ETF Market Canada News - ETF Market Canada - Tue Aug 20, 9:02AM CDT
As society moves toward decarbonization and electrification, the importance of metals, specifically uranium, copper, and silver, in the global energy transition is increasing. The mass adoption of sustainable energy sources, such as nuclear, solar, wind, hydro, and geothermal energy, is driving the supply and demand pressure for these metals, which are necessary to create and maintain clean-energy technologies. For investors, the sustainable energy shift is a growth opportunity for firms that produce these metals, as they play an essential role in adopting and advancing clean energy technologies.
The Importance of Specific Metals
While uranium, copper, and silver have distinct value propositions and use cases, they each play a vital role in the global economy. They are indispensable for producing various products, including electronics, renewable energy technologies, aerospace, defense, and medical applications. The criticality of these metals stems from their economic significance and the associated supply risk. Key factors that render these metals important include their limited availability, geographical concentration of production, vulnerabilities in the supply chain, and the absence of easily accessible substitutes.
Given the importance of uranium, copper, and silver as metals, companies that facilitate their global supply chain access are well-positioned to benefit from the increased demand of these metals for the clean energy transition.
The Value Proposition of each Metal
Energy Generation: Uranium and Silver
When renewable energy generation is discussed, wind and solar are naturally top of mind; however, their intermittent nature does not allow for surety in long-term power generation. As such, nuclear energy, with uranium as its essential component, is viewed as a viable source due to its low greenhouse gas profile while also delivering the highest capacity, meaning that actual electricity production is close to its maximum potential output compared to other greener energy sources.
Silver is unique as a metal due to its superior electrical conductivity profile—silver ranks as the most conductive metal on Earth, even more than copper. Silver plays an important role in the solar energy sector and is used to help solar panels generate electricity. As the use of solar panels grows over time, industrial demand for silver is expected to expand significantly. The World Bank estimates that green technology demand for silver will double between 2017 and 2050, from 1.4 thousand metric tons to 3.2thousand metric tons, driven primarily by solar panels.
Energy Transmission: Copper
Copper’s exceptional electrical conductivity and contribution to energy efficiency make it a critical element in energy transmission. It’s broad market demand and versatility in use across many industries have historically positioned its price as a gauge of the global economy. As the global economy moves towards decarbonization and electrification, emerging clean-energy technologies require significantly more copper than traditional systems.
Recently, copper prices briefly passed the US$10,000 per ton mark, propelled by projections of tightening global supplies and heightened demand from the electric vehicle and power sectors. Against this backdrop, the copper market has become of keen interest to differing stakeholders. As reported by Bloomberg, some of the biggest energy traders are re-entering the metals market based on the anticipation that long-run production shortfalls will occur in the near future.
Investing in Metal Producers Through ETFs
As clean energy development occurs and sustainable technology is brought to market, investors are poised to benefit from having exposure to metal producers. For Canadian investors seeking exposure to companies involved in procuring and developing metals, namely uranium, copper, and silver, the following are worth considering.
For investors looking to gain broad exposure to the investable universe of global mining companies, the iShares S&P/TSX Global Based Metals ETF (Ticker: XBM) provides exposure to companies with North American equity listings that are involved in the production or extraction of base metals. For Investors looking for a more specific metals focus, Global X has provided such optionality with ETF solutions that provide pure-play exposure to copper, silver, and uranium producers.
The Global X Copper Producers ETF (Ticker: COPP) provides exposure to the companies active in copper ore mining listed on select North American stock exchanges by replicating the performance of the Solactive North American Listed Copper Producers Index. Similarly, the Global X Silver ETF (Ticker: HUZ) and Global X Uranium ETF (Ticker: HURA) replicate the performance of the Solactive Silver Front Month MD Rolling Futures Index ER and Solactive Global Uranium Pure-Play Index, respectively.
As a point of note, HUZ, relative to the other stated ETFs, has underperformed year-to-date. However, over a 1-year, 3-year, and 5-year time frame, the fund has returned 47.06%, 27.81%, and 31.80%, respectively. Furthermore, as reported in a recent Bloomberg article, demand for uranium is increasing as more countries look to nuclear energy as a source of power generation, with 61 nuclear power plants under construction globally. Another 90 or so are in the planning stage, and more than 300 have been proposed.
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
