This year the copper prices beat every record. And even if speculation has played an important role in raising prices, there is a real expectation that this soft metal, and other so -called minerals of the future, play a vital role in the energy transition. Iin Pyle, Senior Investment Director, UK Equities, Aberdeen Investments underlines this, explaining that the speculative question is, by its nature, unstable. It is not possible to say with certainty if the international prices of copper will continue to rise during the year, above all because the demand linked to industrial use in China remains undertone. However, looking to the future, there are convincing arguments to invest in strategic minerals, topics based on both utility and scarcity.
What they are and what the minerals of the future are for
The minerals of the future are raw materials – including copper, lithium, aluminum, platinum and nickel – which are essential for the development of economies. They are fundamental for the energy transition, since we are moving away from fossil fuels to move on to a more sustainable economy, especially through the electrification of energy production and transport. For example, copper is a metal widely used for its qualities as a good conductor. It is essential in most electronic and electrical applications. The question + A white-argento alkaline metal is important for rechargeable lithium-ion batteries that power electric vehicles and batteries used for the accumulation of energy in electrical networks. The International Energy Agency estimate that by 2040 we will need a quantity of lithium 20 times higher than that necessary in 2020.
Is it a supercycle of raw materials?
A supercycle is a period in which a structural change generates a high and lasting demand, with consequent prolonged rise in prices. The growing importance of the minerals of the future is supported by the transition by fossil fuels and government policies, promoting a robust question in the next twenty years and beyond.
At the same time the offer will remain limited: the mining companies, which in the last ten years have not invested in new resources, have not created additional production capacity; Where it exists, the volumes and the quality are falling. These dynamics increase the probability of a new supercycle.
Buy the company, not the goods
We believe that investors must invest in companies behind the minerals of the future, since history teaches us that it is the best way to benefit from the increase in raw material prices. Investment opportunities extend along the entire value chain: from mineral companies to extraction machinery suppliers, to companies that make high intensity products of minerals, such as electric vehicles.
Valley of the value chain, it is possible to find opportunities among the companies active in the decarbonisation of transport, buildings and industry, and those engaged in the development of permanent magnet engines.
Play in advance
Everything is aligning for the start of a supercycle of raw materials, which could be transformed into a decades. A timely entry can therefore make a difference in terms of performance. In China, sales of electric vehicles, which in 2020 represented 2%, grew up to represent almost half of the market, while in developed countries, where the penetration of electric vehicles is less profound, the diffusion is destined to accelerate with the entry into force of the prohibitions to combustion engines and the drop in battery costs.
In parallel, in the United Kingdom, National Grid has announced ambitious ten-year plans in support of the Green transition, while on a global level, the electrical networks will have to expand the transmission and distribution lines of about 150 million km, equal to the land-sail distance. Faced with this question, the supply will struggle to keep up, supporting prices.
In parallel, in the United Kingdom, National Grid has announced ambitious ten-year plans in support of the Green transition, while on a global level the electrical networks will have to expand transmission and distribution of about 150 million km, equal to the land-sell distance. Faced with this question, the supply will struggle to keep up, supporting prices.
Final considerations
The transition to the net zero of carbon emissions will have to proceed with an unprecedented rhythm, requesting a wide spread of low -emission technologies and sustainable infrastructures, all based on the minerals of the future.
In addition to electric vehicles and electric networks, a profound transition in transport, buildings, industry and agriculture will be necessary, all high intensity sectors of minerals of the future. In this context, sustainability is now at the center of investment logic, and the ability to monitor and manage environmental, social and governance risks (ESG) investors is fundamental.
Furthermore, since many companies in this universe operate in emerging markets, it becomes essential to maintain a constant dialogue with the companies in which we invest.
