With the shift towards cleaner energy alternatives, the demand for metals like lithium, copper and nickel is increasing.
Carla Gottgens / Bloomberg
As the big countries move closer to the zero carbon target and make a bigger shift to cleaner energy alternatives, the demand for metals like lithium, cobalt, copper and nickel is expected to increase.
“We have already seen metals like lithium and cobalt being at the heart of the market, but it is estimated that metals like copper, nickel and rare earths will get more of their needs from clean energy in the years to come. “Says Brandon Rakszawski, Director of Exchange Traded Fund Product Development at VanEck.
The metals used in cleaner energy -plications are known as “green” metals. Copper is used extensively in wind, solar, hydro, nuclear, and geothermal, as well as in electric vehicle and battery technologies.
Metals like manganese and molybdenum are also important inputs for wind, water and geothermal energy, says Rakszawski.
It is expected that lithium and cobalt will also be driven by the switch to clean energy. Lithium prices have already more than doubled this year. The October value for the lithium price index has risen 225% since the beginning of the year, according to data from Benchmark Mineral Intelligence.
The recently passed infrastructure bill provides $ 7.5 billion to build the US network of electric vehicle chargers, which aims to accelerate the adoption of electric vehicles. The “trend towards increasing penetration by electric vehicles is the key to [lithium] future demand, ”said Cameron Perks, senior analyst at Benchmark Mineral Intelligence. At the same time, there will be “little chance of a balanced supply market in the next few years,” he says.
In a scenario that meets the goals of the Paris Agreement, the total share of demand for minerals from the energy sector would rise significantly over the next two decades to over 40% for copper and rare earth elements, 60 to 70% for nickel and cobalt, and nearly 90% % for lithium, according to the International Energy Agency.
The lithium supply has been “severely underinvested in recent years, while demand is expected to grow exponentially over the decade as multiple countries set ambitious targets for electric vehicle sales,” said Scott Yarham, associate regional pricing director for metals in Europe and in the Middle East, and Africa, or EMEA, at S&P Global Platts.
Lithium demand was around 300,000 tons last year and is projected to reach 1 million tons in 2025 and 2 million tons in 2030, according to S&P Global Platts.
Yarham points out that increasing demand has pushed lithium prices up – and battery pack prices up. If this continues, electric vehicles will “fight for price parity with internal combustion engines,” which could slow the adoption of electric vehicles.
For investors, green metals like copper, nickel and zinc are traded on the futures markets, which presents a “unique set of risks and costs,” says VanEck’s Rakszawski. Investing in other green metals is not accessible through futures contracts, and physical investing is impractical in most scenarios, he says.
Instead, “investing in companies involved in the production, refining, processing and recycling of green metals offers investors returns that are heavily influenced by the price of those metals,” says Rakszawski. the
VanEck Green Metals
The ETF (ticker: GMET), launched on Nov. 11, offers investors exposure to a basket of these companies, he says.
There is a “structural growth opportunity in green metals,” says Rakszawski, as governments implement “aggressive policy goals” and shift consumer preferences to low-carbon technologies.