Metals as a Long Term Investment

Written by: Thomas Kostigen

The transition to alternative energies is pushing demand for electric vehicles, solar power plants, and wind farms, and all sorts of green infrastructure. And the material most needed for all of that is metal.

Metals are needed for batteries, solar panels, wind turbine blades, as well as for good old building and construction. But there isn’t enough metal to go around never mind sustainable metals that won’t harm the environment.

Metal mines are famously dirty and hazardous, and many of them were forced to shut down during the initial COVID-19 outbreak and have yet to recover and operate at full capacity. That has meant a spike in prices. High demand for less supply is economics 101 for price rises. And by the looks of it, metals prices will continue to rise into and beyond the near future.

Evidence of that: Tesla is revamping its metals supply chain to ensure it has enough material for its vehicles. China is shoring up supplies and is threatening export duties on steel. And the Biden Administration has issued an Executive Order to keep critical minerals in stock and available. Indeed, the International Energy Agency has issued an alert to all countries about the need to hoard metals supplies as supplies have plummeted.

“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realizing those ambitions,” says Fatih Birol, executive director of the IEA. “The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action. By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions.”

But where are governments and the private sector, for that matter, expected to get their metals from? Terrestrial mines are increasingly subject to stricter environmental regulations. These mines ruin entire eco systems and can produce tons of toxic waste. These are issues that environmental, social, and governance (ESG) investors look for and divest from.

Offshore metals extraction is something that is being considered but is too embryonic to help supplies at the moment. Although companies such as The Metals Company, which is publicly traded, are looking to speed things up.

For the moment, metals supplies are what they are and even if land-based mining was ramped up, it would take years to fill new orders because of operational lags. That leaves prices posted to go higher.

Beyond individual companies, there are exchange traded funds in the space. Both Vanguard and VanEck operate popular ones. A good financial advisor, of course, can guide you best as to which investment avenue to pursue in the metals market.

With 250 million electric vehicles expected to be manufactured by the end of this decade and the net zero requirements of countries calling for massive overhauls of utilities and infrastructures, the need for metals is great and getting greater. In fact, by the middle of the century six times as many metals will be needed to power the world, according to the IEA. It’s demand worth pursuing.

Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.

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