40 BARRON’S November 22, 2021
COMMODITIES
Shift to Cleaner Energy
Boosts Lithium, Copper
A
s major countries move toward
reaching a goal of zero carbon
emissions and make a bigger
shift toward cleaner-energy al-
ternatives, demand for metals such as
lithium, cobalt, copper, and nickel is ex-
pected to climb.
“We have already seen metals like lith-
ium and cobalt take center stage in the
market, but it is estimated that metals
such as copper, nickel, and rare earths
will see a larger portion of their demand
come from clean energy in the years to
come,” says Brandon Rakszawski, direc-
tor of exchange-traded-fund product
development at VanEck.
The metals used in cleaner-energy ap-
plications have become known as “green”
metals. Copper is used extensively across
wind, solar, hydro, nuclear, and geother-
mal energy, as well as in electric-vehicle
and battery technologies.
Metals such as manganese and molyb-
denum are also important inputs to wind,
hydro, and geothermal energy generation,
says Rakszawski.
Lithium and cobalt are expected to be
driven by the clean-energy transition, as
well. Lithium prices have already more
than doubled this year. The October read-
ing for the lithium price index is up 225%
year to date, according to data from Bench-
mark Mineral Intelligence.
The recently passed infrastructure bill
includes $7.5 billion to build out the U.S.’s
network of electric-vehicle chargers, which
is expected to help speed up the adoption
of EVs. The “trend of increasing EV pene-
tration is key for [lithium] demand going
forward,” says Cameron Perks, senior ana-
lyst at Benchmark Mineral Intelligence. At
the same time, there is “little chance of a
balanced supply market” in the next few
years, he says.
In a scenario that meets the Paris
Agreement goals, the total share of miner-
als demand 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 co-
balt, and almost 90% for lithium, accord-
ing to the International Energy Agency.
Lithium supply has been “severely
underinvested in the past few years, while
demand is expected to grow exponentially
throughout the decade as several coun-
tries set ambitious targets for EV sales,”
says Scott Yarham, associate regional
pricing director for metals in Europe, the
Middle East, and Africa, or EMEA, at
S&P Global Platts.
Lithium demand was at about 300,000
metric tons last year and is expected to
reach one million metric tons in 2025 and
two million metric tons in 2030, according
to S&P Global Platts.
Yarham points out that increasing
demand has led to a jump in lithium
prices—and an increase in battery-pack
prices. If that continues, EVs will “strug-
gle to reach price parity with internal-
combustion-engine vehicles,” which may
slow down EV adoption.
For investors, green metals such as cop-
per, nickel, and zinc are traded in the fu-
tures markets, which presents a “unique
set of risks and costs,” says VanEck’s Rak-
szawski. Investment in other green metals
isn’t accessible through futures contracts,
and physical investment isn’t practical in
most scenarios, he says.
Instead, “investing in companies that
are involved in the production, refining,
processing, and recycling of green metals
provides investors exposure to returns
that are strongly influenced by the price
of these metals,” says Rakszawski.
TheVanEck Green MetalsETF
(ticker: GMET), launched on Nov. 11, of-
fers investors exposure to a basket of
these companies.
There is a “structural growth opportu-
nity in green metals,” says Rakszawski, as
governments implement “aggressive policy
goals and consumer preferences shift to
low-carbon technologies.”B
By Myra P. Saefong
NNOW IN PRIME TIME
EveryFridayintheirnewprime-time9p.m.slot,
editorsandwritersonBBaarrrroonn’sRoouunndttaabbllehelpyou
anticipatemarketshifts,takeinformedrisks,and
makesmarterinvestmentdecisions.
Fox Business
Fridays at
9PMET
© 2021 Barron’s Group & Dow Jones & Company, Inc. All rights reserved. 4E5262SPONSOREDBYHOST:JACKOTTER