With the clean energy transition gaining momentum, rare earths are in the spotlight. Moreover, green metals, some of which are also rare earths, are gaining more attention, and rightfully so.
The VanEck Green Metals ETF (GMET) is one of the exchange traded funds focusing on green metals. Specifically, GMET isn’t a commodities futures fund. Rather, the rookie VanEck ETF follows the MVIS Global Clean-Tech Metals Index, which is comprised of companies that mine and produce green metals.
Green metals, which include familiar fare such as copper, lithium, tin, and zinc, among others, are integral in the production of clean energy concepts including batteries, solar panels, and more. In other words, green metals have long-term tailwinds.
“The global transition from fossil fuels to a low carbon economy is the primary driver of demand, while the difficulty of and environmental hurdles related to the development of new mining projects are a major factor limiting supply. This dynamic has driven increased investor interest in the companies extracting and processing green metals,” said Brandon Rakszawski, VanEck senior product manager.
As vernacular, “green metals” may be new to many investors, but many of GMET’s 50 components are companies that market participants are familiar with. Those include commodities giant Glencore, mining outfit Freeport McMoRan (NYSE:FCX), and Albemarle (NYSE:ALB) — one of the biggest lithium producers. Those companies and other GMET holdings could be on the cusp of a demand super cycle due to increasing adoption of clean energy concepts.
“Put simply, the demand for green metals is expected to be driven in large part by their role in the energy transition. Metals such as lithium, cobalt, and various rare earth elements are widely discussed metals in this regard, but other metals such as copper, nickel, and platinum group metals have increasingly become intertwined with the clean energy supply chain,” added Rakszawski.
Some green metals, including those represented in GMET, have strong underlying futures markets — think copper. However, the fund’s equity focus keeps investors away from irritating K-1 tax forms while delivering relevant exposure.
“Green metals are often produced in combination with a wide range of other metals, including widely-mined precious and base metals. As a result, it is difficult to quantify each metal’s portfolio level exposure in GMET. In early 2022, the most prominent metals exposures came in the form of copper, lithium, platinum group metals, rare earth elements, zinc, and nickel,” concluded 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.
