Expect Electric Demand for Electrified Metals | ETF Trends

With adoption of clean technologies and renewable energy products soaring around the world, intrepid investors are examining new ways to capitalize on those trends, such as electrified metals.

Not surprisingly, the world of exchange traded funds presents market participants with unique, credible avenues for tapping into what’s expected to be a blistering pace of renewable energy deployment. That group of ETFs includes funds focusing on producers of metals and minerals that serve as the foundations of clean technology and renewable energy.

The KraneShares Electrification Metals ETF (KMET) is one of the funds to consider on that front. KMET follows the Bloomberg Electrification Metals Index and debuted last October. Its holdings provide investors with exposure to metals needed for a variety of products, including electric vehicles and renewable energy concepts used to power homes and offices. In other words, while KMET is a new ETF, it could also prove to be a well-timed ETF.

“The energy crisis is also driving an acceleration in installations of renewable power – the world is now expected to add the same amount of renewable power in the next five years as it did in the previous 20, according to the International Energy Agency (IEA). This build-out would be some 30% higher than the level of growth the IEA forecast in 2021,” noted BNP Paribas.

KMET is certainly levered to those trends, but what makes the ETF unique among rivals in this nascent category is its approach. While many ETFs focusing on metals tied to renewable energy are equity-based funds, KMET gets straight to the heart of the matter by focusing on commodities. Translation: KMET’s components are commodities futures contracts with top-10 holdings including copper, nickel, cobalt, and lithium contracts.

That could position KMET to avoid some of the issues associated with equity-based commodities ETFs, including lagging spot prices on the upside and overshooting those prices on the downside. Not to be forgotten is the point that commodities are denominated in dollars, meaning that the former’s prices often rise when the greenback declines, meaning that KMET could be a novel way for investors to profit from dollar weakness. And of course, the KraneShares ETF could benefit over the long-term from government policies that support renewable energy adoption.

“The EU’s REPowerEU plan is to cut the bloc’s reliance on Russian fossil fuels and speed up the energy transition. The US Inflation Reduction Act includes USD 369 billion in incentives to boost clean energy supplies and investment in green technology,” concluded BNP Paribas.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.