Rio Tinto's CEO, Jakob Stausholm, has called for Western governments to take more decisive measures to hasten the clean energy transition. He suggested these governments could learn from China's industrial policies.
Speaking at the London Metal Exchange, Stausholm noted that the U.S. Inflation Reduction Act has yet to significantly impact manufacturing output. Launched in August 2022, the Act aims to invest $369 billion in new energy and climate change projects, providing subsidies and tax incentives for green industrial products.
However, a survey revealed that 40% of the major manufacturing investments announced in the first year since the Act's launch have been delayed or halted. This has affected mining and smelting companies like Rio Tinto (RIO, Financial), BHP, Teck Resources, and Alcoa, which had expected greater benefits from Western support for domestic manufacturing.
Stausholm criticized the Western policies, highlighting aluminum smelter closures as an example of failing to meet clean energy goals. He emphasized that globalization has led to a decline in Western manufacturing, citing a 77% drop in U.S. aluminum smelting capacity and a 22% decrease in Europe since the early 2000s. This decline is primarily due to high energy costs and increased Chinese smelting capacity.
Rio Tinto (RIO, Financial) has a network of aluminum smelters and is a major producer of copper and iron ore. The pace of the global energy transition significantly impacts its performance. The transition will drive demand for metals like copper, aluminum, and lithium, essential for building energy grids and infrastructure.
Stausholm pointed out that electrification progress is insufficient worldwide, with minimal growth in power production in the U.S. and Europe. He also mentioned that it's too early to judge the outcomes of policies like the Inflation Reduction Act, as there is no significant output growth or evidence of Western reindustrialization taking hold.
He suggested that Western countries could adopt China's strategies, including scaling industries, fast delivery, and closely integrated supply chains with supporting infrastructure.
