Whether it’s electric vehicles, solar panels, or wind turbines, clean energy concepts and products depend on an assortment of components and metals.
Some might call those green metals, and this new exchange traded fund is dedicated to that theme. The VanEck Green Metals ETF (GMET) debuted yesterday and could easily check some of the boxes that all new ETFs yearn to check, including good timing and a relevant underlying investment objective.
GMET, the latest addition to VanEck’s suite of environmentally focused ETFs, follows the MVIS Global Clean-Tech Metals Index. That benchmark features exposure to companies that produce, refine, recycle, and process green metals.
“Green metals are metals used in the applications, products and processes that enable the energy transition from fossil fuels to cleaner energy sources and technologies,” according to VanEck.
Whether it’s cobalt, copper, lithium, manganese, nickel, or others, a variety of green metals are essential to renewable energy concepts. For example, copper is need for solar cells, hydrogen concepts, nuclear plants, and more. Lithium is, of course, pivotal in energy storage while zinc is used in wind turbines, solar cells, energy storage, and more.
“Many clean energy sources and associated applications require far more metals inputs than traditional fossil fuel-based equivalents. For example, in addition to steel, a conventional car requires copper and manganese, whereas an electric car requires more copper and more manganese than a conventional car and at least seven additional metals,” says Brandon Rakszawski, VanEck senior ETF product manager.
The newly minted GMET holds 44 stocks with a weighted average market capitalization of $26.3 billion, putting the fund at the lower end of large-cap territory. As is the case with rare earth metals, the green metals space is dominated by China, and GMET reflects as much, allocating nearly a third of its geographic weight to stocks in the world’s second-largest economy.
“China has become increasingly dominant in the production and processing of many green metals, adding a level of risk to investment in the space. This dominance has led many countries to sound the alarm when it comes to their reliance on China. Many are investing in efforts to onshore their supply of and processing capacity for green metals,” adds VanEck’s Rakszawski.
And as is the case with rare earths, demand for green metals is running hot, supporting prices and prompting speculation about supply shortfalls.
“The question remains: can supply keep pace with demand? It can take years before projects to source and process green metals are in production, and declining resource quality can make metals processing more complex. These and other factors have driven supply deficits in some metals,” concludes Rakszawski.
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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.