China’s emergence as a dominant force in industrial metals is increasingly being driven not only by its access to raw materials, but by the scale and structure of its electricity system as it emerges as the world’s leading “electrostate”.

A report by Rhodium Group argues that China’s ability to generate vast quantities of cheap and reliable power has become the decisive factor underpinning its leadership in aluminium, steel and processed critical minerals. The country produces roughly one-third of the world’s electricity, a scale that allows it to sustain energy-intensive industries that would be uneconomic elsewhere.

“Electricity, rather than raw material access, is the critical input underpinning China’s metals ecosystem,” the report states, highlighting how power availability shapes the geography and competitiveness of industrial production.

The model rests on a dual-track energy system. Coal continues to provide the backbone of China’s grid, ensuring stability and predictable pricing for heavy industry, while rapid expansion in renewables — including wind, solar and hydropower — adds incremental to the supply of cheap renewable energy that is almost infinitely scalable. This combination has enabled Beijing to expand capacity without sacrificing reliability, a balance that many advanced economies have struggled to achieve.

Energy-intensive processes such as aluminium smelting and steelmaking are closely tied to this system. Aluminium production in particular is effectively a form of “solidified electricity”, and China’s power surplus has allowed it to become the world’s largest producer. The same dynamic extends to the refining of lithium, cobalt and rare earth elements, where processing — rather than extraction — accounts for the majority of value creation.

“The country’s power system and metals sector are deeply intertwined, with electricity pricing and availability directly shaping global competitiveness,” the report notes.

Regional industrial policy reinforces this integration. Provinces rich in coal or renewable resources host clusters of metals production, reducing transmission costs and aligning local economic incentives with national supply chain objectives. This has enabled China to build an ecosystem in which mining, refining and manufacturing operate in close proximity to abundant power.

The implications extend beyond cost advantages. Replicating China’s position would require competing economies to match not only its resource base but also its electricity infrastructure and policy coordination. In liberalised power markets, where prices are often higher and more volatile, such alignment remains difficult.

At the same time, the model introduces structural tensions. Continued reliance on coal complicates China’s decarbonisation commitments, while overcapacity in both power generation and metals production raises concerns about inefficiency and financial risk.

Yet the central dynamic remains unchanged. As the report concludes, “future competitiveness in industrial materials is likely to depend as much on energy strategy as on mineral resources,” reinforcing China’s position as the world’s foremost electrostate, where control over electrons increasingly translates into control over metals.

Coal is the backbone, renewables is the future