emergence of lower-cost suppliers drove prices lower. Following the breakup of the Soviet Union, large volumes of nickel were released into the global market. Combined with weak demand during the East Asian financial crisis, this flood pushed prices to historical lows in 1998. The demand boom in China (which today accounts for more than half of the world's nickel demand), alongside recent growth in use in batteries, reversed the downward price trend.

Nickel is found in two types of ores: sulfide ores, which are typically found in underground rock formations, especially in Canada and Russia (figure 1.10), and laterite ores, found near the surface of humid, tropical areas—such as Indonesia, New Caledonia, and the Philippines. Sulfide was originally preferred because of its higher purity and less complex production process, but technological improvements in laterite ore (the majority of global reserves) made it profitable in the 1970s and it is used extensively today.

Historically, New Caledonia has been a key nickel supplier, but Canada emerged as the dominant producer in the 1960s. Canadian International Nickel Company enjoyed a near monopoly outside the former Soviet Union, setting global prices and thereby