The world of electrification metals has weathered a turbulent storm of global economic challenges, presenting a unique opening for investors seeking to capitalize on the rebound. In the aftermath of supply and demand imbalances caused by the recent economic downturn, there lies a promising opportunity to dive into metals poised for a resurgence in demand in the coming years.
Lithium: Riding the Rollercoaster
At the helm of the energy transition sits lithium, a vital metal in the realm of rechargeable batteries. While the spotlight on lithium-ion batteries for electric vehicles shines brightly, it’s essential to recognize lithium’s presence in a spectrum of EV battery variants.
The tumultuous journey of lithium prices unraveled dramatically in 2023. Soaring to a record $80,000 per ton in December 2022, the metal faced a sharp decline by the end of 2023, with lithium carbonate now trading around $14,000 per ton. Although oversupply issues stemming from new projects and weakened demand during the economic slowdown led to this downfall, the market is on the cusp of a major shift.
Despite challenges, EV sales have shown resilience, witnessing growth both in China and globally, with further expansion anticipated in the upcoming year. As African mines, particularly in Zimbabwe, gear up production, the industry at large has responded by trimming output. Forecasts predict a transition from surplus to deficit starting next year, with demand projected to surge exponentially by 2030.
Insight from William Adams, head of battery and base metals research at Fastmarkets, suggests that while 2023 grappled with oversupply, a wait for demand absorption is imminent, with the surplus anticipated to remain manageable given supply constraints and positive demand momentum.
Capturing Value in Lithium Ahead of the Upcoming Demand Resurgence
For advisors and investors eyeing a strategic entry into energy transition metals at discounted rates, the KraneShares Electrification Metals ETF (KMET) presents a compelling option. Offering focused exposure to crucial metals like lithium, KMET leverages the escalating demand fuelled by the clean energy shift through the futures market.
Tracking the Bloomberg Electrification Metals Index, KMET features futures contracts across copper, nickel, zinc, aluminum, cobalt, and lithium. These metals form the cornerstone for batteries, electric vehicles, and the renewable energy infrastructure pivotal for achieving net-zero objectives by 2050.
At present, KMET prominently allocates 30.1% to copper futures and 24.23% to nickel futures, with lithium futures constituting 8.72% of the fund’s investments. With an expense ratio of 0.80%, KMET positions investors to tap into the promising realm of electrification metals.
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The opinions expressed herein are solely those of the author and do not reflect the views of Nasdaq, Inc.
