Demand for electrification metals is expected to grow exponentially in the next 15 years as the primary components of renewable energies and electric vehicles. The KraneShares Electrification Metals ETF (KMET) is positioned to capture rapidly rising demand in the six key electrification metals such as nickel and copper, and makes for a strong addition to the commodity sleeve of portfolios.
The International Energy Agency estimates that overall demand for the key minerals needed for clean energy technologies will double by 2040 if all companies hold to their climate target mandates that currently will overshoot the Paris Agreement goal of 2°C by 2050. That demand grows exponentially if new mandates and goals that curtail emissions to meet the Paris Agreement are put into place.
“A concerted effort to reach the goals of the Paris Agreement (climate stabilisation at ‘well below 2°C global temperature rise’, as in the SDS) would mean a quadrupling of mineral requirements for clean energy technologies by 2040,” the IEA wrote in the executive summary of their report. “An even faster transition, to hit net-zero globally by 2050, would require six times more mineral inputs in 2040 than today.”
Nickel and copper are two electrification metals that will experience strong increased demand under such a scenario: nickel demand for clean technologies has climbed from 3% in 2010 to 8% in 2020 but under the aggressive emissions reduction outlook, that demand will grow to 61% by 2040. Copper, a core metal in many industrial applications, has maintained demand over the years within clean technologies, growing from 22% in 2010 to 24% in 2020 but would nearly double to 45% in 2040 under the sustainable development scenario.
Image source: Venture Capitalist
An easier way to visualize this is through nickel and copper demand in electric vehicles compared to internal combustion vehicles. The automotive industry has committed over $1.2 trillion to manufacturing EVs through 2030, doubling their current spending, creating a demand spike for nickel, copper, and the other key electrification minerals used in EV batteries and manufacturing.
Investing in Growing Nickel and Copper Demand with KMET
Electrification metals such as nickel and copper will play increasingly larger roles in the transition to lower- and zero-emissions practices in the years ahead. The KraneShares Electrification Metals ETF (KMET) offers targeted exposure to the metals necessary for electrification and the clean energy transition via the futures market.
The fund seeks to track the Bloomberg Electrification Metals Index and is comprised of futures contracts on copper, nickel, zinc, aluminum, cobalt, and lithium. These metals are all core components for batteries, electric vehicles, and the renewable energy infrastructure being created and expanded as countries aim for net-zero emissions by 2050 to curtail global warming.
KMET currently has a 27.01% allocation to nickel futures and a 24.73% allocation to copper futures, and has an expense ratio of 0.79%.
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