How to profit from the scramble for metals and minerals
Copper and other metals will be vital in the transition to cleaner technologies and artificial intelligence. Soaring demand is pushing prices up – investors should buy in now
Two of the biggest trends in technology right now are the rise of “clean tech” – that is, technology designed to lower carbon emissions and other pollutants, especially from electric vehicles (EVs) – and AI. As well as disrupting a score of industries, these trends have also given a massive boost to the demand for key metals and minerals. Rising geopolitical tensions between the US and China, and the prospect of “resource nationalism”, have also affected the market. Both factors could combine to create a “supercycle” in the metals market – “a phase of long-term price increases far beyond normal fluctuations”, as Lale Akoner, a global market analyst at eToro, explains. Here’s what you need to know about the global scramble for metals and minerals and how to take advantage of it.
How to take advantage of the metal supercycle
The rise of “clean tech”, and of electric cars in particular, is going to lead to a “fairly unprecedented level of demand for all types of metals and minerals”, says Duncan Goodwin, manager of the Premier Miton Global Sustainable Growth Fund. Electric vehicles typically use around six times as many mineral inputs as conventional cars, according to the International Energy Agency (IEA). Large quantities of lithium, nickel, cobalt, manganese and graphite will all be needed. Copper will also be in huge demand, being used in the cars themselves and the kit needed to connect these and other similar technologies to the grid.
There will be a big impact on three metals in particular: lithium, nickel and copper, agrees Alexandra Symeonidi, a corporate credit analyst at William Blair. Lithium is used in electric-car batteries, which are already accounting for around 60% of current demand for the metal. The IEA expects that to rise to 90% by 2040, with the overall volume of lithium used rising eight times over that period. Electric vehicles currently account for a much more modest 16% of total demand for nickel, but this is up from only 6% a few years ago. The IEA projects it will rise further to around half of the total, and overall nickel consumption increase sevenfold within the next 15 years.
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Whether these projections prove accurate will depend on which technologies win the day. Dominic Vergine of Monumo, a company aiming to shake up the motor industry with high-tech innovation in engineering, is sceptical about the medium-term need for lithium and for the rare-earth minerals also in demand. The “environmentally destructive nature of the mining process” required to extract such metals has “spurred a lot of research as to how their use could be minimised, or even eliminated”. Most of the big car companies are trying to develop a different type of electric motor that doesn’t need lithium. Vergine predicts that in the best-case scenario the proportion of electric-car batteries that use permanent magnets, which require a lot of rare-earth minerals, could fall from 80% to as little as 20% within the next decade.
Developing these more sustainable batteries will be “a very fine and complex challenge”, however, and the technology won’t work for all types of cars, especially those that require more torque, such as sports cars. Chinese manufacturers are also likely to keep using permanent magnets in order to take advantage of their large domestic supplies of rare earths, says Vergine. And any substitute batteries are likely to use larger amounts of other materials instead, especially copper, demand for which is already surging.
Indeed, copper looks to be the “linchpin of the green-energy revolution”, says Hakan Kaya, senior portfolio manager at Neuberger Berman. Green-energy technologies in general use “more copper than when producing energy through traditional technologies” – electric cars, for example, use two and a half times the amount of copper than vehicles with an internal combustion engine. In some cases, wind farms and solar plants can use up to seven times more copper than conventional gas plants. Investors playing a rise in demand for copper rather than for other metals are arguably making a safer bet as “it is hard to replace copper with anything else on the periodic table”, says Kaya.
How to take advantage of the AI boom
Just as copper once “ushered humanity into the Bronze Age”, so it is now set to “help us transition from the fossil-fuel age to the zero-carbon age”, says Kaya. Copper has superb conductive properties – only silver is better – which means it will be in demand as the numbers of data centres and the advanced computing infrastructure required to support AI technology rises. The shares in AI technology companies now look expensive, so playing the rise in the copper price could be a better way to benefit from the AI boom.
Indeed, the escalation of AI and the rapid building of data centres will be “a significant additional driver of demand for many of the same minerals used by battery EVs and clean technology”, says Martin Frandsen, portfolio manager for Principal Asset Management. Data centres are “essentially vast jungles of sophisticated semiconductors, electrical equipment, and cooling technology”, all of which consume large amounts of minerals and electrical power.
In particular, the production of semiconductors relies on materials such as silicon, gallium, indium, and germanium, says Géza Sebestyén, Head of Economic Policy at the Mathias Corvinus Collegium and associate professor at the Institute of Finance at Corvinus University of Budapest. AI hardware also requires rare-earth metals, such as neodymium, dysprosium, praseodymium, and terbium for magnets and displays. Battery production depends on lithium, nickel, cobalt, and vanadium. Copper and silver are essential for wiring, processors, and thermal management. Data centres also use aluminium for cooling systems and steel for construction. Overall, the largest relative increases in demand are likely to be for copper, gallium and indium – little surprise, then, that “all three have shown a bullish price trend over the past five years”, says Sebestyén.
The sheer pressure placed on the energy grid by data centres, which “can consume as much as 80,000 households”, is also starting to become an accelerator of renewable-energy deployment, says Frandsen. Most technology companies have pledged themselves to achieving net-zero emissions, which means that the AI boom will probably create a “feedback loop”, whereby increasing demand for artificial intelligence creates more demand for green infrastructure and electricity, and hence for the metals and minerals used in that.
The weaponisation of critical minerals
At the same time as clean-tech and AI have led to an increase in demand for metals and minerals, resource-rich countries have “become more assertive about maintaining control of their natural resources”, mindful that they have “an outsized influence on supply chains”, says Frédérique Carrier, head of investment strategy for the British Isles and Asia at RBC Wealth Management. In some cases, the interventions are minor – Chile, for example, mandated in 2016 that mining companies allocate part of their earnings to community development. But increasingly the controls are becoming more direct – Indonesia’s ban on exports of bauxite (raw aluminium), for example, came into effect last year.
Some have gone even further and are engaging in the outright “weaponisation of critical minerals”, says Carrier. China has been particularly aggressive, banning exports of certain vital minerals to Japan in 2010 due to a dispute in the East China Sea. In 2023, it went further, entirely prohibiting the exports of certain key rare-earth minerals. “It’s hard to imagine anyone more nationalistic than Chinese leader Xi Jinping”, the “high priest of resource nationalism”, says Christopher Ecclestone, principal mining strategist at Hallgarten & Company. The latest restrictions go so far that China “risks cutting off its nose to spite its face”, distorting the country’s internal economy by effectively penalising its mining and metals industry to support its more marginal manufacturers. These restrictions are also “inconsistent with China’s stated desire to keep global prices low, in order to discourage other countries from developing their own rare-earth mineral resources”.
The “growing wave of protectionism” in resource-producing countries is in turn prompting governments around the world, including in the West, to “scramble to secure access to critical minerals essential for strategic industries”, says Tal Lomnitzer, senior investment manager on the global sustainable equity team at Janus Henderson Investors. Research by global risk-intelligence firm Verisk Maplecroft reveals that there has already been “a surge in state intervention” in the resources market, says Lomnitzer, as “various economic blocs seek to build duplicative supply chains” and stockpile scarce resources. This should lead to higher global prices.
Trying to predict geopolitical developments can be dangerous as the “policy momentum” in producing and consuming countries can suddenly shift, warns Peter Myers, principal consultant at SRK. At the moment, however, miners in Western countries are “definitely rubbing their hands together with glee at the prospect of reduced supply from China”, which will boost prices. Western miners should also benefit from tax breaks and a more sympathetic regulatory environment in their home countries, prompted by the desire to reduce dependence on external imports. Alessandro Valentino, product manager at VanEck, points to the EU Critical Raw Materials Act and US Inflation Reduction Act as examples of such incentives.
The best ways to play key metals
The price of key metals and minerals may be rising, but finding the best way to take advantage of it is another thing entirely. One way to buy into the boom directly is to invest in exchange-traded funds (ETFs) that track the price of the metals, or in the companies that mine them. The problem is that sorting out profitable mining companies from those that are speculative ventures is not easy, notes Valentino. When it comes to mines, for example, you need to “check the quality of proven reserves, including grade, tonnage and feasibility of extraction”.
Investors should also “evaluate the financial health of mining firms by analysing profitability metrics, such as Ebitda, all-in sustaining costs (AISC), and debt-to-equity ratios”, says Valentino. They also need to consider management expertise and the firm’s operational record – “a well-managed mining company will have a history of delivering projects on time and within budget, while maintaining strong relationships with local communities and governments”. On the other hand, companies with “red flags” – such as “frequent equity dilution, overly optimistic projections, and lack of proven reserves” – should be avoided.
Valentino expects the scramble for minerals to lead mining companies to expand their operations and make investments in new projects over the medium term, and hence create additional demand for mining equipment. This will be good news for the industrial mining-equipment companies that delivering drill rigs, trucks and excavators. The average age of mining equipment globally is relatively old, which is good news for the equipment companies, especially “those that are providing the most efficient solutions”.
Other secondary industries that should benefit from a mining boom include those producing mining vehicles, as well as other inputs into the materials extraction process, such as explosives, says Evy Hambro, global head of thematic and sector-based investing at BlackRock. Hambro recommends the companies seeking to develop more advanced technologies for identifying and extracting materials from ore, as well as those aiming to help the materials producers themselves to decarbonise. That is important, otherwise the move to clean technologies will simply shift emissions creation from the point of consumption to the point of production.
Finally, Alexandra Symeonidi of corporate credit analyst William Blair is bullish on recycling and scrap metals. New copper mines typically take between ten and 20 years before production begins, so “there’s a clear opportunity for both more established networks of scrap collection and more metal processing and refining of scrap”. A significant amount of copper and nickel supply will come from these sources in the future, she says. Indeed, there are already a large number of legacy industries that technology companies can take scrap copper from, although that won’t be nearly enough to compensate for the extra demand.
Add it all up and it’s no surprise that metals have become the “hottest topic” in investment, says Akoner. Below we look at some of the most promising plays on the themes discussed.
The best investments to buy now
The easiest way to play the rise in price of a commodity is through an exchange-traded commodity (ETC), which is essentially an exchange-traded fund (ETF) that directly follows a commodity index. WisdomTree Copper (LSE: COPA) aims to follow the Bloomberg Commodity Copper Subindex 4-Week Total Return index. It comes with an annual charge of 0.49% a year. Alternatively, you could consider an ETF that invests in copper-mining companies, such as Hanetf ICAV Sprott Copper Miners ESG Screened UCITS ETF (LSE: COPP). This invests in a basket of 30 copper-mining companies, including such names as Ivanhoe Mines, Evolution Mining and Southern Copper Corporation, which have been screened for minimum ethical standards. In this case the total expense ratio (TER) is 0.59%.
One of the largest holdings in the above fund is the FTSE-100 company Antofagasta (LSE: ANTO). It operates several copper mines in Chile as well as a transportation company that specialises in transporting materials from mines. Revenues can be volatile, but the firm grew by around 35% between 2018 and 2023 and is expected to keep growing over the next few years. The company has a decent return on capital employed (Roce) of 9%, suggesting it is run efficiently. Antofagasta currently trades at 23 times 2025 earnings, with a dividend yield of 1.85%.
Lithium miner Atlas Lithium (Nasdaq: ATLX) looks interesting as it operates several mining projects in Brazil. It isn’t currently making any money, which makes it a bit riskier than more established companies, but its Neves project received official approval to begin operations at the end of last year, and production is expected to start very shortly. It also received a major stamp of approval a few months earlier when it agreed a strategic partnership with the industrial conglomerate Mitsui, which is looking to start developing lithium batteries. The deal involved the Japanese company taking a 10% stake in Atlas.
Increased mining activity around the world will be good for Caterpillar (NYSE: CAT), the world’s leading manufacturer of mining equipment. Caterpillar makes a wide range of equipment, including cutting-edge autonomous vehicles. Revenue growth has been solid at around 4% a year, and earnings per share have more than doubled between 2018 and 2013. The Roce ratio is 24%, which will allow dividends to grow strongly as well. Caterpillar trades on 16.3 times 2025 earnings, with a dividend yield of 1.6%.
With demand for copper and other metals on the rise, there will be a greater push to recycle and repurpose scrap metal. This is good news for Sims (Sydney: SGM), one of the global leaders in metals and electronics recycling. Sims has facilities in 13 countries, with its largest operations in the fast-growing markets of the United States, Turkey, China and India. The volatility of scrap-metals prices can have a big short-term impact on profitability – Sims lost money in 2024 – but the company has a good record of medium-term revenue growth and is expected to return to profitability this year. It trades at 23 times 2025 earnings.
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