An International Energy Agency report confirmed that rising demand for critical minerals is occurring worldwide with lithium, cobalt, and nickel seeing an exponential rise in particular.
A global focus on reducing carbon emissions is certainly a catalyst as more nations seek alternative energy sources. Electric vehicles (EVs), for example, are increasing in demand, thereby emphasizing the need for lithium, which is used in the batteries of EVs.
According to the report, “Critical minerals, essential for a range of clean energy technologies, have risen up the policy and business agenda in recent years. Rapid growth in demand is providing new opportunities for the industry, but a combination of volatile price movements, supply chain bottlenecks and geopolitical concerns has created a potent mix of risks for secure and rapid energy transitions.”
Fueling the rise in critical minerals demand will be the support of federal governments around the globe. Government subsidies will help fund projects to mine and extract critical minerals, which should only provide further growth in the industry.
“This has triggered an array of new policy actions in different jurisdictions to enhance the diversity and reliability of critical mineral supplies,” the report added.
Rising Investment in Critical Minerals Development
With demand rising, so is investment in the development of critical minerals. The IEA noted that investment rose by 30% in 2022, rising 10% more than the previous year.
“Our detailed analysis of the investment levels of 20 large mining companies with a significant presence in developing energy transition minerals shows a strong rise in capital expenditure on critical minerals, spurred by the robust momentum behind clean energy deployment,” the report said. “Companies specialising in lithium development recorded a 50% increase in spending, followed by those focusing on copper and nickel.”
Given this growth spurt, exchange traded fund (ETF) investors may want to take a closer look at the Sprott Energy Transition Materials ETF (SETM). SETM presents investors with an opportunity to capture the growth as it focuses on companies positioned upstream in the supply chain that stand to benefit from the increased investment in the critical minerals required for the clean energy transition.
Per its fund description, SETM seeks to provide results that correspond to the total return performance of the Nasdaq Sprott Energy Transition Materials Index. The index tracks the performance of a selection of global securities in the energy transition materials industry.
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