Materials and mining stocks are critical to the global economy, with raw materials and the manufacturing of chemicals used to build and manufacture goods, products, construction materials, and infrastructure. But the acceleration to net zero and a more digitized economy means the demand for metals and materials is expected to soar over the coming decades.
What Do Materials and Mining Companies Do?
Materials companies are engaged in the discovery, development, and processing of raw materials used in steelmaking, farming, and construction.
The primary metals extracted by materials and mining companies include precious metals such as gold, platinum, and silver and industrial metals including iron ore, coal, copper, and uranium.
New technological demand also requires a massive quantity of rare earth elements (REEs).
REE elements refer to a group of 17 elements with diverse applications used in electrical components, EV batteries, glass, lasers, x-rays, fiber optics, infrared lasers, stainless steel, nuclear medicine, cameras, smartphones, catalytic converters, wind turbines, and electric vehicles (EVs). Some REEs are also the cornerstone of military equipment like missile guidance systems.
The Materials and Mining Sector Is Reshaping the Modern World
While fossil fuels helped drive the economy and improve the standard of living around the world over the last 300 years, the associated greenhouse gas emissions have led global governments to adopt or try to adopt a net zero economy by the middle of this century.
It will take a lot of effort to get there and can only be achieved by huge input from materials and mining companies. That’s because a greener economy – which includes solar photovoltaic (PV) plants, wind farms, electric vehicles (EVs), geothermal, hydro, bioenergy, and electricity networks – is more mineral-intensive than the one that is based on fossil fuels. And that transition will be a great opportunity for the materials and mining sector.
For example, the typical electric car requires six times the mineral inputs of a car with an internal combustible engine. While the EV industry is still in its infancy, EVs and battery storage have already surpassed consumer electronics as the largest consumer of lithium and are poised to surpass stainless steel as the largest end-user of nickel by 2040. Over the near term, by 2026, EVs will account for half of all cobalt demand.
By 2040, lithium will experience the fastest growth, with demand jumping by over 40 times, followed by graphite, cobalt, and nickel. That explains why the demand for rare earth minerals used in EVs and battery storage will grow at least 30 times by 2040.
Electricity networks will need a massive amount of copper and aluminum. The development of electricity networks means the copper demand for grid lines will more than double by 2040.
Meanwhile, an onshore wind plant requires nine times more mineral resources than one that is gas-fired. Generating one terawatt-hour of electricity from solar and wind could, respectively, consume 300% and 200% more metals than generating the same amount of terawatt-hours from a gas-fired power plant.
These developments will fuel rising demand for battery metals, rare earths, copper, and iron ore. The move toward newer technologies will put the materials and mining sector to the test. Over the coming decades, it needs to provide huge quantities of raw materials to meet the needs of energy, technology, and industrial transitions. As a result, these companies will need to grow faster, become more efficient, and be cleaner.
What Is the Best Way to Invest in the Materials and Mining Sector?
When it comes to the materials and mining sector, there are two primary ways you can invest: purchase shares in a large number of different stocks or purchase an exchange-traded fund (ETF) with diversified exposure to the most well-known companies involved in materials and mining.
Buying enough individual stocks to create a diversified materials and mining portfolio could take thousands of dollars. Alternatively, investors could consider the Evolve Global Materials & Mining Enhanced Yield Index ETF (TSX: BASE).
BASE ETF seeks to replicate the performance of the Solactive Materials & Mining Index while mitigating downside risk by utilizing covered calls on up to 33% of the portfolio securities. BASE ETF invests directly or indirectly in equity securities of global issuers engaged in the manufacturing, mining, and/or integration of metals and materials. It has a weighted average market cap of $57 billion (as at January 31, 2023), has a target yield of 7.00%*, and 20 holdings in the portfolio.
Two of the biggest holdings in the fund include BHP Group Limited and Steel Dynamics, Inc.
Melbourne, Australia-based BHP Group Limited is a global resource company with operations in over 90 locations worldwide. From the iron ore and metallurgical coal that creates steel for construction, to the nickel powering electric vehicles, and the copper enabling the next generation of renewable infrastructure, BHP Group’s products are the building blocks of the modern world.
Steel Dynamics, Inc. is one of the largest and most differentiated steel producers and metal recyclers in North America, with facilities located throughout the U.S. and Mexico. The Fort Wayne, Indiana-based company is the fourth largest steel producer in North America, the largest metals recycler, and the second largest joist-deck producer. The company’s products are used in appliance, automotive, energy, equipment & mining, heavy non-residential, light commercial/residential, manufacturing, metal building industries, and transportation & rail.
Materials and mining stocks are poised to gain traction over the coming years and decades thanks in large part to strong demand for a greener, net zero economy that is heavily reliant on minerals.
A materials and mining ETF like the Evolve Global Materials & Mining Enhanced Yield Index ETF can help diversify portfolios and tap into the ongoing global growth of a greener, digitized economy.
Invest in the Materials and Mining Sector With Base ETFs
If you’re looking for better yields in the materials and mining sector, consider BASE ETF, Evolve Global Materials & Mining Enhanced Yield Index ETF. BASE ETF invests in global companies involved in the material and mining industry. For more information, visit the fund page here: https://evolveetfs.com/base/.
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