China's Influence Will Help Set the Stage for Energy Transition Materials

The shift to clean energy will create a heavier reliance on energy transition materials. China’s influence will help set the stage for these materials, opening up investment opportunities for exchange traded funds (ETFs) like the Sprott Energy Transition Materials ETF (SETM).

One of the trends highlighting the clean energy shift will be the proliferation of electric vehicles (EVs). As such, critical minerals like lithium, nickel, cobalt, manganese, and graphite will be essential to develop more batteries to power EVs.

China’s dominance in the EV market is well documented by the Massachusetts Institute of Technology (MIT). According to MIT, China has been the world’s largest market for EVs for the past eight years, and it doesn’t appear to be slowing down, given the trend for more EVs in the future.

While the country has had its fair share of economic challenges over the past couple of years, it’s regaining its footing once again. This should open up further investment even more, accelerating the need for energy transition materials.

“In the most recent case, China’s reopening after ending its zero-COVID policy can add further demand on top of the secular and cyclical forces. The demand growth rate for critical metals for the energy transition (EVs, solar, nuclear, wind, etc.) is expected to increase over the next decade,” a Sprott blog noted, with insights from Sprott market strategist Paul Wong and ETF product manager Jacob White.

World Leader in Clean Energy Investment

China is already ramping up its investment in clean energy technology. The country already poured $546 billion in clean energy last year, surpassing even the U.S. That should only increase in years to come, opening up growth opportunities in SETM.

The fund seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Energy Transition Materials Index, which is designed to track the performance of a selection of global securities in the energy transition materials industry.

Per the Sprott product website, the fund offers:

  • Pure-play access to a range of critical minerals necessary for the global clean energy transition.
  • Potential for explosive growth as the government looks to achieve its net-zero goals. Globally, $1.11 trillion was invested in the energy transition sector in 2022. To meet net-zero targets, global investment may need to accelerate to a yearly average of $3.9 trillion from 2023 to 2030.
  • Exposure to well-positioned companies that are upstream in the supply chain and may be set up to benefit from the increased investment in the critical minerals necessary for the clean energy transition.

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