The International Energy Agency (IEA) said manufacturers of clean energy technologies may not be able to operate at full capacity given the shortage of critical minerals in the long term. In turn, this sets up investors for potential growth opportunities in ETFs that focus on critical minerals.
A Wall Street Journal report noted the drop in prices during 2023 for industrial metals like copper, lithium, cobalt, and nickel. An oversupply of metals like lithium has also led to a glut in the electric vehicles (EVs) market. But overall, the long-term projection of these metals skews toward the upside given their uses in a number of clean energy applications.
“Secure and sustainable access to critical minerals is essential for smooth and affordable clean energy transitions,” said IEA Executive Director Fatih Birol. “The world’s appetite for technologies such as solar panels, electric cars and batteries is growing fast—but we cannot satisfy it without reliable and expanding supplies of critical minerals.”
To help appease demand, more investment would need to be made in areas like critical minerals mining. This also creates an opportunity for investors to look at mining companies that focus on increasing critical minerals supply.
A Single ETF for Critical Minerals
While investors can look at the aforementioned metals for opportunities, one ETF captures the energy transition growth — the Sprott Energy Transition Materials ETF (SETM ).
The fund seeks to provide results that correspond to the total return performance of the Nasdaq Sprott Energy Transition Materials Index. That index essentially tracks the performance of a selection of global securities in the energy transition materials industry
With the overall demand for these minerals projected to rise, the demand for miners that materially affect the global supply will also increase. Last year saw a rise in critical minerals investment mining. But there’s still a lot of upside to attain while prices remain depressed.
“Investment in critical minerals mining rose 12% in 2023, and exploration funding rose 15%—a healthy market, but still slower growth from the previous year, the IEA said,” per the WSJ report.
As such, it may be an opportune time for investors to buy on the weakness. Furthermore, SETM gives investors exposure to equities across a variety of countries, adding additional diversification by investing outside of domestic borders.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
