As countries all around the world pursue the transition from fossil fuels to renewables, green energy metals are becoming increasingly important. World leaders are jostling for control over the production and processing of lithium, copper, cobalt, nickel and others, rewriting geopolitical lines and adding new impetus to ongoing (and potentially new) conflicts. 

China has emerged as the dominant force, which is adding to existing tensions with the West. But the competition for influence over supply dynamics also offers an opportunity for investors to profit from the growing trade and blossoming demand for green energy metals (including rare earth elements). While some may categorize it as a battery ETF, a raw commodities product like CHRG ETF makes it possible to benefit from global trends no matter who dominates supply. 

Green Energy metals are growing in importance 

The green energy transition – with power generation from solar, wind, and other renewables -, is expected to expand 300% from 2020 levels by 2035¹. This requires green energy metals, particularly copper for the miles of wires and cables, and lithium, cobalt, and nickel for the batteries that store green energy and power electric vehicles (EVs). Global demand is predicted to outpace supply within the next decade². 

As the world’s largest processor of these green metals, and the world’s largest manufacturer of green energy technologies, China desperately needs to secure its own supply chain to maintain its global position. It’s estimated to have just 16% of the mined copper it requires, leaving it short around 7.5 million tonnes (Mt) a year and pushing for increased production³. 

Analysts at Wood Mackenzie calculate that even the base case scenario will see the world’s nickel production rise by almost 80% in the next 20 years, cobalt demand by 180%, and lithium by 510%, and that’s the lower estimate⁴. If this race to decarbonization continues to accelerate, demand for green energy technologies will outpace supply, which in theory should lead to price appreciation across the supply chain, including the raw materials. 

This makes direct commodity exposure through a nickel, cobalt, or copper ETF highly appealing for investors looking for opportunities. But nation states that have net zero targets are just as eager to profit from green energy metals, and even more importantly, to take control over their supply chains of these in-demand minerals. And China is leading the run. 

China dominates the green energy metal trade 

While green energy metals are abundant in the planet as a whole, there are very few areas where they can be found in mineable quantities. Copper is mined largely in Chile and Peru; the highest concentrations of nickel are in Indonesia, Australia, and the US; lithium in Chile, Argentina, Australia, and China; and over 60% of cobalt is mined the Democratic Republic of Congo⁵. 

But as shown on the graph below, while mining activities are somewhat scattered around the world, the minerals are mostly processed in China.⁶ 

China manages the vast majority of the production of components needed for renewables. 85% of the world’s lithium-ion battery production, 50% of EVs, and close to 70% of solar panels are made in China, and it’s the biggest manufacturer of wind turbines⁷. 

In contrast, the US is currently lagging far behind. It has very few domestically-produced key components⁸, and EV battery manufacturing capacity is approximately 50% and 63% of that needed by its home EV market in 2023 and 2024⁹, yet it is one of the largest consumers of the finished products!. 

China’s dominance is no accident. It was late to the fossil fuel game, which left it dependent on others for most of its energy up till now. It’s determined not to repeat the mistake with clean energy. The CCP’s plan for energy independence requires control over both the production of clean energy systems, and the green energy metals supply chain.¹⁰ 

According to Wood Mackenzie’s Gavin Thompson, Huang Miaoru, and Zhou Yanting, China’s blueprint for net zero is “the most important energy-market document in history. It will shift the global balance of power.”¹¹ 

Other countries are jostling for a share

In fact, it already is. The US and Europe see the power that OPEC has regarding oil, and OPEC controls approximately 60% of the trade. China’s share of green energy metals trade is already higher, provoking governments around the world to find ways to restrict it.¹² 

In the US, the recent Inflation Reduction Act (IRA) set aggressive targets and incentives to reshore mineral processing and production for components such as photovoltaic cells and EV batteries, and ally-shore a rare earths supply chain. The US is not alone; Wood Mackenzie chairman and chief analyst Simon Flowers observes that “every country pursuing Net Zero wants to do what the US is doing – establish its own domestic low carbon supply chain to reduce dependence on China”¹³. 

But the reality is that very few green energy metal supply chains exclude China, and many companies and countries will be competing for them. The stakes are high for green energy metal supply dynamics. 

This is worrying for world leaders who are trying to check China’s dominance, but it offers a big incentive for a number of other states. Countries with significant mineable deposits could expand their share of the global trade, and others to develop the capabilities to process critical minerals mined elsewhere. 

Australia is an appealing alternative for lithium, nickel, and graphite, as are many Latin American countries. Companies in areas with lower mineable resources, including Indonesia, the Philippines, Brazil, Mozambique, and Madagascar, offer mineral processing capabilities which could be ramped up.¹⁴ 

Much depends on the level of investment and support that Western countries offer, to help accelerate green energy metals production and processing. It’s likely that a great deal more resources will soon pour into this vertical, which in turn opens up opportunities for investors. 

 Investors could profit from global green energy metal competition 

Investors can profit from the global race to control green energy metals, no matter which country comes out on top. With so much demand for critical minerals, metal exposure could be a valuable addition to investor portfolios. The challenge, as always, is identifying which metal stock will benefit the most. 

This is why a lithium ETF, copper ETF, nickel ETF or cobalt ETF, or an electric vehicle ETF which includes EV battery stocks, can be an appealing alternative. CHRG is an ETF that tracks the raw materials needed for EV batteries, including copper, lithium, cobalt, and nickel. An ETF like CHRG enables investors to spread their investment across a number of promising commodities stocks, helping mitigate their exposure to risk and balance their portfolios. 

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