Electrification metals play a crucial role in fueling the energy transition. Metals like lithium, nickel, copper, and cobalt are crucial for EV manufacturing, while aluminum, copper, and zinc are must-haves for low-carbon power generation.
Innovation and expansion in the clean energy fields could lead to resounding demand for electrification metals. A recent report from Columbia University’s Center on Global Energy Policy predicts that by 2050, use of critical minerals for battery storage will rise nearly 40-fold. In the same timetable, the report finds that need for critical minerals for low-carbon electric power generation will triple.
Recent analysis from KraneShares finds that electrification metals are currently seeing a value mismatch, especially when considering the forecasts for higher demand down the line.
“We believe there will be a correction to the upside in metal prices as the global energy transition marches forward. Despite recent market volatility, analysts project exponential growth in battery and base metals over time,” KraneShares added.
Traders and investors looking to get ahead of the energy transition game may want to consider the KraneShares Electrification Metals Index ETF (KMET). KMET aims to offer targeted exposure to a number of minerals that remain key components for the energy transition.
The fund possesses a net expense ratio of 0.80%. KMET tracks the Bloomberg Electrification Metals Index, investing in a mix of futures contracts on copper, nickel, aluminum, zinc, cobalt, and lithium. The index weights its holdings using data related to expected supply and demand for the different metals.
Valuable Metals
Per the KraneShares analysis, KMET’s largest weights at the end of 2023 were in copper, nickel, and aluminum. Copper prices have shown signs of recovery over the last month, and KraneShares notes demand is anticipated to rise toward the end of the year. Likewise, nickel has shown signs of life, growing notably despite a slow start at the beginning of 2024. On aluminum, KraneShares notes that the metal saw less volatility in 4Q23, partially due to demand in China.
Reflecting the current electrification metals market, KMET began 2024 down significantly from the start of 2023. However, the fund saw a recent resurgent and is currently up 3.62% over the last month.
KraneShares possesses an extensive library of ETFs, with 26 currently listed in the U.S. These funds represent over $7.2 billion in assets under management.
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