Rio Tinto boss urges Western governments to accelerate transition to clean energy

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Rio Tinto chief executive Jakob Stausholm called on Western governments to “learn from China’s example” in industrial policy, urging them to do more to accelerate the transition to clean energy.

The US Anti-Inflation Act has yet to have a “significant impact” on manufacturing output, Stausholm said as he delivered the opening keynote at London Metal Exchange Week, the industry’s top annual gathering, on Monday.

An FT investigation found that 40% of the biggest US investments in manufacturing announced in the first year of President Joe Biden’s flagship IRA program have been delayed or cut.

That hurt mining and smelting companies such as Rio Tinto and rivals BHP, Teck Resources, Alcoa and Freeport-McMoRan, which had hoped for a bigger boost from Western efforts to shore up domestic production and encourage production of critical resources at home .

Stausholm pointed to the closure of aluminum smelters – and the metal’s important role in the energy transition – as an example of how Western policies have fallen short of their goals.

“One of the unintended consequences of decades of globalization has been the decline of manufacturing in the West,” he said.

“If we take aluminum production as an example, there has been a sharp decline in smelting capacity in the West over the last 20 years.”

U.S. aluminum smelting capacity has fallen 77% since the turn of the millennium, and European aluminum smelting capacity has fallen 22%, according to its presentation. High energy costs as well as China’s huge increase in smelting capacity contributed to the decline.

For Rio Tinto, which owns a network of aluminum smelters and is also a major producer of copper and iron ore, the speed of the energy transition is a key indicator of future mineral supply. It bought Alcan, the North American aluminum company, in 2007.

As LME week – a significant gathering of metals producers, consumers and traders – kicks off this week in London, the poor state of metal demand in developed economies such as Europe and the US has been a big topic of discussion among traders and manufacturers.

The energy transition will be a major driver of demand for metals such as copper, aluminum and lithium, as it will require an expansion of power grids and infrastructure.

“Most of the world is not moving fast enough to electrify,” Stausholm said. “In the US and Europe, electricity production has barely increased.”

“While it is still too early to tell what the outcome of policies like the IRA will be, we have yet to see a significant increase in production. At present, there is insufficient evidence to suggest that Western reindustrialization has taken place.”

He suggested that “Western countries can learn from China’s example of scale replication, rapid delivery and a tightly integrated supply chain with supporting infrastructure.”

On Monday, prices of iron ore, a vital ingredient for steelmaking, rose 10 percent on China’s stimulus measures announced last week.

Those measures, which include reducing the cost of household mortgages and introducing a $114 billion credit fund for capital markets, also propelled China’s stock market last week to its best week since 2008.

China is Rio Tinto’s biggest customer and Chinalco, the Chinese aluminum giant, is the company’s largest shareholder, holding 11% of the shares.