Taiwan Shock Index: Impact on Mining

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. To explore and download the map, click here.

Sector Snapshot: Mining

Sectors Impacted Upstream: Equipment manufacturers, energy, and transportation

Sectors Impacted Downstream: Metals, green energy, heavy industry, construction, and electronics

A decoupling with China would result in a supply shock in commodities that China imports, extracts, and refines. In the long term, higher prices and opportunities to expand domestic and African operations may arise.

Short-Term Impact: Moderately Adverse

• Companies that are engaged in joint ventures with Chinese firms will have to navigate a narrow path to avoid the legal consequences of sanctions and the economic consequences of divestment.
• A rapid decoupling would result in an immediate, extreme supply shock in commodities that China extracts and refines. China’s market dominance in rare earths mining and processing cannot be quickly substituted.
  • China is the world’s largest producer of more than 20 different metals and minerals, including zinc, gold, aluminum, lead, and most significantly, rare earths.
• Companies engaged in the mining of cobalt and lithium would likely see sustained price increases for those elements. The price increase for inputs such as mining equipment from China would not match or negate the increase in revenue from lost Chinese competition.  
• Firms with logistical or other services that could be offered to mining companies in Central and East Africa may be able to capitalize on the increased access Western companies may gain to important mineral deposits concentrated in these areas.  
• Companies engaged in the production or sale of consumer electronics, batteries (including electric vehicles) and green energy generation will be hurt in the short term by the decreased supply of precursor components and materials.
  • China conducts roughly 63% of all rare earth mining, 85% of rare earth processing, and 92% of rare earth magnet production.
  • Rare earths and their derivatives are critical in the production of semiconductors, small magnets, and other necessary components for batteries, smartphones, electronic controllers, communications equipment, etc.
  • China manufactures 80% of the world’s solar PVs.

Medium to Long-Term Impact: Neutral

• Chinese capital and logistical constraints and challenges may open the door for Western companies to expand in the African market.
• This shock could result in Western governments loosening environmental regulations to allow for more domestic mining operations.
•  Opportunities exist for companies to capitalize on potential Chinese exits from certain competitive metal markets.
• Decoupling could create sticky higher prices for rare earth metals.
  • The current affordability of these minerals and their downstream products rests on an effort by the Chinese state to capture the market. Prices will approach a new higher equilibrium in a decoupled environment.
• Commodities like copper, zinc, and nickel will see price fluctuations, as both supply and demand dynamics will be altered.
  • The new equilibrium price for these metals will depend largely on future trade, regulatory and environmental policy responses, and China’s ability to evade sanctions.

Recommendations